NTL has confirmed it has approached Virgin Mobile over merging the firms in a potential deal worth more than £800m.
NTL is set to benefit from Virgin's branding
The combined company would challenge Rupert Murdoch's dominant UK satellite TV firm BSkyB.
NTL said it had also held preliminary discussions with T-Mobile, Virgin Mobile's network provider, which has said it supports any proposed deal.
If the deal goes ahead NTL will use the Virgin brand to offer internet access, TV and fixed line and mobile telephony.
Virgin Mobile shareholders would be offered 0.09298 of NTL shares for each Virgin one, or 323p per share instead.
Sir Richard Branson owns 72% of Virgin Mobile through his Virgin Group holding company.
Following the announcement shares in Virgin Mobile were up more than 12% at 349 pence in London morning trade, before slipping back to just over 8% ahead in early afternoon trade.
"These discussions are preliminary in nature and subject to the satisfaction of certain further conditions, including due diligence," said an NTL statement.
Virgin confirmed it had received an approach from NTL that "may or may not lead to a formal offer being made for the company".
David Cleevely, telecoms analyst and chairman of Cambridge University's Communications Research Network, said: "It is a good match. NTL needs a good brand - Virgin has a strong image."
BSkyB, which is run by Mr Murdoch's son James, was told last month that it would lose its monopoly over live coverage of English Premier League matches, following a deal thrashed out by the Premier League and the European Commission.
Part of the Virgin Group
Launched in November 1999
"Virtual" operator, using T-Mobile network
Five million customers
Sells phones at 5,000 High Street outlets
Pre-pay and contract deals
Employs 1,400 staff in UK
Mr Cleevely said: "It should up the game for Sky, who had a bit of a blow on the football."
A deal between Virgin Mobile and US-listed NTL would radically shake up Britain's media landscape, as operators move to offer their customers a full range of TV, entertainment and telecom services.
NTL - which announced in October a $6bn merger with cable TV firm Telewest - has TV, telephone and internet customers in about five million UK households.
BSkyB currently has about eight million subscribers. Earlier this year, Britain's dominant pay-TV operator bought broadband provider Easynet for £211m so it could sell internet services to its own customers.
Provides home phone, TV and internet services
Provides data, voice and internet services to firms
Emerged from bankruptcy protection in 2003
Merging with Telewest
NTL/Telewest valued at £3.8bn, revenues of £3.4bn
NTL/Telewest total of five million subscribers
Employs 10,000 people
"Strategically it is further evidence of convergence in the sector between telecoms and media," ING analyst Damien Chew said about the NTL-Virgin proposal.
However other analysts counselled caution, with one questioning the "quality" of Virgin Mobile customers.
"While we applaud the improved branding clout that Virgin would add to NTL we caution that NTL may be taking on too many things at once," said Jim McCafferty at Seymour Pierce.
Virgin Mobile is the UK's fifth-largest mobile phone carrier and has more than five million customers. It does not own its own network but rents capacity from Deutsche Telekom's T-Mobile.