Cellular 3, the company which runs the Imagine mobile phone service, will make 40 people redundant today, its chief executive, Mr Sean Bolger, said last night.

These are the first significant job losses since its workforce was put on full notice last week following Eircell's decision to cancel an airtime reselling agreement.

Mr Bolger said further redundancies were likely among the 80 remaining staff unless Imagine reached agreement with Eircell to become a mobile virtual network operator.

Virtual mobile operators do not own their own networks but supply a service by piggybacking on a network. Imagine has been involved in commercial negotiations with Eircell since August last year.

However, these broke down recently following a High Court ruling on a protracted legal action between Eircell and Cellular 3's parent company, Meridian Communications.

An attempt by Meridian to have the Office of Telecommunications Regulation mediate in the dispute has been rejected by Eircell.