BT has confirmed that it has held talks with Dixons Store Group (DSG) about replacing Freeserve in a key distribution deal with the high street electrical retailer.
However, the UK's dominant telco has confirmed that it has ruled itself out of any tie-up with DSG.
A spokesman for BT told The Register "Yes, we have had held talks with Dixons but we're not going ahead with it at the moment."
Although BT declined to say why, it's understood that the telco was concerned that a distribution deal to promote its Internet services in DSG shops was likely to face objections from rivals.
Today's confirmation from BT follows a report at the weekend, which claimed that BT and AOL UK were holding secret talks with DSG that could result in ousting Freeserve from DSG stores.
DSG and Freeserve deny they are parting company, insisting that while the contract for the promotion of narrowband ISP services is up for review, negotiations are still ongoing.
Both say that no decision on the outcome of those negotiations has been made as yet.
But with BT now ruling itself out of the race, all attention is on AOL UK to see if it will dislodge Freeserve from the shelves of Dixons, Currys and The Link.
It's not known if DSG is talking to any other ISPs.
Freeserve - which was founded by Dixons in 1998 before being flogged to French outfit Wanadoo - remains defensive about talk of a possible severance.
A spokeswoman for Freeserve said: "It's not over 'til it's over. Dixons have served notice on the contract, not terminated it." ®