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The companies last week signed a six-week agreement to explore the possibility of a joint venture using UBC’s Oneword digital radio licence.

C4 chairman Luke Johnson mooted the possibility of branching into radio in the national press this month and the deal with UBC is the first solid step towards making this a reality.

But sources within C4 stressed that the agreement was just one option for 4Ventures, the broadcaster’s commercial arm, and “may not go anywhere”.

UBC, which took 100% control of Oneword in July, announced the deal in a statement to the London Stock Exchange last Friday.

It said the companies had agreed to consider Oneword as a transmission platform for a C4 radio service and to begin developing programming ideas.

C4 refused to comment on the basis that it was still early days, but Johnson has previously indicated a C4 digital radio station could be promoted on the channel and go to air by early 2005.

It has been suggested that C4 is planning a talk-based station with some music programming to take on Radio 4.

The Ofcom licence for Oneword stipulates that it must be talk-based, with strict controls on how much music is permitted.

In its current format, its content includes readings from books, poetry and interviews with authors.

UBC finance director Jennifer Donald told Media Week that Oneword was loss-making “like all digital-only stations” but had cut annual costs from £1m in January to less than £700,000.

UBC decided the station needed “shifting sideways” in January after the Government decided not to act on the company’s objection to the BBC launching Radio 7, which apparently had eaten into Oneword's audience figures.

Rajar results show the current demographic for Oneword – mainly men aged 34 to 50 – is quite different to C4's youth-oriented audience, but Donald said this should change as digital radio becomes more widespread.

“A huge number of digital radios are coming on the market, the price is coming down so rapidly and digital radio is becoming available on more devices such as handhelds,” she said. “You can't really tell what the audience would be if we had a larger proportion of digital radios spread out across the population.”

Oneword has operated with virtually no marketing budget since its launch four years ago and Donald said the main advantage of an alliance with C4 was the potential for cross-promotion.