Vodafone has missed out on more than £2bn worth of government contracts to provide innovative smart meter technology which could bring down energy costs in homes and small businesses.

Telefónica, the Spanish group which owns the O2 mobile phone business in Britain, has been made preferred "communications service provider" for the south and centre of Britain with contracts set to run over 15 years and worth £1.5bn while the much smaller and privately owned firm Arqiva has won a £625m deal to play a similar role in the north.

A Vodafone spokesman said the company was "disappointed" by its failure to land any of the three contracts it applied for. "We are still getting feedback (from the government)," added the spokesman for Vodafone, the world's second largest mobile phone company.

Telefónica said it was "extremely proud" to have been selected as a preferred bidder. "It's a huge endorsement of cellular as the right communications technology and of our vision for smart meters to be the foundation of a smarter energy future for the UK," said David Plumb, a director at Telefónica UK.

The Department of Energy and Climate Change (DECC) said it hoped to complete negotiations and confirm the contracts worth in total about £2.5bn within the next few weeks, though ministers recently admitted that earlier plans for the introduction of this technology had been delayed by a year and could not start before 2015.

Meanwhile G4S, the company at the centre of the Olympics security guard bungle, is another firm likely to miss out on the contract bonanza, this time to services group, Capita.

The two firms had been vying to win a £175m contract to manage the overall introduction of smart energy meters but Capita – itself under fire recently for using lie detectors as part of a contract to crack down on welfare benefit cheating in Cornwall – has been selected as the successful applicant for the "data and communications company" licence which runs for 12 years.

US-based CGI IT, is to provide data services in a fourth deal worth £75m, to last for eight years.

The government hopes the introduction of 53m individual smart electricity and gas meters in homes and businesses will help people monitor their energy usage and counter rising costs.

The meters will give consumers near real-time information on energy use, expressed in pounds and pence, while bringing an end to the manual reading of meters and estimated billing.

But some critics question the financial benefits and technological efficiency while warning the two-way communication system could undermine privacy by providing already unpopular energy suppliers with more information about peoples' lives.

DECC said it would make sure that consumers were protected when smart meters were being fitted in homes by stipulating that there could be no sales during installation, and all data would be protected.

"The government is committed to helping hard-working consumers with the cost of living," said a DECC spokesperson. "This includes our ambitious smart meters programme, which is set to benefit 30 million homes and small businesses by 2020. Smart meters will mean an end to estimated billing and will enable consumers to cut their energy bills and better manage their energy use.

"In preparing for the rollout of smart meters, we have today informed bidders of the outcome of the competitions to put in place the Data and Communications Company which will link smart and electricity meters with energy suppliers and network operators. These decisions remain subject to contracts being concluded, which will occur in the next few weeks after which we will make a statement to parliament"

The government said the overall programme would cost more than £12bn over the next 20 years, but provide £18.6bn worth of "benefits". However there are ongoing concerns that some pilot studies have shown the technology does not always work well in basements and houses located in remote areas.