Eircell is to buy Let's Talk Phones, a retail group with 15 outlets around the State, for a figure of around £4 million.

The move will give Eircell a presence in the Irish retail market, following a trend started in Britain which has seen mobile operators move into retailing. Let's Talk Phones is 40 per cent owned by ICC Venture Capital, while the remainder is held by a number of shareholders, who include Mr Jonathan Stanley, the company's managing director.

Eircell chief executive Mr Stephen Brewer said no deal had been completed. "We have been in very serious negotiations with at least three major players in the mobile phones retail market," he said, "and we hope to conclude some deals this year."

Mr Stanley said he did not make any comment on "rumours in the industry".

However, reliable sources said the deal with Lets Talk Phones was virtually complete. About half the company's shops are in Dublin, with the remainder in Cork, Limerick, Galway, Waterford, Kilkenny and Tralee.

ICC paid £1 million for its stake in December, valuing the business then at £2.5 million. The investment was to be used to fund the company's expansion. A relative newcomer to the market, Lets Talk Phones has expanded very quickly.

It is thought that the deal will be conditional on the management achieving certain targets via an earn-out element, over a period of years. "What you are buying is not just the company's current performance, but its potential in the future," said one source.

It is known that both Eircell and the second operator, Esat Digifone, have been in talks with retailers in recent months with a view to buying them out. However, sources said that many retailers are reluctant to sell out at this stage.

It is believed that although Let's Talk Phones has built up a reasonable brand name, Eircell will be keen to re-brand the stores. The State operator has spent millions of pounds on marketing and now has an extremely strong brand.

Mr Brewer said buying outlets made sense and helped the operator get closer to the customer. "We want to maintain and build market share," he said.

He said Eircell wanted to extend its market reach, through selling and distribution. "At present retailers can move customers from one operator to another and get a second commission. That's not good for the customer," he maintained. Industry sources say the move is also part of a drive by the operators to position themselves more strongly in the market before Meteor, the consortium awarded the third mobile phone licence, begins trading.

One source said that the retailers are facing a dilemma and are unsure whether to sell out at this stage, or whether to take an exclusive franchise. The operators have sought exclusive deals from retailers without taking equity in their companies. However, the retailers are reported to be demanding so much money for this arrangement that operators now believe it would make more sense to buy them.

Mobile phone retailing can be lucrative, but is based on the retailer achieving certain sales targets on behalf of the operator. The higher the sales, the better the margin so the trick is to know what target is achievable and strike the best deal based on the target.

A number of retailers in Ireland have built up very strong brand names. These include Cellular World, which has a strong presence in the corporate market, Carphone Warehouse and Person2Person. Esat Digifone has some shops, including one in Grafton Street and one in Henry Street, Dublin.