As previously reported, parents are concerned about the potential health risks to children. They fear Drayton Playgroup will be forced to close if the mast went up on land next to Trinity Close because fewer parents will be willing to send their children there.
But despite planning approval from Cherwell District Council earlier this year, O2 has halted digging the foundations for the mast after meeting campaigner and mother Mary Jenvey on Tuesday.
Mrs Jenvey of Powys Grove, Banbury, said: "I have no idea why O2 had this change of heart but we are all delighted.
"They were very very helpful which we haven't experienced up until now."
She will meet representatives from the company again on November 6 when she will look at alternative sites with company representatives. "I have until then to try and come up with another site that's suitable," Mrs Jenvey said.
O2 community liaison officer Angela Johnson said: "If it is feasible to find another site then we will certainly look at moving the mast. We do try to work with local communities wherever possible and will try to find somewhere that is more acceptable to residents."