NTL has agreed to acquire Telewest in a deal that values Telewest at $6bn, the two companies announced on Monday.
Telewest shareholders will receive $16.25 (£9.22) in cash and 0.115 shares of NTL stock for every Telewest share they own, giving them around one quarter of the newly enlarged NTL.
The combined company will have a customer base of nearly five million customers, including 2.5 million broadband users.
The deal, which will leave the UK with a single cable operator, is subject to regulatory approval. The combined company will have more broadband customers than any other ISP but given the dominance of BT it is unlikely that the merger will be blocked on competition grounds.
While both companies are primarily focused on consumers, with their triple-play of telephony, Internet access and digital television, the deal has implications for corporate customers too. Telewest sells telecoms services to businesses and the public sector through its Telewest Business division; a merger with NTL could help it to reach more customers.
NTL and Telewest have predicted that the merger will allow them to save around £250m a year by 2008 and generate added value of £1.5bn, which could help the company to cut its prices.