Charter Communications, one of Microsoft Corp co-founder Paul Allen's "Wired World" companies, has agreed to acquire Falcon Communications LP for $3.6 billion (€3.4 billion) in cash and stock, bumping Charter into the No 4 slot among US cable operators.

"This acquisition will allow Charter to reach its stated goal of serving more than five million customers, an achievement of critical mass," said Jerald Kent, president and chief executive officer of St Louis-based Charter, in a statement.

Earlier this month, Charter, along with Esat, failed in its bid for Cablelink. The consortium offered £485 million (€616 million) for the state-owned cable service provider, which was awarded to rival bidder NTL only after a legal wrangle.

"These properties, when combined with our other properties, are an excellent fit with Paul Allen's Wired World strategy," Kent said. Charter and Falcon are privately held.

Falcon, based in Los Angeles, has roughly one million cable TV subscribers and by linking up with Charter, will get strong ties to the Internet and cable.

"I am convinced that Falcon customers will grow and benefit with the Charter merger," Falcon founder and chief executive Marc Nathanson, who will become vice chairman of Charter, said in the statement. "Paul Allen's vision of a Wired World interconnected global network is particularly exciting for all of us at Falcon."

Mr Nathanson, his family and Falcon management own 54 per cent of the company. AT&T Corp's AT&T Broadband & Internet Services unit, which has approved the deal, owns the remaining 46 per cent.

The acquisition is the latest in a series of cable mergers and acquisitions that have reshaped the industry's competitive landscape. It comes on the heels of AT&T's blockbuster $54 billion cash and stock offer for MediaOne, in which it outbid Comcast Corp. AT&T began the consolidation last June when it acquired TeleCommunications for $48 billion in cash and stock.