The Italian telecommunications company, Telecom Italia, is to examine its purchase of the Serbian telecoms company following newspaper allegations of irregularities in the sale.

The government of former Yugoslav President Slobodan Milosevic sold 49% of Telekom Serbija to Italian and Greek telecommunications holdings in 1997 for $730m.

But now press reports say that that 3% of that total was siphoned off into special bank accounts.

In a lengthy article based on the original contract of sale, the Rome daily La Repubblica retraces the 1997 privatisation of the Serbian telecoms company.

The deal gave Italian and Greek partners a foothold in the Balkans market and provided a desperately needed cash boost for the Milosevic regime.

The paper published paragraphs from the contract where the buyers agreed that part of the privatisation payment - DM28m ($13.1m) - would go not to the Serbs but into NatWest bank accounts in Frankfurt and London.

The British bank NatWest acted as an intermediary for the Serb authorities in the privatisation but has always declared that it received a straight fee of more than �10m.

La Repubblica quotes unnamed Serb politicians who allege that the re-routed funds were actually kickbacks and said that President Milosevic had complained that this money had to be paid rather than enter state coffers.

However, the report in La Repubblica did not say who received the money that it alleged had been siphoned off from the deal.