Report says Vodafone walks away from Tiscali auction

By Kate Holton and Douwe Miedema

LONDON (Reuters) - Vodafone Group (VOD.L) has pulled out of the auction for Italian broadband provider Tiscali (TIS.MI), a source familiar with the matter told Reuters on Thursday.

The news, confirmed a Financial Times report, sent shares in the Italian group down as much as 12.9 percent. They traded down 3.5 percent at 2,1675 euros by 11:37 a.m.

Vodafone had been seen as the most likely buyer for Tiscali as it could acquire both the Italian and British divisions to combine them with existing assets.

The report said BSkyB (BSY.L) and Carphone Warehouse (CPW.L), Italy's Wind and Swisscom (SCMN.VX) were all still interested in a Tiscali deal.

Both Vodafone and Tiscali declined to comment on the report.

"We do not comment on the details of the process," a Tiscali spokeswoman said. "What I can say is no decision has been taken yet; all is open, and Tiscali will decide by the end of the month."

Both BSkyB and Carphone had previously said they would look at the British unit.

Analysts noted that the auction did appear to be dragging on, but said Tiscali was looking to sell at a time of tight credit markets, increasing pressure on consumer spending and slowing broadband growth.