Virgin has lost London's first digital radio multiplex licence to CE Digital, a joint venture between Capital Radio and Emap Radio.
The multiplex will be officially launched in May 2000. Capital promised to roll out its digital services immediately after. Capital's offerings will include all existing stations including Capital FM, Kiss 100 and Magic, and one new station, provisionally named Hot AC which will offer "adult contemporary rock".
This is CE Digital's third digital radio licence, following awards for Manchester and Birmingham.
Paul Davies, group commercial director at Capital Radio said: "It is important for us to gain a place on the digital platform. I expect to see one in five households having digital radio by 2005 and this decision by the Radio Authority guarantees us the London licence for the next twelve years."
A spokesman for Virgin Radio, which applied for the licence in a joint venture with Talk Radio, said he was disappointed, but not to count his company out. "We are committed to digital and are looking forward to broadcasting nationally on digital in the next few months."
Kelvin McKenzie, managing director of Talk Radio and father of Live! TV's news bunny, was more bitter. "This is a vote for the old order," he said.
Virgin would not comment on whether it would pursue the remaining two London licences.
Virgin will begin national digital radio broadcast on Digital One's multiplex later this year but it will not be able to compete for the revenue stream from London-specific advertising until it is awarded a London licence.