Carphone Warehouse downplays talk of AOL UK buy

As speculation grows over the future of AOL's UK arm, Carphone Warehouse has played down reports that it may be poised to launch a bid.

According to a report in The Times, Carphone Warehouse chief executive Charles Dunstone revealed on Tuesday that he was keeping a "close eye" on AOL UK. Dunstone would have to spend around £1bn to secure AOL UK, The Times believes.

As reported last month, Citigroup has been engaged to conduct a strategic review of AOL UK. This has led to speculation that the operation, which with 2.2 million users is one of the UK's largest ISPs, could be sold.

Carphone Warehouse is currently struggling to cope with the huge demand for its "free" broadband offering, which will ultimately see it unbundle BT's local exchanges and offer its own high-speed Internet services. The company is on track to become one of the top five UK broadband providers, even though it only entered the game in April.

Buying AOL UK would swell Carphone Warehouse's user base and give it access to AOL's recent work on unbundling.

A Carphone Warehouse spokeswoman declined to comment on whether the company was planning to bid for AOL, but insisted that it didn't need to buy expertise from outside.

"We own Opal Telecom, which is experienced in unbundling," she said. "Our biggest focus is in developing LLU services for our customers."

According to AOL UK insiders, the Citigroup review is focused on partnership opportunities. There are many telecoms firms who could potentially benefit from a link with AOL UK. One candidate is Vodafone, which is under pressure to move beyond its mobile roots.