Deutsche Telekom, the German telecoms giant, and Netherlands phone company KPN have ended talks to acquire mobile operator O2, the firms said on Tuesday.
O2's size and independence from a fixed telecoms firm make it a target
O2, which operates in the UK, Germany, Ireland and the Isle of Man, is an alluring takeover target because it is successful, but small in global terms.
Deutsche Telekom (DT) had suggested to KPN that it buy O2's German business, while DT would buy O2's other units.
DT said it had "no present intention" to bid, which bars it for six months.
"DT and KPN initiated exploratory discussions with respect to a potential acquisition of O2. These discussions have now ended," the German phone firm said in a statement.
"At the request of the Panel on Takeovers and Mergers, DT confirms it has no present intention of making an offer for O2," it explained.
The Sunday Times reported over the weekend that DT and KPN had called off their £14bn ($25.3bn) bid for O2 - once the mobile arm of UK telecoms firm BT.
DT might have encountered regulatory problems in Germany if it had launched a bid without KPN, as it already runs a large German mobile operation under the brand name T-Mobile.
"The discussions with DT, which were of a preliminary nature, are no longer taking place," KPN said in a statement.
O2 shares fell 2.4% or 3.5p to 143p on Tuesday. They reached a high of 149.5 pence on Friday before news of the failed talks appeared in the weekend press.
A spokesman for O2 told the BBC it had "received no formal approaches from DT or KPN, and management attention is focused on continuing to improve financial and operational performance".