Former Telecom Eireann chairman Mr Brian Thompson offered to sell the Irish subsidiary of Global Tele-Systems (GTS) to avoid any conflict of interest, it has emerged. Mr Thompson, who resigned his Telecom post on Monday to take up the job of chairman and chief executive of the US-based telecoms group GTS, also offered to try to "ring-fence" the Irish operation.

Mr Thompson opted out of Telecom because of possible conflicts of interest between his roles. It is understood he was reluctant to do so, but agreed that it was the best option, when the issue was examined by the Government and its advisers.

It is also understood that Dutch telecommunications group KPN, which holds a 12 per cent stake in Telecom, was concerned that Mr Thompson's new role at GTS might conflict with its operations in Europe.

A spokesman for the Minister for Public Enterprise, Ms O'Rourke, said last night that selling off the GTS subsidiary in Ireland was never going to be possible in the time-scale available - prior to the Telecom flotation in June. "There was no way the Government was going to accept what was going to be a contrived and ad-hoc arrangement," he said.

The Government has moved to replace Mr Thompson with someone of a similar background and last night announced the appointment of Mr William Ferguson to the Telecom board. He has held senior positions with Michigan Bell and New York Telephone and is a former chairman and chief executive of the NYNEX Corporation, a US telecoms groups, which recently merged with Bell Atlantic and is now the biggest regional telecoms company in the US.

Sources said last night that Mr Thompson had been somewhat reluctant to surrender his Telecom role. In a letter to the Telecom board, which met yesterday, he said GTS's interests in Ireland comprised a very minor part of its overall operations. The Irish subsidiary claims to have 2,500 customers in Ireland. It is thought that aside from KPN's concerns there were also some fears that Mr Thompson's new position in GTS would conflict with Telecom's plans to roll out services in Europe and Britain.

Sources said yesterday that the board held a five-hour meeting yesterday. The first item on the agenda was the election of former EU Commissioner Mr Ray MacSharry as chairman and the second was the election of Mr Pat Molloy, former Bank of Ireland group chief executive, to replace Mr Ron Bolger. Mr Bolger had been deputy chairman but resigned on Tuesday after Mr MacSharry was appointed chairman by Ms O'Rourke. It is thought he was angry that, having made way for Mr Thompson's appointment, he was passed over a second time.

Sources said the board meeting went well but several members were annoyed that they had not been informed about Mr Thompson's resignation before the media.

Some sources said they felt too much had been made of the GTS conflict issue and Mr Thompson's resignation had been badly timed. They suggested that perhaps a solution could have been found and if at a later stage a serious conflict had arisen, then this could have been dealt with.

The Government's advisers had concluded that it was important to beef up the Telecom board prior to flotation and Mr Thompson's appointment in January was part of this process. The advisers also said a US telecoms figure with extensive experience would be a useful appointment.

It appears the Government believes Mr Ferguson will meet this criteria. In a statement Ms O'Rourke said Mr Ferguson's experience "at the cutting edge of the industry should be of immense value".