TORTOISE-PACED progress in negotiations to merge NTL and Telewest will hit a new obstacle this week when Labour confirms it is pushing ahead with its timetable to switch from analogue to digital television.

Tessa Jowell, secretary of state for culture, media and sport, is expected to confirm at the Royal Television Society Convention in Cambridge the government’s plans to complete the switch by 2012. There had been speculation that the deadline would be put back, partly because of concerns that the elderly and poor could be excluded from receiving television.

Analysts said the announcement would underline the threat that cable television companies face from Freeview, the free-to-air digital service backed by the BBC that has quickly attracted more than 5m customers.

Disagreement on the future prospects for cable TV is a key obstacle to a deal between NTL and Telewest, one source said this weekend. With more customers already using digital services and with lower churn, Telewest is more optimistic about its cable TV business — and its value — than is NTL.

A deal, expected to be completed by now, looks likely to drag on, perhaps into next year. It is still unclear whether Telewest is serious about selling Flextech, the programming business for which it invited bids.

Some believe Telewest, or the merged group, is more likely to retain a stake in Flextech. That could further complicate tax planning for the merged company. Tax losses, a reflection of both companies’ previously heavy trading deficits, are an important asset.

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