Cox Communications Inc., the third- largest U.S. cable provider, has held talks about combining with rival Charter Communications Inc., according to two people with knowledge of the matter.

Cox president Pat Esser has discussed a deal with representatives from Liberty Media Corp., which owns a 27 percent stake in Charter, said one of the people, who asked not to be named because the negotiations are private. The structure of a potential deal hasn’t been determined, including which company might be the acquirer, the other person said.

Billionaire John Malone, who controls Englewood, Colo.- based Liberty, has said he wants Charter to get bigger so it can gain leverage in negotiations with TV networks, which have sought higher prices for the use of their programming. Charter is the fourth-largest U.S. cable company by subscribers.

Todd Smith, a Cox spokesman, declined to comment. Courtnee Ulrich, a spokeswoman for Liberty, didn’t immediately return phone and e-mail messages.

A potential change in the ownership structure of Cox Enterprises Inc., owner of Cox Communications, may make a deal more likely. James Cox Kennedy, chairman of closely held Cox Enterprises, asked a judge earlier this week to dissolve a 1941 trust for Anne Cox Chambers, his billionaire aunt and the company’s biggest shareholder, to free the money for relatives and charities.

Dissolving the trust is a step toward Atlanta-based Cox gaining flexibility to merge the cable company, one of the people said.

Another Option

The Cox deal is just one potential move in Malone’s effort to consolidate the cable industry. Liberty and Stamford, Connecticut-based Charter are still pursuing an acquisition of Time Warner Cable Inc., the people said. Cox would serve as another option for Charter if Time Warner Cable, which has been resistant to a combination, refuses to agree to a deal, said the people.

Shares of New York-based Time Warner Cable rose 3.2 percent yesterday to $117.68, even though it reported disappointing quarterly subscriber numbers. Investors are betting that the weak results will increase the possibility of an acquisition with Charter, said Craig Moffett, an analyst at Moffett Research LLC in New York.

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