It had been reported at the weekend that the two were close to a deal after an initial offer of £817m was rejected last year.
As part of the deal, NTL, which recently completed its takeover of smaller UK cable rival Telewest, will take on the Virgin brand name.
It had been reported the two were wrangling over a price for the rights to license the Virgin name. They have agreed that NTL will pay around £9m a year for the rights to the name over 30 years, which will net Virgin £180m.
Investors in Virgin Mobile will be able to either exchange their shares for either 372p in cash, take NTL shares or a combination of NTL shares and cash.
Sir Richard Branson, the Virgin chairman who owns 71.3% of Virgin Mobile, will take a cash and shares option, which will make him the largest shareholder in the newly combined NTL.
James Mooney, chairman of NTL, said: "We are delighted to announce the recommended offer and the brand licensing with Virgin today, which not only delivers mobile capability to our product bundle but also gives us access to a leading consumer brand.
"It truly is a step-change transaction not only for NTL but for the media sector as an whole in the UK."
Mooney said that central to the announcement is NTL's strong belief that offering a "quaduple-play" underpins true media convergence.
"There is a natural appeal for mobile, telephony, broadband and television content, and NTL is now truly unique in its mass market product offering," he said
Charles Gurassa, chairman of Virgin Mobile, added: "After careful consideration, the independent directors of Virgin Mobile intend to recommend NTL's offer to shareholders. We believe this offer is in the best interests of Virgin Mobile's shareholders, customers and employees."
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