The move is part of a wider effort by the New York-based media giant to reorganise its cable and broadcast businesses. It is also shedding some non-core interests in its efforts to boost earnings.
In a surprise announcement last week, Time Warner revealed it was withdrawing from a bid for the franchise for the future Channel 5 in Britain, which should start broadcasting within two years.
Cablevision, based in Liberty, New York, will provide Time Warner with about 1.3 million extra subscribers, increasing the group's total reach to about 11.5 million in the US. That would put it past the 11 million households currently boasted by rival Tele-Communications.
Gerald Levin, Time Warner's chairman, said: "With this merger, we've enhanced our position as the best-clustered cable system in the world."
Last month, the group announced a similarly costly deal to purchase Kblcom, based in Houston, Texas for $2.2bn.
With its reorganisation complete, Time Warner should have its cable operations concentrated in several high-population regions that should attract advertisers. They include the New York area, Florida and the San Fernando Valley in California.
The company also announced yesterday improved fourth-quarter earnings, up 9 per cent over the previous year before interest payments and taxes. Earnings were up 5 per cent for all of 1994, even though there was a net loss for the year.
Net income at the company, which is the world's largestmedia group, was only $12m for the last quarter, compared, however, with $5m in the same quarter in 1993.
Its net losses last year reached $91m, also an improvement over losses of $221m the year before.
Until last week, Time Warner, had been considered a keen bidder for Channel 5, as part of consortium led by MAI, the media and financial services group, and Pearson.
The company is thought to have been discouraged by difficulties connected with the putative channel, including a decision by the Government to reallocate its promised broadcast frequencies.