There will be 30 spacecraft in the Galileo constellation

It was expected a winner would emerge on Tuesday to capture the multi-billion euro contract to operate Galileo.

But the two groups, iNavSat and Eurely, will now have further negotiations with the Galileo Joint Undertaking, the body set up to award the concession.

Galileo will work alongside the US Global Positioning System (GPS).

It will be both compatible and interoperable with the American constellation, improving the accuracy and reliability of navigation and timing signals received across the planet.

The venture is also expected to create more than 100,000 jobs in related industries across the European Union.

The test satellites are already under construction and the first spacecraft is expected to be launched on a Russian Soyuz rocket before the end of the year.

Improved bids

"I have decided to invite both consortia for parallel negotiations on the concession contract," said Rainer Grohe, executive director of the Galileo Joint Undertaking, in a statement.

WHAT IS GALILEO? Europe's own global satellite navigation system Will work alongside US GPS and Russian Glonass systems Promises real-time positioning down to just a few metres Guaranteed under all but most extreme circumstances Suitable for safety-critical systems - can run trains, guide cars and land planes

"I am convinced that this decision will prove the most beneficial for the public and I envisage that within the next three months, it will become clear with whom the GJU will continue the final negotiations."

Media speculation across Europe on Tuesday had both consortia winning the concession outright. But the true outcome was a dead heat.

The GJU, set up by the European Commission and the European Space Agency to manage the system's development phase, took the view that there was "very little difference" between the rival bids.

Transport Commissioner, Jacques Barrot, said further discussions could only benefit the project.

"Opening simultaneous talks on the concession agreement will also make it possible to improve the two candidates' proposals, to the greater benefit of the Galileo project," he said.

Frequency deadline

The two consortia comprise mostly European business interests. The Eurely alliance includes Alcatel, Aena, Finmeccanica and Hispasat; while the iNavSat group includes Thales, EADS Space and Inmarsat.

The delay in naming the operator should not slow the deployment of Galileo.

There is a deadline of June 2006 for at least one spacecraft to be launched to claim the frequencies allocated to Galileo under international agreements.

This is already in hand. Laboratories in the UK are currently preparing components for two separate test satellites that will fulfil this key objective.

They will launch independently of each other some time in the next 12 months.

They will be followed by the first four constellation spacecraft; and by a further 26 in due course.

Galileo should see sat-nav receivers move into a host of new markets - from consumer devices such as mobile phones to safety-critical applications such as guided trains and buses.

Analysts estimate the industrial spin-offs could create 150,000 jobs.