Chinese multinational Huawei has emerged as one of Smart Telecom's creditors. The Irish Times learned yesterday that the troubled telecoms group owes Huawei in the region of €2 million.

The debt is a result of a deal that saw the Chinese company equip exchanges for the introduction of Smart's broadband network.

London-listed Smart's shareholders are set to vote on Tuesday on a proposal to transfer the company to Bidco, a vehicle controlled by businessman Brendan Murtagh, who owns 20 per cent of the telecoms group. In return, Smart will get 10 per cent of Bidco.

Its shares will be delisted but shareholders will continue to hold their interest in the company unless they decide to sell or otherwise dispose of their stakes.

The company is reported to have debts of €40 million and has essentially run out of cash. Earlier this month, Eircom, the wholesaler of some of Smart's services, cut it off in a dispute over a €4 million debt. The service has since been restored.

News of Smart's financial woes emerged last month at its annual general meeting when the company said it was relying on key shareholders such as Mr Murtagh to provide the €2.5 million a month it needed to stay afloat.

Huawei was one of two major players contracted by Smart to build and equip its planned third generation (3G) mobile network. The other was BT Ireland.

However, communications regulator ComReg withdrew the offer of a licence from Smart earlier this year in a row over financial bonds.

These were designed to underpin guarantees that the company gave relating to the time it would take to build the network and establish a service.

Smart subsequently took the regulator to the High Court. Mr Justice Peter Kelly heard the case last July and is expected to deliver his judgment next Tuesday, the same day that shareholders meet to vote on the Bidco proposal.

Victory in this case would boost Smart's fortunes considerably as it would leave the company with a potentially valuable asset.