According to reports, mobile phone provider Carphone Warehouse is out of the race to buy the UK division of Italian broadband firm Tiscali.
Vodafone is now thought to be the frontrunner of the remaining companies looking to make a bid, with other potential candidates rumoured to include BT, BSkyB and Virgin Media.
A number of firms have made it to the second bidding round, but Carphone Warehouse is not thought to be among these. Chief executive at Tiscali, Mario Rosso, is thought to be putting together a shortlist of remaining candidates but he has not officially disclosed who they are.
Tiscali's entire broadband
business is up for sale; however, it is thought that its UK arm – which could be worth more than £550 million – may be sold separately. The company as a whole is thought to be worth approximately £1.1 billion.
Its share prices have already risen in response to speculation over an impending takeover. It also reported a revenue increase of 43 per cent for its first quarter, with revenue totalling €276.4 million compared with €193.2 million in the corresponding period last year.
Vodafone already has operations on the continent, having purchased internet assets in both Spain and Italy in 2007. Reports indicate that the UK telecommunications giant is hoping to buy Tiscali's broadband operation in order to boost its domestic and overseas operations.
If Carphone Warehouse had succeeded in taking over the company, it would have taken the crown from BT to become the largest broadband provider in the UK, merging its 2.7 million broadband customers with Tiscali's 1.7 million.
It is thought that a sale of the company, or its components, could be agreed by the end of May.