The Cambridge-based company has announced that 600 staff will be made redundant out of a workforce of 1,000.

The company had called in the administrators after failing to find a strategic partner to help develop its radio-based telephone system.

The group has been brought down by the massive cost of developing its network which initially rolled out in the Midlands, East Anglia and Yorkshire.

But only 50,000 subscribers signed up to the service, which promised a free second line and 24-hour customer service.

Money running out

In its first full year of trading, the company made a loss of £173m on turnover of just £11m.

In August the company terminated its £300m loan facility and began looking for a strategic investor.

After the failure of talks with a potential investor, and with its cash reserves running out by January, the Ionica board felt it had no choice but to act.

Ionica chairman Tony Coleman said: "Naturally we are very disappointed. The board had been very hopeful of securing the investment necessary for Ionica to continue trading and expand its service."

The company says that the services to existing customers will be maintained during administration.

No immediate announcement of redundancies has been made, but some are expected in the very near future.

Share price collapses

Ionica had initially been one of the darlings of the stock market.

When it was floated 15 months ago, the shares shot up to 421p, valuing the company at over £700m.

By Monday, when its shares were suspended, the company was worth less than £25m, with a share price of just 17.5p.