Telewest Communications, the UK's second-largest cable television company, has disclosed that it is holding £10 billion merger talks with Flextech.
The talks started on Sunday but as yet no agreement has been reached on price or on who would run the merged company.
The merger would combine Flextech interests in 13 television channels, including a series of joint venture channels with the BBC such as UK Gold, with Telewest's cable infrastructure and 1.4 million cable customers.
Industry commentators see a successful merger as a very likely outcome due in part due to major shareholders, Microsoft and Liberty Media, which own sizeable stakes in both companies. Microsoft owns 29.8 per cent of Telewest and 6.68 per cent of Flextech while Liberty owns 21.66 per cent of Telewest and 36.76 per cent of Flextech.
Although still early, Adam Singer, chief executive of the smaller Flextech, is being tipped as the man who will end up running the combined company.
In a statement the companies said: "The board of Telewest and Flextech announce that exploratory discussions between the two companies as to ways of working closer together to develop their respective businesses are taking place. These discussions, which include the possibility of a combination of the business, are at a very early stage and there is no certainty that any agreements will be reached."