Smart Telecom, the company being kept afloat by its biggest shareholder, could lose its mobile licence if it were to become insolvent.

Smart is currently depending on its 20 per cent stakeholder, Brendan Murtagh of Kingspan Group, for working capital. Its operations need around €2.5 million - €3 million a month in cash to keep trading. The company is confident it can raise money and stay in business in the long term.

Communications regulator ComReg offered Smart a third-generation (3G) mobile licence last November, but withdrew it in February, saying that the company had failed to provide it with the financial guarantees that it had agreed to supply in its original application.

Smart said it had provided the guarantees and took High Court action. The case was heard in July and the judge, Mr Justice Peter Kelly, is due to deliver his verdict next month.

There is a possibility that his ruling, whatever it is, will be appealed to the Supreme Court, which could drag the process into next year.

Sources suggested that if Smart were to become insolvent and go into either liquidation, receivership or examinership before the case is finally resolved, this could end its hopes of getting the licence.

Smart was offered the licence, but never actually received it, as ComReg withdrew the offer. Sources said that if the company went into liquidation and stopped trading, it would be impossible to issue it with a licence.

They also argued that if it were placed in receivership or examinership, and continued to trade, the offer of a licence could still be withdrawn in these circumstances, depending on the terms imposed by the regulator.

ComReg would not comment yesterday, but evidence that emerged during last July's court hearing indicated that Smart could lose the licence in any event if it became insolvent.

However, sources pointed out that the issue is complicated by the fact that if the company does become insolvent, and the courts subsequently rule that Smart should have received the licence earlier this year, it could be open to a receiver, examiner or liquidator to pursue ComReg, either for the licence itself or some form of compensation.

"The problem is that this has not happened before, so nobody really knows what the final outcome could be," one commentator said.