Telefonica has been chosen as the preferred communications service provider for smart meters in two out of three UK regions, according to the UK government.

The value of the Telefonica deal is £1.5 billion over 15 years to supply mobile connectivity to smart meters in central and southern parts of the country, although the agreement is subject to the contracts being agreed.

Arqiva is the preferred bidder in the north of the UK, a contract which is worth £625 million over 15 years. Both potential contracts were announced by the country’s Department of Energy and Climate Change (DECC).

Vodafone lost out in the bid. It told the Guardian it was “disappointed”. It is unclear if rivals EE and 3 UK were also among the unsuccessful bidders.

The potential scale of this contract gives an idea of what might be coming in other energy markets around the world. It also demonstrates what the much talked-about smart meter market might offer mobile operators.

Smart meters are intended to promote energy efficiency by providing real-time pricing information to gas and electricity consumers, as well as removing the need for the energy utilities to send out employees to consumers’ premises for meter reading.

The UK government is obliging the UK energy sector to install smart meters. The idea is to install 53 million new meters across the country between 2015 and 2020. However, the process has already been subject to delay.

The government aims to finalise contracts in early September.

Telefonica said its proposed smart meter-reading service will be based on its existing mobile network in the UK, as well as the use of mesh networks in areas without cellular coverage.

The UK government also announced that Capita is the preferred bidder to manage the data and communications services for the UK’s smart metering deployment. CGI is in line for the data side of the contract. And a firm called Gemserv may get the contract to maintain and update a smart metering code that defines the technology.

Smart metering has been used elsewhere in Europe but not on a widespread basis. There have been introductions in Nordic countries using GPRS for meter reading in rural areas where it is more efficiently for utilities than  physically sending out an employee to read a meter.

But supporters of smart meters are more ambitious. They want the technology to revolutionise the energy market by making it more interactive between energy provider and consumer.