TELEWEST and NTL, Britain’s two cable-television operators, are finally heading towards agreement on a £5.5 billion merger to create a powerful competitor to the satellite broadcasting giant BSkyB.

Preparation for the long-awaited deal will take an important step forward this week when Telewest meets investment banks in New York to decide on a line-up of advisers for the merger. NTL is already understood to have asked Goldman Sachs to advise it on the merger.

Telewest and NTL, which have both been listed on Nasdaq since emerging from bankruptcy protection, have also been drawing up plans for the management structure of the new company.

Telewest directors are understood to have given their backing to a deal at a board meeting last week.

The company’s chairman, Cob Stenham, is believed to be keen to see the merger progress quickly, with formal talks likely to begin next month. Crucially, the deal is also understood to have the backing of Bill Huff, the US fund manager who is Telewest’s largest shareholder and the second-biggest owner of NTL stock.

NTL is substantially bigger, with £2.1 billion of revenues last year compared with Tele-west’s £1.3 billion.

However, the difference in market valuation is narrower — at £2.95 billion, NTL is worth only £500m more than Telewest — reflecting the latter’s higher pre-interest operating margins.

Disagreements over valuation and management roles are thought to have held up a deal that analysts regard as being inevitable.

Because NTL and Telewest operate different franchises and do not overlap geographically, combining the two would generate substantial savings.

Such a merged cable-television company would also have the resources to compete more effectively against BSkyB, which has in the region of 7.7m pay-television subscribers.

NTL has about 3.1m subscribers, while Telewest has 1.8m. BSkyB is 36%-owned by News Corporation, parent company of The Sunday Times.

Telewest has engaged Deutsche Bank to sound out prospective buyers for Flextech, its programming division.

According to a senior executive, Telewest has been holding out for greater managerial control. It now appears to have shelved those demands.