Sky has offered to pay around £40m a year in broadcasting rights for a Twenty20 tournament with teams billed as cities rather than counties when the new format gets under way in 2017.

The England and Wales Cricket Board chairman, Colin Graves, is known to be set on introducing a city-based T20 series and the additional revenue from Sky would allow for each team to pay big wages to lure international stars similar to those in the IPL and Australia’s Big Bash League and enable Sky to market the broadcasting rights globally.

While the ECB says no final decision has been made, the Observer understands they are close to final proposals that would see a revamp of the domestic T20 competition based around eight city-based teams.

Sky is keen for the tournament to be played in a three- or four-week block at the height of summer, with matches in the evenings so they can be broadcast after the end of any international matches taking place at that time.

There is real opposition among the counties to the idea, though Warwickshire have played as Birmingham Bears, and it is understood that some of Sky’s additional money will be offered as a sweetener to accept a cut in the number of Championship matches down to 12 as a way of making room for the competition. The ECB is exploring whether the franchise tournament could run in addition to a Twenty20 competition played by all 18 counties.

It is likely that city-based teams would be owned by either the ECB or by the county doing the hosting rather than by private companies, as are the IPL franchises. The success of the Big Bash League and the increased viewing figures that has attracted has prompted both the ECB and Sky to consider the merits of a similar tournament in England.

They have recently recruited Mike Fordham, one of the leading figures involved in launching both the IPL and the Caribbean Premier League. Fordham, who is a vice-president at IMG, a global sports and media business, was involved in drawing up IMG’s proposals for how franchise cricket might work in England and which suggested any such tournament could end up being worth over £1bn.

Both the ECB and Sky declined to comment.