Vodafone and Capita run the UK's last two paging businesses and agreed the sale in February.
But the Competition and Markets Authority said it was concerned customers may now face price rises.
Vodafone said was 'disappointed' by the CMA's decision and it made more economic sense to close the business.
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spokesman for Vodafone said: "This seems to be a surprising decision
considering that this market has been contracting for some time and no
other country in Europe has more than one wide area paging network.
"Due
to the expense involved with a prolonged investigation, Vodafone will
not pursue the transaction and has made the decision to close down this
business, which is based on ageing, standalone technology no longer
supported by network vendors."
He added that Vodafone could do "its utmost to minimise the impact on the 1,000 or so customers still using the service".
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spokesman for Capita declined to comment on whether Vodafone's
remaining customers will end up transferring to its PageOne business.
He said: "We are disappointed that the acquisition has not been approved at phase one by the Competition and Markets Authority."
Pagers,
a decades-old technology, are still used by many people such as those
working in the emergency services because of their reliability, coverage
and battery life. They are used by the NHS and the Army as well as
lifeboat services.
The technology had its heyday in the 1990s and
early 2000s and was sometimes referenced in rap music such as Jay Z's
single "I Just Wanna Love U (Give It 2 Me)" where he boasted about his
new Motorola two-way pager.
As Vodafone and Capita are the only
suppliers of wide-area paging services in the UK, the CMA said it
believed the deal could lead to higher prices as well as reduced quality
of coverage for customers.
In a statement, the CMA had said the
two companies must find "acceptable ways of addressing competition
concerns" to avoid an investigation.
"Capita and Vodafone both
supply wide-area paging services to customers, including emergency
services and hospitals," the regulator says
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