On-demand TV company Homechoice hopes to reach 10 million UK homes by the end of 2006 and may merge with Sky, according to company insiders. 

"Plans are afoot to roll out beyond London," Homechoice press officer Barney Hooper told vnunet.com today. "We are hoping to reach about 10 million homes by the end of the year, though I can't say yet which cities we'll cover." 

Since its relaunch in 2004, Homechoice has built a customer base of 45,000 in the London area for its TV-over-internet (IPTV) service. The package combines broadband, home phone and digital TV. Monthly subscriptions start at £17.99.

Special deals with networks including CNN and the BBC allow subscribers to view movies, music videos and other programmes on demand. 

Subscriber numbers are dwarfed by Sky's 8.1 million and NTL/Telewest's 5.5 million. Homechoice may be looking to attract a big-name buyer as it faces stiff competition from the telco giants. 

BT launches its BT Vision IPTV service this autumn, offering broadband, on-demand digital TV and a Freeview personal video recorder. Orange, which now owns ISP Wanadoo, has also confirmed plans to launch a home TV plat form. 

Cable providers are also joining the IPTV act, with Telewest offering some on-demand content as part of its Teleport package.

Industry rumours have long mooted a Sky takeover of Homechoice. Press reports have suggested price tags from £50m to £200m.

A takeover could benefit both companies. Sky could use Homechoice to achieve its all-important IPTV presence, and a buy-out could stem Homechoice's losses.

The company's present owner, Video Networks, made losses of £46.5m in 2004, up from £1.5m the year before. Last November it appointed investment bank CSFB to assess its options. 

Sky bought broadband provider Easynet for £211m in October. If it buys Homechoice, it could merge Easynet and Homechoice to form a larger business. 

Hooper predicts a bright future for IPTV. "I think the services will get faster and cheaper, with more sophisticated technologies like TV through your phone line coming in the next couple of years," he said.

"Most of Europe's big telecoms companies are looking to launch a TV service, or have launched one already. There are thriving services in France and Italy, and Germany's just getting started."