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Virgin Media has revealed it is yet to resolve an ongoing row with broadcaster BSkyB over the carriage of its basic channels, just hours before its current agreement with the company expires.

An existing contract which covers the airing of Sky One, Sky Two, Sky Sports News and Sky News on Virgin's pay-TV service expires at midnight, with BSkyB having warned earlier this week that a new deal may not be reached following a dispute over distribution fees.

In a statement accompanying its fourth quarter results, published today, Virgin Media said that it had offered BSkyB a binding arbitration process to settle the row and was awaiting the company's response.

Virgin Media, which was launched at the beginning of February following the merger of NTL, Telewest and Virgin Mobile, claims that the price BSkyB is demanding to permit the distribution of its basic channels is "radically out of line" with the value that it places on the Virgin Media channels that it distributes on its own cable network.

"Despite a dramatic and sustained decline in the Sky basic channels' popularity in Virgin Media households…Sky demanded a price that bears no relation to the channels' popularity and is radically out of line with the way it values our own Virgin Media TV channels on its own network," Virgin Media said.

The company added that if Sky withdrew its basic channels from Virgin Media then it would divert some of the savings from no longer having to pay "significant wholesale charges" into the provision of additional content on its existing on-demand library.

BSkyB, which claims that the row could see it lose between £15 million and £20 million in operating profit, insists that Virgin Media are blocking a new deal between the two companies.

Commenting on Monday, BSkyB's chief financial officer Jeremy Darroch said: "We are disappointed that Virgin Media appear to have walked away from negotiations.

"Sky offered more channels to Virgin Media than ever before. We have invested in developing our channel offering and sought a fair price which reflects that fact. With three days still to go before the deadline, we hope that Virgin Media will focus on getting a deal done rather than on their PR offensive."

Meanwhile, Virgin Media, now the UK's largest cable operator, has announced a net loss of £122 million in the fourth quarter, with profits having been affected by growing costs as a result of increased spending on marketing.