BSkyB chief executive, James Murdoch is understood to be contemplating a bid for Homechoice as it looks to continue its spending spree.

Homechoice, which is reportedly struggling to stay afloat in a crowded market provides video-on-demand, broadband and telephone services for customers.

Video Networks, the owner of Homechoice, accrued losses of £46.5m in 2004, up from £1.5m the year before, and it faces a future of even stiffer competition.

Homechoice currently has 15,000 subscribers compared with Sky's 7.8m and NTL/Telewest's 5.5m. The group recently doubled the amount of homes that could receive the service to 2.5m, but it remains to be seen whether subscriber numbers will be boosted to anywhere near that amount.

BSkyB has already purchased Easynet for £211m, its first step into the broadband TV arena, which could later be merged with Homechoice if a bid was successful.