Vodafone said on Tuesday there was no sale process underway for Deutsche Telekom'sT-Mobile UK subsidiary, at a gloomy annual meeting overshadowed by economic and performance concerns.

Chairman John Bond said he could not comment further on T-Mobile UK, but said he did not think there was a sale for Britain's second-smallest mobile operator, which has been at the center of speculation as it struggles in a crowded market.

The chief executive of Telefonica's British arm O2 also said this month there was no formal process going on to his knowledge, although he told Reuters that Telefonica was watching developments at T-Mobile with interest.

Deutsche Telekom says it is open to considering options for the business. It recently installed Richard Moat, a former Orange manager and turnaround expert, as managing director of its British operations.

Shares in Deutsche Telekom rose 1.3 percent.

Aside from the comments on T-Mobile, the annual general meeting was dominated by the tough economic conditions and Vodafone's share price performance in recent years.

Vodafone's Chief Executive Vittorio Colao reiterated that economic challenges would continue. His remarks followed a downbeat quarterly report on Monday from Verizon, Vodafone's joint venture partner in Verizon Wireless.

By 1251 GMT, shares in Vodafone, the world's largest mobile group by revenues, were down 1.8 percent to 117.85 pence, leading the decliners in a flat European telecoms index .SXKP.

Vodafone had said last Friday it would at best match last year's adjusted operating profit this fiscal year to end-March 2010. The unchanged guidance and lack of nasty surprises in the first quarter had sparked a relief rally.

(Reporting by Kate Holton; Editing by Greg Mahlich and Rupert Winchester)

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