The companies said the conditions set by the country did not suit the two operators, despite joining forces to bid for a licence in April this year.
The government is looking to increase the number of mobile operators in the country from two to four, and the Chinese and British groups were among the 12 applicants to reach the final short list.
"Following the publication of the final licence conditions on 20 May, the Vodafone-China Mobile consortium has reached the decision not to proceed with the process as the opportunity does not meet the strict internal investment criteria to which both Vodafone and China Mobile adhere," Vodafone said.
