The two companies face competition from BT and Mercury in the race for the multi-million pound deal. Racal, which runs the Government's data communications network, had hoped to take over the voice telephony operation as well.
The government network, which serves 250,000 users in 1,000 locations, is operated by the Central Communications and Technology Authority. An authority spokesman said the long-distance network was only a small part of its functions and no job losses were expected.
The successful company will have to pay pounds 10m for the 13 switches on which the network is based and will then charge the Government for providing telephone and other communications services. Revenues from the operation are likely to be tens of millions of pounds a year.
AOTC said it would use a successful bid as a springboard to enter the wider UK telecommunications market.
US Sprint has already applied for a licence as a full-blown telephone operator in the UK, offering national and international services to challenge Mercury and BT.Reuse content