Tiscali, the Milan-listed company that supplies broadband in the UK and Italy, expects its businesses to be bought up by rivals in the next two years, according to Tommaso Pompei, its chief executive.
Mr Pompei said he did not see many opportunities for Tiscali to buy rivals, and therefore it was more likely that the company's UK and Italian broadband operations would be sold.
However, he said the company was not for sale, adding that he was focused on executing its 2008 strategy to report a net profit for the first time in its 10-year existence.
Tiscali's share price fell 20 per cent in 2007. The stock closed down 0.22 per cent at €1.35 on Tuesday.
Europe has experienced a wave of consolidation deals between companies providing high-speed internet access in the past two years.
Mr Pompei predicted a second wave of consolidation in the coming two years. "We do expect to be part of this process," he told the Financial Times.
He added that Tiscali had previously received expressions of interest in its UK operations, although no negotiations were taking place.
"This year for sure we'll be 100 per cent focused on our results, but we are prepared to react should the consolidation take place," Mr Pompei said.
Broadband companies are seeking profitability through scale because cut-throat competition has reduced margins. In the UK, Carphone Warehouse became the third-largest broadband provider in 2006 by buying Time Warner's AOL internet access business.
Last September, Tiscali agreed to buy Pipex, a medium-sized UK broadband provider, for £210m ($412m), which transformed it into the fourth-largest supplier of internet access. But some analysts still question whether Tiscali has sufficient scale to remain independent.
The scale issue is even more acute for Tiscali in Italy. It is the country's fourth-largest broadband provider, but has only a 5 per cent market share.
Swisscom, Switzerland's leading telecoms company, last March agreed to buy Fastweb, Italy's second-largest broadband provider.
Vodafone, the UK phone group, agreed in October to buy the Italian broadband business owned by Tele2, the country's fifth-largest internet access provider.
Mr Pompei said Tiscali's UK and Italian operations represented the only remaining independent broadband operations for rivals to buy if they wanted to increase market share significantly.
"This year is crucial for our company because, as anticipated, it will be a turnover of the new strategy and the new plan, with important financial results to be achieved," he said.
"Once we are there, let's see what happens, and we are open to consider all alternatives."
Mr Pompei highlighted how Tiscali's UK and Italian operations had deferred tax assets valued at €350m ($511m) and €150m, respectively.