Conduit, the directory assistance provider whose management has bid for the firm, lost a multimillion contract with mobile company O2 yesterday, and confirmed it would not be among the first firms to enter the British market.

The Dublin-based company said yesterday it had agreed a phased withdrawal from its contract with O2 which would be complete by April.

The contract was not due to finish until November 2003, but was cancelled early due to a dispute with British Telecom.

Under the contract dated February 26th, 2002 agreed between Conduit and British Telecom, the Irish firm had committed to supply directory assistance services to O2 (UK) Ltd. But British Telecom subsequently terminated this contract in July 2002 causing Conduit to begin High Court proceedings for damages.

In a stock exchange announcement yesterday, Conduit said it had agreed a settlement with British Telecom which would require the telecoms firm to pay Conduit £4.65 million (€7.3 million) without admission of liability for lost profits, damages and costs, in return for the withdrawal from the High Court proceedings.

"The settlement ... while compensating Conduit for the loss of future profits from the contract, may also prevent Conduit from obtaining additional directory inquiry business from O2 (UK)," continued the statement.

Meanwhile, Conduit will not be among the first companies to initiate a directories service in Britain and will face stiff competition from British Telecom, British Gas and a number of other firms.

From today, the British directory enquiries market will begin a phased liberalisation which will enable new entrants to offer a directory assistance service.

For the first time, people will be able to dial new six-digit numbers instead of the current 192 provided by their phone company. Around 10 firms plan to introduce new services tomorrow followed by others in the new year.

All of the services will have the prefix 118, and the 192 number will eventually by phased out next year. British Telecom, British Gas, the German firm Telegate, Opal Telecom and Orange are among the firms that will compete in the British market. Conduit, which provides the equivalent directory service in the Irish market, will not launch until next year, according to a spokeswoman.

But the firm, in the midst of management buy-out talks, did not return calls yesterday to clarify exactly when its British launch would take place.