U.S. mobile operator AT&T on Monday ruled out buying Vodafone for the next six months after an enquiry by Britain's takeover panel following months of speculation, sending its shares down sharply.
AT&T had sparked speculation that it could be interested in a deal with Vodafone after its Chief Executive Randall Stephenson said there was a "huge opportunity" to invest in mobile broadband in Europe.
In a statement to the London Stock Exchange, the second-largest mobile service provider in the United States denied that it was planning a bid. However, it could come back under certain circumstances, including if a third party enters the fray.
"AT&T notes the recent speculation regarding a potential transaction involving Vodafone Group Plc," it said in a short statement. "At the request of the UK Takeover Panel, AT&T confirms that it does not intend to make an offer for Vodafone."
Shares in Vodafone sank. (Click here for the latest stock price.)
Espirito Santo analyst Robert Grindle, who downgraded Vodafone last week, said he thought AT&T had realized that Europe was still too tough a region to buy into, with fierce competition driving down prices.
However, he said the group may return once it sees signs of trading starting to stabilize. "We downgraded because one of the issues was that we didn't think a deal would happen as quickly as people thought," he said.
Vodafone is the world's second-largest mobile operator, with assets in Europe, India and Africa. Britain's Sky News reported on Saturday that AT&T had started courting European regulators, with Stephenson meeting the European Union telecoms commissioner Neelie Kroes.
AT&T is the second-largest operator in the U.S. after Verizon Wireless, the joint venture that Vodafone is in the process of selling out of for $130 billion.
(Read more: Why $130 billion Verizon-Vodafone deal makes sense)
But it is not adding new customers in its home market as fast as Verizon, and it is also ceding market share to much smaller rival T-Mobile US.
Analysts and bankers have speculated that the sale by Vodafone of the U.S. Verizon Wireless unit to majority partner Verizon Communications, which is due to complete in February, would leave the British firm more open to a takeover.