The Danish government said yesterday that it had agreed to sell partly-privatised telecoms group Tele Danmark 14 billion crowns (£1.35 billion) worth of its shares as a first step to shedding the state's entire 51.73 per cent holding.

"The government has discussed the subject with Tele Danmark and they have together agreed on proceeding with a 14 billion crown buyback of A shares from the kingdom," a finance ministry statement said.

The buyback - to be at the market price on the day of purchase minus 2 per cent - covers more than half of the state's present holding. The statement added that the transfer, subject to approval by shareholders and parliament, should take place during the first half of 1998.

"It has furthermore been agreed that the kingdom's remaining shares are not to be sold until after the buyback. The government will be exploring in detail the options available," it said.

The sale of Tele Danmark shares was signalled in the presentation of the draft 1998 state budget last month and is a cornerstone of the government's pledge to bring it into surplus.

Yesterday's agreement was in keeping with an analysis by advisors Den Danske Bank and N.M. Rothschild commissioned by the state.