Swiftcall, which offers cheap international calls to the residential market from Ireland, is close to being sold to a Japanese telecommunications company. The company, KDD, paid £5 million for an option to buy 20 per cent of the Swiftcall, which has offices in Dublin, when it floats later this year. Swiftcall founder Mr Tom McCabe said last February that he would float 55 per cent of the company before the end of this year.

However, sources said yesterday that Mr McCabe - the majority shareholder - had been bought out by KDD. Attempts to get a comment from Swiftcall in Dublin proved unsuccessful. The buyout, which industry sources say was instigated by KDD, now means it is extremely unlikely that the flotation will take place.

A spokesman for KDD's European operations denied that the sale had taken place. He said no deal had been finalised, but that the two were having discussions "which could lead that direction".

In February, Mr McCabe said US investment bankers Salomon Brothers had valued the company at between $200 million and $350 million (£142.2-£248.8 million), a valuation which surprised others in the market.

Industry sources estimate the company's Irish operations are bringing in revenues of between £3 million and £4 million a year. It offers cut-price international calls, routed out of Belfast, and buys minutes from carriers around the world to deliver its traffic. Sources say it is aimed mainly at off-peak and weekend use in the residential market. Overall, Swiftcall is said to have annual revenues of £27 million for all its operations. It employs 200 people in Dublin.

KDD is a giant telecoms company which carries Japan's international traffic. Formerly state-owned, the Japanese government still has a stake of about 40 per cent. Sources said the purchase would fit in with KDD's international strategy of buying up small companies which offer value-added telecoms services.