The firm -- which owns a majority stake in Digital One, the first multiplex licence that was created in 1998 -- was furious that the creation of a second would undermine its heavy investment.
It had also said that when its licence was awarded, it had been told by the previous regulator the Radio Authority that it would be the first and only national licence.
However, following discussions with Ofcom, the firm has now dropped plans to seek a judicial review over the move and in a statement claims the second licence will "broaden lasting consumer choice and to create an environment for complementary digital radio services to those currently broadcasting on Digital One, now and in the future."
GCap, which owns Classic FM, has also been given assurances that it will be allowed to bid for the second licence.
Ralph Bernard, GCap chief executive, said: "We have been in the vanguard of digital radio development in the UK since the beginning and as sales of DAB sets reach the 3m mark, we are confident that the next phase of development is intended to truly broaden choice for listeners.
"We look forward to helping to create new and complementary national services and believe that at GCap and Digital One we have the best DAB track record to deliver them."
This is the second U-turn this month by GCap, which has decided not to plough ahead with plans to sell nine analogue local radio stations as it revealed it expects revenues to be down 13% for the year ending March 31 2006.
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