The new chairman of Telecom Eireann predicted yesterday the State company would be over-subscribed by between 300 and 400 per cent when it is floated on the stock exchanges. Mr Brian Thompson, a US citizen, said interest from US institutional investors would be substantial. Eireann was functioning very effectively. "I would be quite surprised if it is not over-subscribed substantially," he said.

Up to 35 per cent of the company will be floated on the New York Stock Exchange, and in Dublin and London, in June under its new name, Eircom.

Speaking after a conference on e-commerce in Dublin, Mr Thompson said there was interest in the Republic "far beyond the 3.5 million people you have here" and "everything that has happened in telecoms in Europe has been positive". "What you have got is a real strong following and we will make no bones about it."

He did not expect the Norwegian company, Telenor, or the Swedish group, Telia, which have announced a merger plan, to await a decision from the regulatory authorities on how they should divest some of their Irish interests.

A conflict of interest will arise through the merger because Telenor has a 49.5 per cent in the mobile phone operator, Esat Digifone, and Telia, through its 8 per cent stake in Telecom Eireann, has an interest in the second mobile phone operator, Eircell.

In addition, Telia has an option to buy a further 15 per cent stake, with the Dutch telecoms group KPN. KPN and Telia together hold a 20 per cent stake in Telecom Eireann through their holding company, Comsource.

"It will have to be a conscious business decision. They [Telenor/ Telia] are going to have to make some judgments about whether they will be having assets in Ireland, and, if so, what they are," said Mr Thompson.

Following speculation that Telenor's decision to increase its stake in Esat Digfone signalled that Telia would withdraw from Telecom Eireann, Mr Thompson said the decision had been tactical and not strategic. Telenor had been faced with the option to buy the shares or let someone else buy them. It did not give the company any extra leverage in Esat.

Asked if he expected Telia to sell its 8 per cent share of Telecom Eireann, he said he was not concerned if the stake came "up for grabs". "I can only say that Telia continues to take the position, as it has in the past, that its investment in Telecom Eireann is a good one."

He added that the sale of Telecom Eireann's cable infrastructure between the customer and local telephone exchanges - unbundling the local loop - would not be done below cost. The issue of unbundling loops, allowing other operators to buy into the network, was being considered across the EU.

He said the introduction of a £20 flat rate Internet service for 100 hours of usage per month, making the State the cheapest in Europe for Internet connection charges, was not uncompetitive because it was not below-cost selling.