Winding-up proceedings were starting today against a company which owes schools across Bradford district hundreds of thousands of pounds in ‘cash back’ mobile phone deals.

ETC Communications Limited, the parent company of troubled Link Telecom, is set to be placed in liquidation following the appointment of insolvency experts.

The firm’s creditors have received letters inviting them to a meeting today at the London office of RSM Tenon Recovery to agree to its appointment as liquidators.

The letter, seen by the Telegraph & Argus, states that the directors of ETC “having regard to its financial position, have decided to commence liquidation proceedings”. The company employs between 50 and 60 staff who now face redundancy.

Its creditors include schools which signed up cash-back deals for phones with network provider O2.

Link Telecom’s managing director Gary Fawcett has admitted schools in Bradford and elsewhere in West Yorkshire are collectively owed £700,000 by his company.

Bradford’s Liberal Democrat education spokesman, Councillor David Ward, said: “It looks extremely unlikely now that the schools are going to get their money back.”

Under the deals, schools paid out monthly line rentals for hundreds of mobile phones on the O2 network.

They did so on the understanding Link Telecom would pay back the money from some of the commission paid to it by O2 for signing up schools to its network.

But the deals started to turn sour when O2 vastly reduced the amount of commission it was paying Link Telecom and, in turn, Link Telecom was unable to make all its payments to schools.

Link Telecom’s bank called in its overdraft after realising the company was making a loss on previously profitable phone deals – plunging the company deeper into debt.

Its parent company, Link Telecom Holdings, and subsidiary Voice Connections Limited, went into administration last October.

The company carried on as ETC Communications Limited trading under the Link Telecom name.

Bradford Council’s Labour education spokesman, Ralph Berry, has now called for schools to “learn the lessons” of how Link Telecom was allowed to negotiate deals which left them open to owing money for what were supposedly free mobiles.

O2 has stated it is now seeking to take legal action against Link Telecom to recoup money it says it is owed by the company.

Mr Fawcett told the T&A he was counter-suing O2 to get back money he alleges his company is owed. He also confirmed in a statement that ETC is set to go into liquidation and that Link Telecom was now operating from Dalton Lane, Keighley, after moving out of its Saltaire headquarters.