The group which last year won a contract to provide digital terrestrial television (DTT) services in Ireland has pulled out of the project.

The Broadcasting Commission of Ireland said Boxer - which includes Denis O'Brien's Communicorp - had withdrawn its applications for the three multiplex contracts.

Boxer blamed the economic downturn and 'challenges' in reaching a deal on transmission facilities with RTE Networks for its decision.

DTT is set to replace the current annalogue television signal which is due to be switched off at the end of 2012. Households without satellite or cable television services will have to upgrade to DTT.

The BCI said it would now ask the second place applicant in last year's competition - One Vision - whether it was interested in negotiating on the contracts. One Vision includes TV3, Setanta and Eircom.

Read more about plans for DTT in Ireland here.

BCI chairperson Conor Maguire said the commission was 'disappointed' but was committed to pursuing its digital policy objectives.

Under legislation, the BCI was to licence commercial DTT for three multiplexes - or bundles of channels - while RTÉ was assigned a single DTT multiplex to ensure the continued availability of the four existing free-to-air services in Ireland - RTÉ 1, RTÉ 2, TG4 and TV3.

RTÉ is to set up and run this DTT multiplex independently of BCI-licensed multiplexes in fulfilment of its public-service obligations.