"It is truly a step-change transaction not only for NTL but for the media sector as a whole in the UK," said James Mooney, executive chairman of NTL.

Deal options

Virgin Mobile is 71%-owned by Sir Richard Branson's Virgin Group. But NTL's original £871m bid was rejected by Virgin Mobile's independent board members.

Under the new offer from NTL, owners of Virgin Mobile shares will be offered 372p cash per share, or NTL shares, or a mixture of both.

Sir Richard's Virgin Group is to accept the third option - of shares and cash - which will see it become the largest shareholder in the new entity.

"After careful consideration, the independent directors of Virgin Mobile intend to recommend NTL's offer to shareholders," said Charles Gurassa, chairman of Virgin Mobile.

The NTL cash offer represents a 19.6% premium to the price of Virgin Mobile shares on the day before news of the takeover interest was made known, on 2 December 2005.

NTL - which only recently completed its merger with smaller cable firm Telewest - has also agreed an exclusive 30-year licence for the Virgin brand and believes this will help attract and retain customers.

It will have to pay 0.25% royalties on its revenue for three decades - with a minimum annual payment of £8.5m - to Virgin Enterprises for the use of the brand name created by Sir Richard.

NTL has also persuaded Virgin Mobile management to stay on and run the business, which will continue to be based in the UK.