The French telecoms group is NTL's largest shareholder with a 24% stake. It is said to want to expand its transmission business TDF, while providing NTL with extra cash.
NTL is selling the business, which had ebitda in 2000 of £100m, in an attempt to reduce some of its £11bn debt mountain. It is hoped the business will fetch between £1.2bn and £1.6bn.
France Telecom is thought to be competing against at least two rival bids from financial institutions. France Telecom is understood to be trying to negotiate a deal with $500m (£343.7m) of preferred stock and $2bn (£1.4bn) of convertible loan notes, which it would invest in NTL.
A sale of the business would help shore up confidence among investors, who have been worried about NTL's funding over the next two years until it becomes profitable at the end of 2003.
These concerns sent NTL's shares tumbling to an all-time low of $1.50 in New York last Wednesday.
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