Eircell will challenge the legal powers of the telecoms regulator today by refusing a request to re-enter commercial discussions with the Imagine mobile phone service over its bid to become a virtual operator.

The refusal will increase the pressure on Imagine which is seeking to access Eircell's network to offer mobile phone services to its customers as a means to stay in business.

Imagine supplies its 20,000 customers with a cheap service using a volume discount agreement negotiated with Eircell in 1997. But Eircell is seeking to turn off its supply of airtime, putting the future of Imagine in doubt.

This has focused attention on its attempt to negotiate a deal with Eircell that would enable it to become a virtual operator and piggyback on Eircell's network.

Imagine and Eircell have been in discussions since last September over its bid to become a virtual operator. But negotiations recently broke down following a bitter court battle.

This prompted Imagine to officially ask the regulator to intervene earlier this week following a demonstration outside the regulator's offices.

It is understood the regulator sent an official dispute resolution request to Eircell yesterday asking that it re-enter discussions with Imagine.

But an Eircell spokeswoman confirmed last night the firm would dismiss the request to restart negotiations because the regulator had "no legal mandate to intervene" in commercial discussions.

She said the discussions were not a matter of interconnect, with which the regulator has powers to intervene, but were a question of national roaming. "She has no basis to invoke these powers," said the spokeswoman.

Although Eircell has a matter of weeks to respond it is understood the company will send a letter to the regulator today.

Earlier, a spokeswoman for the regulator confirmed the regulator had issued a dispute resolution request. She could not be contacted for comment later.