Carphone Warehouse has fallen out of the £550 million running to buy the UK broadband business of Italian telecoms group Tiscali, according to reports.

The Daily Telegraph cited sources close to the auction process, which said last night that the Charles Dunstone-run business had failed to make the shortlist.

Telecoms group BT, multimedia group BSkyB, UK mobile phone giant Vodafone and Virgin Media are believed to be among the several companies to have submitted first-round bids for Tiscali.

The Tiscali board held a meeting last night to discuss the bids, following which it said that it had received an unspecified number of approaches and that chief executive Mario Rosso was negotiating a shortlist. In order to find a buyer, the Italian company is willing to break up the €1.43 billion (£1.14 billion) business.

Carphone Warehouse’s rejection from the auction is a potential blow to chief executive Dunstone, who is eager to take on the might of BT – the UK’s largest broadband provider with about 4.25 million customers.

Carphone Warehouse’s broadband subsidiary TalkTalk has 2.7 million customers and a successful purchase of Tiscali would have bolstered that figure to 4.4 million, enabling it to become the market leader.

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