BSKYB has entered exclusive talks to acquire Tiscali, the troubled internet provider, after rival bidder Carphone Warehouse walked away from the long-running auction.

The satellite broadcaster, 39% owned by News Corporation, parent of The Sunday Times, is understood to have lodged an indicative bid of about £450m for the Italian company’s UK operation. The price may fall further after more due diligence.

If Sky goes ahead with the acquisition it would become Britain's third-largest broadband supplier with 3.6m customers, leapfrogging Carphone and putting it within touching distance of Virgin Media, which hopes to add to its 3.8m-strong base when it reports third-quarter figures on Thursday.

The purchase would also mark a strategic departure for the company, which has only offered broadband to date to customers who also subscribe to its television package. So far 20% have taken up the offer.

On Friday Sky reported 164,000 broadband additions, taking its total to 1.79m. Tiscali has 1.84m subscribers, but has lost market share recently.

Sky chief executive Jeremy Darroch said on Friday that the company was not involved in the auction of Spanish pay-TV business Digital Plus.

He added: “From time to time we will look at lots of things, but there is a lot of opportunity for us in the UK and we are pretty focused on that.”

Tiscali, 20% owned by Sardinian tycoon Renato Soru and listed in Milan, has been trying to find a buyer since May.

Vodafone, a small player in home broadband, considered paying £600m for the business, but since then the valuation has fallen.

The process is complicated by the fact that Tiscali’s advisers, JP Morgan and Banca IMI, are believed to be sponsors of a bond that the company must pay off.

Sky, which declined to comment on the discussions, could make use of the tax losses accrued by Tiscali in its small internet TV business, HomeChoice.

BT is Britain’s biggest broadband provider, with 4.5m customers.

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