Telewest opens talks with Liberty

LONDON, England (CNN) -- Debt-laden British cable operator Telewest plans to start discussions with its biggest shareholder John Malone's Liberty Media and bondholders about cutting it debt pile.

Billionaire Malone is keen on taking control of Britain's second-largest cable-TV operator after plans to buy Deutsche Telekom's cable assets were dashed by regulators. He already controls Europe's largest cable group, United Pan-Europe Communications, based in the Netherlands.

Telewest (TWT) Chairman Anthony Stenham said in a letter to shareholders that a committee representing most of its bondholders proposed talks about reconstructing its balance sheet. Liberty already holds a quarter of the shares in Telewest and has made an offer to buy 20 percent of its bonds.

"It is in the best interest of your company to enter into discussions with Liberty and the bondholders' committee," Stenham wrote.

MORE STORIES • NTL files for $17bn bankruptcy  • Telewest to cut 1,500 jobs  • Microsoft may sell Telewest stake  • Telewest falls after Liberty offer

Earlier the Financial Times said Microsoft has offered to sell its 23.6 percent stake in Telewest to a consortium led by U.S. cable baron Malone.

Microsoft (MSFT) has offered to sell the stake to the consortium in the next 30 days at a price of 47.8 U.S. cents per share in a deal worth $332 million, the paper said.

Microsoft withdrew its directors from the board of Telewest, which is under pressure to slash its £5.3 billion debt pile, in May.

Rival NTL has swapped two-thirds of its $17 billion debt for stock -- effectively handing the company over to bondholders. Fears that Telewest could do the same has sent its stock plunging more than 90 percent this year.

"Microsoft has given up on cable... they've lost quite a lot of money," Nikkel Hofstee, a telecom analyst at ABN Amro, told CNN in May.

Instead, he said Microsoft is expanding its partnerships with Internet service providers, which it believes will provide bigger profits on its software products.Telewest built up its debt pile through rapid expansion during the telecom boom two years ago.