Esat BT is in exclusive negotiations with Hutchison 3G Ireland for a €100 million deal to build a third generation mobile phone network (3G) in the Republic.

The firm has beaten off competition from local and international firms such as Eircom and Flextronics, and could sign a formal contract later this week.

Under the terms of the contract Esat BT will build out the first part of Hutchison 3G Ireland's network in the Republic.

Hutchison 3G Ireland is a subsidiary of the Hong Kong-based firm Hutchison Whampoa and holds one of three 3G licences awarded last year.It is a sister firm to Hutchison 3G UK, which recently introduced Europe's first 3G networks - branded "3"- in Britain. It is believed Hutchison 3G Ireland has reduced the scale of the network contract it is negotiating with Esat BT. Initially this was valued at €250 million but it is now thought to be worth €100 million for the first phase.

Industry sources believe it will initially focus on building base stations at about 450 sites in urban areas, rather than the 1,000 sites which Hutchison originally planned to build in the contract.

British operator "3" has met technical difficulties with the technology and a shortage of handsets has delayed introduction. Hutchison 3G UK was forced to delay the launch of its British network at least twice before finally beginning to sell handsets earlier this year.

But if Esat BT signs a deal this week it would be a huge boost for the State's second biggest fixed line operator. Last week the firm said it intended to get back into the mobile market and the deal would significantly beef up its revenues. Esat BT is likely to team up with other telecoms suppliers to build the network for Hutchison.

An article published in Business This Week last Friday incorrectly reported that Esat BT lost €185 million in the year to end March 2003 due to an error in the editing process. Esat BT reported a loss of €158 million.