France Telecom and NTL, the group which has bought Irish cable operator Cablelink, are in talks that are expected to lead to NTL launching an £8 billion bid for the residential cable assets of Cable & Wireless Communications (CWC), the UK cable operator.
The move, scheduled to be announced next week, would be the latest twist in the complex consolidation of the UK cable industry. It would also threaten a proposed deal between CWC and Telewest, the third UK cable operator.
CWC and Telewest have been discussing a merger of their cable operations since April. However, Mr Barclay Knapp, NTL's chief executive, has made no secret of his desire to become involved in the negotiations.
People close to the situation confirmed that France Telecom is negotiating what stake it will take in NTL and what boardroom representation it will receive in return for partially funding the transaction.
Executives from France Telecom and NTL were last night locked in talks over what proportion of the offer each company supplies. NTL refused to comment and France Telecom could not be reached for comment.
The move shows how Cablelink's new owner is now bidding to become a central player in the industry in Britain, in a move which could give the French company a significant shareholding. NTL is also in talks to buy Cable Management Ireland, a smaller cable company with franchises concentrated in the Dublin suburbs.
NTL and France Telecom's intervention is likely to speed up the sale of CWC's assets, which encompass the company's 1.2 million residential cable customers.
People familiar with the situation said they expected a buyer to be selected within the next 10 days. Telewest is understood to be preparing an offer that would offer CWC shareholders a choice of cash or shares in the enlarged entity.
A speedy sale of the assets would be a boost for Cable & Wireless. This week the auction of One-2-One, the mobile phone operator jointly owned by C&W and MediaOne, the US telecoms group, collapsed after the two remaining bidders pulled out.
The proposed deal with NTL would represent a major step for France Telecom in its attempts to expand outside its home market.
