AT&T Inc has reached an agreement in principle to buy Time Warner Inc for about $85 billion, sources said on Friday, paving the way for what would be the biggest deal in the world this year, giving the telecom company control of cable TV channels HBO and CNN, film studio Warner Bros and other coveted media assets.

The deal, which has been agreed on most terms and could be announced as early as Sunday, would be one of the largest in recent years in the sector as telecommunications companies look to combine content and distribution to capture customers replacing traditional pay-TV packages with more streamlined offerings and online delivery.

AT&T, which sells wireless phone and broadband services, has already made moves to turn itself into a media powerhouse, buying satellite TV provider DirecTV last year for $48.5 billion.

It also in 2014 entered a joint venture, Otter Media, with the Chernin Group to invest in media businesses, and has rolled out video streaming services.

AT&T will pay $110 per Time Warner share in cash and stock, or about $85 billion overall, sources told Reuters. It will need to line up financing to pay for the deal, since it only has $7.2 billion in cash on hand. This could put pressure on its credit rating as it already has $120 billion in net debt as of June 30, according to Moody's.

Time Warner's shares rose almost 8 percent in regular trading, and a further 3.4 percent after hours, to $92.50, giving it a market value of about $73 billion. AT&T closed down 3 percent at $37.49.

Time Warner is a major force in movies, TV and video games. Its assets include the HBO, CNN, TBS and TNT networks as well as the Warner Bros film studio, producer of the "Batman" and "Harry Potter" film franchises. The company also owns a 10 percent stake in video streaming site Hulu.

Time Warner Chief Executive Jeff Bewkes rejected an $80 billion offer from Twenty-First Century Fox Inc in 2014, but sources said on Friday that the former suitor had no plans to renew its bid.

The Wall Street Journal reported on Friday that Apple Inc approached Time Warner a few months ago about a possible merger.