An Post has objected to a £2.35 million (€3 million) levy proposed by the telecoms regulator to monitor its business. The company is believed to have sent a document yesterday to the regulator, Ms Etain Doyle, in response to a consultation paper she published in July.

Ms Doyle's office recently reported a £23.99 million surplus in the year to June 30th, 2000. In a paper last month, she proposed a regulatory charge of £250,000 for the January-June period this year and £350,000 for July-December. The charge proposed for next year was £1.75 million.

An Post's spokesman would not comment. However, senior figures in the company have described levies at such rates as "excessive" and the paper the company sent yesterday outlines why it believes the charge should be reduced.

The levy would pay for Ms Doyle's regulation of the services An Post is obliged to offer throughout the State. This comprises the postal business for letters and parcels up to certain weights.

But the company is facing a cash crisis and it is understood to be concerned that the charge must be paid from the bottom line.

An Post's overall profit from day-to-day operations last year was £7.7 million, but it lost £3 million on the post office network. It has projected losses of £1 million per month on the network this year.

Those familiar with Ms Doyle's thinking believe elements of the charge would have been incurred by An Post before the regulator assumed responsibility to monitor the quality and price of services.

Ms Doyle's office is also assessing An Post's application for price increases of up to 30 per cent for international mail.

Certain sources have suggested the average increase being sought is about 17 per cent.

Draft papers presented to the Department of Public Enterprise earlier in the process suggested a rise of 60 per cent, although that was revised.

Arguing that the price of a stamp has not increased since 1991, the company also plans to seek an increase in domestic mail rates after Ms Doyle reaches a decision on international mail.

The increase An Post will seek for domestic mail rates is not known but it has argued that cost increases that outstrip revenue growth cannot be sustained. The company's profit margins are poor and its management has made no secret of its belief that the returns from its core business are increasingly inadequate.

Still, the Government refused last month to grant the company a subvention to pay for losses on the post offices, where the deficit is expected to reach £79.2 million by 2005.

The company was asked to develop a new payment system for post offices, which must be offered first to postmasters.

If postmasters refuse the fee-per-transaction option - they are paid a retainer at present - the business will be transferred to other retailers.

On Thursday evening, postmasters staged a peaceful protest against the change at a postal depot in Portlaoise. The protesters described their blockade of the depot as a "taster" of further action they plan to take to prevent An Post from "throwing the franchise of our business away".