HUNDREDS of thousands of shareholders in Vodafone, who originally invested in the public flotation of Eircom (formerly Telecom Eireann) 15 years ago, will avoid a tax bill when they share a windfall of at least €27.5m.
The Revenue Commissioners have confirmed that those original investors will not get a bill for the Capital Gains Tax when Vodafone's US business is sold off as proposed next month.
The reason is that small time investors are still operating at a loss on their Telecom investment, a portion of which eventually became Vodafone stock through a sell off.
Almost 400,000 Irish investors who directly hold shares in Vodafone, will have received correspondence outlining its so-called "return to value strategy".
Vodafone is set to distribute almost €62bn back to its shareholders in a mixture of cash and Verizon shares.
Taking the value of December 6 as a guide, shareholders would be entitled to €0.89 in Verizon shares and €0.36 in cash for each Vodafone share.
Having analysed the figures, which they say are provisional, the Revenue Commissoners says there would be no chargeable gain - and therefore no capital gains tax payable by those former Eircom shareholders who take the windfall as capital.
Vodafone expects to announce the exact number of Verizon shares that investors will be entitled to on February 19 and the cash amount they will get on February 21.
For many small investors who will benefit from the tax free status of the windfall, this was their first and last punt on the market .
And it represents scant compensation from the Telecom Eireann flotation debacle.
The flotation turned into a scandal soon after the shares were offered with glossy advertisements and intense Government promotion.
More than 600,000 mostly virgin investors were lured to buy the shares at €3.90 apiece.
Eircom's then chief executive, Alfie Kane said at the time he felt the price at which the shares were initially offered was too high - forcing the Government to defend their decision.
Most kept faith in the shares for the long haul as the stock began a dramatic fall in value.
When Telecom Eireann sold off its mobile business shortly after the flotation, shareholders were rewarded with Vodafone shares.
If shareholders approve the sale of the Vodafone's US operation to Verizon in a deal to be put to them next week, Irish investors stand to receive a windfall of more than €27.5m.
That calculation is based on a minimum shareholding of 55 shares, so the actual final pay-out could be a multiple of that figure.