Ireland's dominant telephone company, Eircom PLC, shut down services Tuesday to smaller rival Smart Telecom leaving 40,000 households and businesses unable to make calls in a row over unpaid bills.

Eircom, which has been threatening to take action against Smart Telecom since May 2005, said it withdrew Smart Telecom's right to lease space on Eircom's fixed line network because of an unpaid euro4 million bill. The former state monopoly said the 40,000 affected customers are no longer able to make calls, except to the emergency services. Incoming calls will be shut off Monday if Smart Telecom does not clear its debt.

Smart Telecom, founded in 2000 shortly after the Irish government first sold shares in Eircom said it is negotiating with shareholders to raise financing to pay Eircom and resume normal service.

The board remains confident that this funding will be obtained, the Dublin based company said in a statement. However, there is no certainty that this will happen.

Smart Telecom's biggest shareholder, Brendan Murtagh, has been giving the company about euro3 million a month from his fortune to keep the company running. Last year the company reported a net loss of more than euro21 million.

Trading in Smart Telecom shares was suspended Tuesday on the London Stock Exchange.

Smart Telecom offers competitively priced broadband, telephone and cable television packages, chiefly in greater Dublin, home to a third of Ireland's 4.2 million residents. The company has sunk into the red because of the high cost of laying its own fibre optic network for broadband services and the need to lease conventional phone lines from Eircom.

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