Tiscali, the troubled Italian broadband provider, has confirmed that it is in talks with BSkyB to sell its UK broadband business to the satellite broadcaster.

BSkyB, which is 39 per cent owned by News Corporation, parent company of The Times, is believed to have tabled an initial bid of £450 million for Tiscali's 1.8 million broadband customers, about £100 million less than earlier valuations for Tiscali's UK arm.

If the deal goes through, BSkyB would leapfrog Carphone Warehouse to become the country's third-largest internet provider with 3.6 million customers, behind BT and Virgin Media.

Until now, BSkyB has sold broadband only to its TV customers. The acquisition would open the possibility of cross-selling its TV package to Tiscali's subscribers.

In a statement, the Italian company said: “Tiscali clarifies that it is currently holding talks with the BSkyB Group plc in relation to certain UK assets.”

The group's shares rose 40 per cent on the news, although the large gains led trading on Italian exchanges to be suspended several times.

BSkyB is believed to have been in exclusive talks with the struggling Italian group for several weeks. However, the satellite provider declined to comment.

Tiscali effectively put itself up for sale when it began a review in Feburary this year, but has so far failed to close a deal.

Vodafone, Carphone Warehouse and BT, which are all believed to have held discussions with Tiscali at various points this year, are no longer in talks with the group.

Vodafone, the world's largest mobile operator by revenue, was considered a strong bidder earlier in the process, as the group was believed to be interested in both the Italian and UK subsidiaries of the business.

At one point Tiscali's combined Italian and UK businesses were expected to fetch about €1.6 billion (£1.3 billion), with a price tag of £550 million for the UK division.

Tiscali withdrew from negotiations in the summer, missing a self-imposed deadline of June 30 after offers failed to reach its expectations. However, analysts feel that given the current market, the price is likely to fall farther.

John Davies, telecoms analyst at Dresdner Kleinwort, said: “This seems to be a very long-running saga. We have had announcements almost as detailed as this before so it is not certain that the deal will close. It seems to be a more sensible price. It would be a bit of a change of strategy for BSkyB. Until now they have been selling directly to TV customers. They could try cross-selling their TV product to Tiscali customers.”

Another analyst, who did not wish to be named, said: “The deal would make sense. At £220 per customer it is financially a winner. Tiscali is a mess as it has acquired so many different businesses along the way. But if Sky can strip that away and incorporate Tiscali into its business, it gains undeniable scale, which will make it all worthwhile.

"Is it the best thing Sky can do with its assets? I think in-country consolidation, buying up distressed assets that are going cheap, makes sense right now.”

BSkyB said on Friday it had added 87,000 new customers in the three months to September 30.

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