France Telecom's Orange unit has pulled out of the bidding for the UK operations of Time Warner Inc.'s AOL, The Times said.
Satellite TV operator BSkyB and Carphone Warehouse would now compete for the unit, the newspaper said in an unsourced report in its Thursday edition.
AOL said in August it expected to reach deals to sell its European Internet access businesses in the UK, Germany and France by the autumn.
BskyB, Carphone Warehouse and Orange were second-round bidders for the unit, sources told Reuters last month.
The sale comes amid fierce competition in the European broadband market as pay-TV and telecommunications providers invade each other's territory.
The sell-off of the European Internet access business is part of AOL's plan to draw most of its revenues from advertising rather than subscriptions.
The Times also said companies including British telecoms group BT were eying the UK operations of loss-making Italian Internet group Tiscali.
AOL declined to comment. Orange, BT, BSkyb and Carphone Warehouse were not immediately available to comment.
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