Bam Bam has presented the Kiss breakfast show for five years. His contract was set to run out in the new year.
This summer, the DJ was approached by Capital Radio, which was seeking a replacement for Chris Tarrant, who leaves next year. However, Bam Bam turned down the approach.
The station has since hired Johnny Vaughan to take over from Tarrant from April 2004.
Vaughan will be charged with the Herculean task of retaining the 1.2m listeners who tune into Tarrant every weekday morning.
The competition among London's radio breakfast shows has become increasingly heated.
Sara Cox has been moved off BBC Radio 1's breakfast show to take over the drivetime show. She makes way for Chris Moyles, who will present the breakfast show from the new year.
In the latest set of Rajars for the three months to September, Cox's breakfast show lost another 25,000 listeners in London and 134,000 overall, a less dramatic loss than the 474,000 nationwide who tuned out last quarter, almost half of them from London.
Moyles will compete against Vaughan, Bam Bam and Christian O'Connell, whose breakfast show on Capital's sister station Xfm is also gaining listeners.
O'Connell's show now draws 258,000 listeners in London, according to the figures for the three months to September.
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