Ocean is claiming damages in excess of £40 million from Eircom in a dispute about the supply of capacity it was offered on the incumbent operator's telecommunications network last year, the company said yesterday.

The claim, which was dismissed as a publicity stunt by Eircom last night, will be heard in the High Court at a future date.

In a statement, Ocean said it had submitted documents to the court, claiming £40 million in damages as part of its legal action taken against Eircom last year. The legal action names Eircom and its two subsidiaries, Indigo (an Internet service) and Eircell (the mobile operator) as defendants.

Ocean claims Eircom has abused its dominant position in the marketplace by restricting supply of capacity to its competitors, in breach of Irish and European competition law.

The supply of capacity to Ocean became a matter of bitter dispute between the two companies following the launch of Oceanfree.net in June last year.

The Republic's first free Internet service attracted a significant public following and quickly encountered capacity supply difficulties. The company blamed these on Eircom's unwillingness to provide extra capacity.

The proceedings allege that the Eircom 1891 Internet access service is illegal as it is controlled by Eircom.

Mr George McGrath, chief executive of Ocean, said Ocean had been forced to take wide-ranging action against Eircom for failing to supply capacity during 1999. He said he looked forward to a speedy resolution of the matter.

Mr Gerry O'Sullivan, head of corporate communications at Eircom, last night dismissed the Ocean action as a publicity stunt and said Eircom would defend itself vigorously. He said Ocean had demonstrated a complete inability to scope its network requirements and had not provided Eircom with accurate information on its supply needs.

"We wouldn't have minded if Ocean's supply estimates had been off by 30-40 per cent or so, but they were actually out by a factor a number of times higher," said Mr O'Sullivan.

"In my view, since British Telecom entered the market in Ireland, they have consistently reverted to litigation because of their failure to make headway in the market," he said.

Ocean, originally a joint venture operation set up by British Telecom and the ESB, was bought outright by British Telecom earlier this year. This followed British Telecom's bid for Esat Telecom. It is thought likely that Ocean will gradually be absorbed into Esat Telecom.