Vodafone is reported to have emerged as one of the frontrunners in the auction for Tiscali after submitting a £1.1bn bid for the Italy-based broadband company.
The network lacks a fixed-line broadband business in the UK, where Tiscali has 1.2m broadband users and is the fourth-largest player.
Vodafone would also seek to merge Tiscali's Italian arm with the Tele 2 business which the mobile phone giant recently acquired in Italy.
It is being reported that Carphone Warehouse has failed to make the shortlist despite lodging a first-round bid for its UK assets pitched at around £550m.
Industry analysts are now say that Carphone Warehouse's telecommunications business itself could become an acquisition target if it has failed to buy Tiscali.
Mark James of Collins Stewart and Mike Jeremy of Daniel Stewart said Carphone could be a bid target after the UK's third-largest broadband provider was excluded from a shortlist of would-be buyers of Tiscali.
Mr James claims Carphone’s next step will be to sell its telecoms business.
‘Many of the bidders for Tiscali have an equally good reason to be interested in [Carphone's] (bigger and better) UK telco arm,’ he said.
Carphone founder and chief executive Charles Dunstone last month expressed keen interest in Tiscali's UK assets, which would turn his company into the largest broadband provider, ahead of BT and Virgin Media.