City A.M. understands that the UK’s third largest mobile operator has pulled out of applying for the contract after it became clear it would not meet the terms being offered by O2, which is hotly tipped to beat the remaining bidder, Orange and T-Mobile owner EE.
BT has used Vodafone’s network to run a mobile service for its 90,000 staff as well as business customers for nine years, but a clause in the deal allowing it to re-open the tender process was activated last year when Vodafone bought Cable & Wireless Worldwide, which competes with BT.
Vodafone was originally planning to bid before a submission deadline this week, but is not prepared to offer access to its network at the same rates as O2. One source said that O2 is prepared to “lowball” other bidders in order to get closer to BT and buy some of the spectrum it acquired in January’s 4G auction.
O2, owned by Spain’s Telefonica, ended up with far less spectrum than either EE or Vodafone in the auction, leading to questions over whether its forthcoming 4G network will be able to compete. However, Ofcom is currently working on allowing firms to trade spectrum, and a mutually beneficial deal could see O2 buy some of the surprisingly large chunk of the airwaves BT bought in January.
BT, which does not have its own mobile network but will use the airwaves of whoever wins the bidding, is also exploring a consumer mobile offering to add to its business services. The parties did not comment.