Internet service provider TalkTalk will not use behavioural advertising services from Phorm.
A TalkTalk spokesperson told ZDNet UK on Wednesday that its Phorm agreement had been terminated, as the company wanted to concentrate on integrating Tiscali, which it acquired formally on Tuesday.
"We've terminated the agreement because we want to focus on other opportunities, including Tiscali," said the spokesperson. "We've never trialled Phorm."
TalkTalk has been evaluating the Phorm service, which serves ads to people based on their web-browsing behaviour, for approximately 18 months. Both privacy campaigners and the Foundation for Information Policy Research have alleged that the Phorm service contravenes UK interception laws, which Phorm has denied.
The European Commission has also begun to take legal steps against the UK government for its failure to take action against Phorm or BT for two trials of the technology in 2006 and 2007. BT conducted the trials without first gaining customer's consent.
The TalkTalk spokesperson said the company had not been worried about any privacy concerns its customers may have about Phorm, and added that any service from Phorm would have required customers to opt-in.
Phorm announced on Wednesday morning that TalkTalk had terminated the agreement, after which its share price dropped 14 percent on the London Stock Exchange.
This came after earlier, sharper falls. On Monday the share price fell 43 percent after BT announced that it had put its plans to implement Phorm's Webwise behavioural advertising service on hold. At market close on Wednesday, the shares were trading at £2.02, having ended last week at £4.70.
On Wednesday, Phorm said its agreement with BT still existed, but that BT had decided to concentrate on other opportunities for the time being.
"In the UK, Phorm continues to hold a commercial agreement with BT," said the announcement. "BT has confirmed to the company that whilst it has no immediate plans to deploy and it is currently prioritising more pressing projects such as developing next-generation broadband, it will monitor Phorm's progress with other internet service providers. The company is extremely encouraged by the fact that BT has stated that privacy was not a factor in their decision making."
A number of companies have declined to use Phorm's services, including Orange, which said that it had come to its decision on the basis that customers may feel the service would compromise privacy.