The £210 million tie-up between Pipex, Britain’s sixth biggest broadband provider, and Tiscali could face a significant delay after the Office of Fair Trading announced a probe into the deal.

The OFT announced today that it is to investigate the tie-up between the two rivals for any potential competition issues.

If it is unhappy the trade watchdog could impose certain conditions on the merger. Ultimately it could refer the deal on to the Competition Commission.

Pipex, which is chaired by the internet millionaire Peter Dubens, announced two weeks ago that it had reached agreement to sell off its one million consumer and small business voice and broadband base to its Italian rival.

The group is continuing to work with its advisers, UBS, to unearth a buyer for the rest of the business, which includes internet hosting services and a Wi-Max venture with Intel.

"Tiscali, which merged last August with HomeChoice, the pioneering television-on-demand provider, is the UK's fourth-biggest broadband player with around 11 per cent share of broadband customers. Pipex is around sixth with a fourth per cent customer share."

It is understood the companies voluntarily highlighted the deal to the OFT.

A rush to grab market share in high-speed internet has already seen a slew of tie-ups in the sector. Last year the UK arm of AOL was snapped up for £370 million by Carphone Warehouse. The satellite broadcaster BSkyB secured the broadband provider EasyNet in a £211 million deal in 2005. Virgin Media, the cable group, is currently being stalked by players including Carlyle, the private equity firm.

Pipex's move to exit now is thought to have been triggered in part by its unwillingness to keep up with the big-name brands crowding the high street and their "free" broadband offers by ploughing money into advertising and marketing.

Tiscali, which now operates in just two countries having been forced to curtail its ambitions, is itself regarded as a likely acquisition target.

However it has so far insisted that it is not for sale.

The OFT is inviting comments on the deal until Aug 17.

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