The BBC is believed to be lining up a joint bid with satellite broadcaster BSkyB to set up a digital terrestrial TV service.

The licences for free-to-air services are being offered by the Independent Television Commission following the recent collapse of ITV Digital.

The BBC had been in talks with a consortium including ITV and Channel 4 with a view to creating a single group to bid for the licences.

However, it is now being reported the BBC and BSkyB will submit a joint bid before Thursday's deadline.

'Still talking'

A spokesman for the BBC told BBC News Online that they were "still talking to various people", but would neither confirm or deny the report, which appeared in the Times newspaper.

The report said the proposed service would be funded by a mixture of the BBC's licence fee and advertising revenue and would be available through simple receivers costing viewers less than �100.

The service would include at least three channels from BSkyB - Sky News, Sky Sports News and Sky Travel - as well as the BBC's BBC Four, BBC Choice and BBC News 24.

Sky One, BSkyB's premier entertainment channel, might also be included at a later stage if the audience builds up significantly, the newspaper said.

Confidential

ITV companies Carlton and Granada, along with Channel 4, are believed to be planning to continue with their application for the licences.

The pay television firm ITV Digital was axed after failing to find either the money to settle its bills or a buyer for the business.

Three digital terrestrial multiplex licences formerly owned by ITV Digital are available.

The expressions of interest in the licences are confidential.