Sky have entered negotiations to aquire currently fourth largest ISP Tiscali, after rival bidder Carphone Warehouse - which runs its own Talk Talk and owns the UK arm of AOL - reportedly pulled out of the auction.

The triple-play provider is thought to have put forward an indicative offer of £450 for the Italian company’s UK operations, with the potential for a further price drop. The potential purchase is seen as a strategic departure for the company, which currently offers free broadband to customers who also sign up for to its television package. 20% of Sky TV subscribers have taken up the offer so far.

If Sky carries the deal forward, it will become the third largest UK broadband provider with 3.6 million, overtaking Carphone Warehouse and creeping up behind its main rival Virgin Media, which hopes to improve on its current 3.8 million customer base in its third quarter report, to be announced this Thursday. BT is currently in pole position as Britian’s biggest broadband provider. The telecoms giant is thought to have walked away from the long-running auction, along with Vodafone.

Earlier on in the bidding, Vodafone had been considered a strong player as the only company willing to buy up both Tiscali’s UK and Italian broadband operations, but has pulled out since the business’s valuation has fallen.

Tiscali has been trying to find a buyer since May. The provider has around 1.2 million broadband users in the UK, although it is believed to have lost market share recently, perhaps due to news that the company is planning to up sticks and sell to the highest bidder. Last Friday Sky revealed that its broadband take-up had risen to 1.8 million customers.

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