Britain's Vodafone has withdrawn from the running to provide a mobile service to fixed-line operator BT , two industry sources told Reuters, bringing to an end a nine-year partnership.
Vodafone had been the so-called mobile virtual network operator for BT, providing mobile services to staff, small companies and multi-national corporations which are clients to the BT Global Services division.
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The Vodafone-BT tie-up was canceled once Vodafone acquired rival fixed-line business Cable & Wireless Worldwide, but Vodafone had been in the running to win a new contract with the British firm.
Its withdrawal is likely to leave Telefonica's O2 and EE in the running for the BT deal. EE is the country's largest mobile operator and is owned by France Telecom and Deutsche Telekom .
The proposition for an operator has become more attractive since BT won a large amount of spectrum in a recent auction, to enable it to boost its wifi offering and consider launching a full BT-branded mobile service to consumers.
Sources have stressed however that any offering would be some time off and would rely on a partnership with an existing operator.
"We can confirm we are making good progress with our tender for a mobile partner," a BT spokesman said.
"The 4G spectrum we obtained recently means we have a strong hand and that has been recognized in the bids we have received to date. We hope to conclude the process in the coming months and we will comment further when the tender has been concluded."
The deal could make the most sense for O2, the mobile business that demerged from BT in 2001, because it did not acquire any of the high-frequency spectrum at the auction that was bought by BT.
One industry source, who declined to be named because the talks were not public, said Vodafone had entered the process to secure a new contract with BT, but had recently withdrawn after reconsidering its options. Vodafone declined to comment.
(Reporting by Kate Holton; Editing by Helen Massy-Beresford)