The owner of T- Mobile claims it has no plans to bid for UK rival O2 after failing to seal a takeover alliance.
German group Deutsche Telekom confirmed that it had held talks with Dutch telecoms group KPN about tabling an offer - thought to be valued at £14 billion.
But these discussions have now ended and Deutsche Telekom yesterday ruled itself out of bidding for O2 for six months by stating that it was no longer interested in the firm.
In a statement, the company said: "Deutsche Telekom has noted recent press speculation about its potential interest in O2.
"Deutsche Telekom and KPN initiated exploratory discussions with respect to a potential acquisition of O2. These discussions have now ended.
"At the request of the Panel on Takeovers and Mergers, Deutsche Telekom confirms it has no present intention of making an offer for O2."
KPN said it had been approached by Deutsche Telekom about a deal that would have seen it acquiring the German business of O2.
"The discussions with Deutsche Telekom, which were of a preliminary nature, are no longer taking place," KPN said in a statement.
At the weekend it was said the pair had been in talks for weeks.
One source said the two sides could not agree on who should bear the risk of raising the offer price if the bid was rejected or a rival emerged. There was also disagreement on the fundamental value of the German business.
Deutsche Telekom would have taken over the bulk of the business to further boost its presence in the UK. Offloading O2's German operations to KPN would hopefully have avoided any competition issues the bid might raise.
Analysts have long viewed O2 as a potential bid target because of its small size in comparison to rival operator Vodafone.
Shares closed at an alltime high of 149.5p on Friday, but fell back to 146.5p on Monday as investors reacted negatively to the report of the collapsed talks.
Slough-based O2 was spun off from BT in 2001 and currently has around 24.6 million mobile phone customers in the UK, Ireland, Germany and the Isle of Man.
Last month it reported a 232,000 rise in user numbers in the UK during the three months to June 30, making a total of 14.6 million.
At the same time its UK arm had made "encouraging" initial progress in its drive to prevent customers moving over to other operators, and added that it was confident that it would deliver all its growth and margin targets in 2005/06.
KPN's E-Plus unit is losing market share, and risks being overtaken by O2's German arm for third place before the end of 2007.
E-Plus ranks after TMobile and Vodafone in Germany, but added only 146,000 new customers in the second quarter of 2005. O2 Germany added 412,000 customers.
"It is a pity that KPN did not succeed in partnering with DT - we still are of the opinion that E-Plus could create large additional shareholder value if it would somehow team-up with O2 in Germany," said Petercam analyst Thijs Berkelder in Amsterdam.