* UK Takeover Panel gives Dixons, Carphone until May 19
* Sky News report says Phones4u could enter fray
* Source says Dixons not in tie-up talks with Phones4u (Adds detail of report of possible Phones4u interest, shares)
By James Davey
LONDON, March 24 (Reuters) - Britain's Takeover Panel hasgranted Dixons Retail and Carphone Warehouse aneight-week extension to their negotiations for a possible 4billion-pound ($6.6 billion) merger.
The extension was given on Monday as speculation that rivalPhones4u could enter the fray was dampened.
Dixons, Europe's second-biggest electricals retailer, andCarphone, Europe's largest independent mobile-phone retailer,now have until May 19 to confirm whether they intend to pressahead with a deal that would create a group with about 2,900stores across Europe and which it is expected would find a placein Britain's FTSE 100 share index.
Dixons and Carphone announced they were in merger talks onFeb. 24 and the Takeover Panel set an original deadline of 1700GMT Monday.
"Since the announcement of Feb. 24 was made when discussionswere at a very preliminary stage, both parties have agreed thatthey require more time to evaluate a potential merger of the twobusinesses," the two companies said on Monday.
A Sky News report said BC Partners, the privateequity firm that owns Phones4u, sounded out senior Dixonsexecutives about a possible tie-up in the days following theemergence of the Carphone merger talks.
Phones4u already operates outlets in some Dixons storesthrough a deal that runs to May 2015.
A source familiar with the situation told Reuters Dixons wasnot currently in talks with Phones4u about any other businesstie-up.
Shares in Dixons closed up 0.2 percent at 49.96 pence,valuing the business at 1.8 billion pounds. Shares in Carphoneclosed down 4.8 percent at 323.6p, valuing that business at 1.87billion pounds.
Both Dixons and BC Partners declined to comment. ($1=0.6065 British Pounds) (Additional reporting by Freya Berry; Editing by Kate Holton,Greg Mahlich)
