Companies including BT are believed to be eyeing the UK operations of Tiscali, the loss-making Italian internet group that is being forced by financial restraints to curtail its ambitions. The Italian group, which has resorted to borrowing money from a hedge fund at 11%, is insistent that its UK division is not up for sale.

The interest in the Milan-listed group came as it emerged that Orange has pulled out of the bidding for the UK unit of AOL, the Time Warner-owned internet business which gave many British consumers their first taste of the internet.

BSkyB, in which News Corporation, parent company of The Times, has a 38% stake, and Carphone Warehouse, the high-street retailer founded by Charles Dunstone, will now compete for the unit, which analysts expect to fetch well below the £1 billion price initially sought.