Peter Jones, chairman and chief executive of Data Select parent company Phones International Group, had a bid for rival distributor 20:20 Mobile rejected las week.
Senior sources at 20:20 said the business was not up for sale.
"The discussions are between 20:20, the banks and Doughty Hanson. Jones’ bid has been thrown out completely. The business is not up for sale," said the 20:20 source.
20:20 said the banking syndicate in charge of 20:20 had received a verbal bid from Jones and a written bid last Tuesday (June 24).
Jones is understood to have bid around £120 million for 20:20, a figure in line with 20:20 parent Doughty Hanson’s positive valuation of the business in early June (see Mobile News issue 416).
Jones and Data Select refused to comment.
Jones and the Data Select management team have decided expansion, at home and abroad, by acquisition and organic growth, is the best way to succeed in the handset distribution market.
US giants Brightpoint and Brightstar have both entered the UK market recently.
Data Select has, to date, been restricted to UK distribution, but it is exploring opportunities abroad already via organic growth. It is understood to be close to signing two contracts with partner businesses overseas.
A source close to Data Select said: "The business is expanding abroad. It has a couple of significant projects underway, which enable it organic growth via contractual relationships in certain territories.
"The UK is extremely tough. It is difficult to make money, and scale at home and investment in overseas markets offer it opportunities."
The banking syndicate is expected to agree proposals from 20:20 parent Doughty Hanson this week, which would see it part with an equity stake of around £50 per cent in 20:20 in return for £15 million now and a further £15 million in nine months.
Doughty Hanson has wiped around £175 million of 20:20’s debt in recent weeks, reducing its original equity holding to zero.