BSkyB and Carphone Warehouse are reported to be in a bidding war for control of the UK operations of Time Warner-owned internet service provider AOL.

Mobile phone operator Orange is reported to have dropped out of the running.

Another internet service provider, Tiscali, is also said by The Times newspaper to be attracting the attention of potential big-name bidders, including BT, even though the Italian internet group that owns it insists its UK division is not for sale.

The Times described the moves as a clear sign of a shake-up in the UK's overcrowded broadband market. Industry experts told the newspaper that they expected the market would eventually reduce to three or four big players, including BT.

AOL and Tiscali are the UK's third and fourth-ranked internet players. AOL is said to have 2.2 million customers and Tiscali 1.2m.