Vodafone UK has dropped out of the race to become the operator-partner for BT, a move which makes it more likely that the fixed-line operator will instead turn to O2 for its mobile service for consumers and businesses, according to reports.

Under a long-term agreement, Vodafone provided a mobile service to BT for its own staff as well as businesses customers, but this agreement was nullified following the mobile operator’s acquisition of BT-rival Cable & Wireless Worldwide last year.

Vodafone was interested in a new contract with BT but pulled out of the running after deciding it could not match the terms offered by rival O2, according to City AM.

BT opened the tender for an operator-partner in April having won frequencies in the UK’s spectrum auction earlier this year.

The fixed-line operator acquired frequencies in the 2.6 GHz band. The frequencies are attractive to O2 which acquired less spectrum in the auction than either Vodafone or Everything Everywhere.

O2’s interest opens up the possibility of a spectrum trade or a sale with BT, meaning the mobile operator is more interested bidder than rival Vodafone, according to sources.

The tender process is due to take several months to complete.