NTL, the UK's biggest cable company, has made an all-share bid for the troubled company, which has found itself in a David and Goliath battle with the dominant BSkyB.
A merger bringing together the two services could finally create an operator serving both terrestrial and cable subscribers that is able to compete against Rupert Murdoch and Sky. ITV Digital has 1.1m subscribers compared with Sky's 5m.
According to reports in the Sunday Telegraph, Barclay Knapp, CEO of NTL, has been holding high-level talks with Stuart Prebble, chief executive of ITV and ITV Digital. Prebble, the report suggests, is a backer of a deal as he believes it offers a long-term future for the business.
Shareholders in Carlton and Granada were recently calling for the plug to be pulled on the costly ONdigital service, into which the two ITV companies have poured hundreds of millions of pounds.
Under the terms of the all-share deal, the two ITV companies would take a share in NTL in exchange for ITV Digital, with Carlton and Granada holding around a 10% stake in the enlarged group.
The talks are believed to have been heavily influenced by the recent letter sent by Charles Allen, chairman of Granada, to the prime minister Tony Blair in which he warned that ONdigital might not survive.
According to the Sunday Telegraph, Prebble is said by friends to have decided that ITV Digital needed a new owner to maximise its value, grow its subscriber base and ensure its long-term future.
Prebble is believed to be supported in the talks by Gerry Murphy, chief executive of Carlton. Like Allen, he is keen to see the future of ITV Digital resolved, since its continuing losses are depressing both companies' share prices.
The paper also reported that Telewest, NTL's rival cable company, is keen to take a stake in ITV Digital. However, this may come after the takeover is completed.
This article was first published on brandrepublic.com