He is looking at using Liberty's 25% stake in Telewest to support a rights issue to fund a takeover of a restructured NTL.
Malone is already in talks with NTL CEO Barclay Knapp about playing a major role in the reorganisation of NTL's financial situation. The company is struggling to manage its £12bn debt.
Earlier this week, it was reported that Malone was interested in buying between 25% and 51% of the company. However, he is now said to be concerned about a long-term solution for NTL.
Currently under discussion is the possibility of NTL's European cable operations being housed with UPC, the Dutch-based pan-European cable operator controlled by Liberty Media.
Speculation of a merger between NTL and Telewest is nothing new and the possibility of a deal between the two is traditionally raised at least once a year. Previously though, it was said that differences in the companies' accounting structures was one of the main obstacles to a merger, along with NTL's debt woes.
However, if NTL restructures its balance sheet and reduces its debt, it is possible that some of the obstacles to a merger would be removed.
A deal that would see Telewest take a stake in NTL may have problems getting support from many Telewest investors, but it is thought that such a deal would also help Telewest's financial situation. It has seen its share price tumble as low as 21p.
Malone's involvement in the NTL situation comes as his plans to move into the lucrative German pay-TV market, through a takeover of some of Deutsche Telekcom's cable networks, have been scotched by German competition authorities.
This week alone, shares in Telewest have fallen by 4p, trading this morning at 25.75p. In March 2001, Telewest shares were valued at 150p.
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