Microsoft said to want BT cable franchise

Rumors that Microsoft is seeking to enter the UK cable TV market with the purchase of two cable franchises from British Telecom (BT) have been neither confirmed nor denied by a BT spokesman. The rumored buyout, which has been circulating in the financial district, or City, for almost a year, was the subject of a story in the Sunday Telegraph newspaper. One of the franchises would bring Microsoft a high-profile cable operation in London's Westminster district.

Rumors that Microsoft is seeking to enter the UK cable TV market with the purchase of two cable franchises from British Telecom (BT) have been neither confirmed nor denied by a BT spokesman.

The rumored buyout, which has been circulating in the financial district, or City, for almost a year, was the subject of a story in the Sunday Telegraph newspaper. The purchase, if it were to happen, would further Microsoft's efforts to use television as a route onto the Internet for consumers.

In order to clear the way for regulatory approval from the European Commission for a proposed joint venture with British Sky Broadcasting PLC (BSkyB) and others that aims to offer consumers interactive TV services, BT has agreed to sell its two remaining cable franchises. BT at one time owned seven of the UK's 30 regional cable TV franchises, but it sold all but its Westminster and Milton Keynes businesses a decade ago, said David Orr, BT's spokesman.

The deal would bring Microsoft a high-profile cable operation in London's Westminster district. "A lot of important people live in Westminster," Orr said. Westminster is home to government leaders and includes many of London's wealthiest neighborhoods. Unnamed sources in the Telegraph story suggested that the Westminster franchise alone is worth about 200 million pounds ($US332 million).

The Milton Keynes franchise is unique also, because Milton Keynes is one of Britain's "new cities" that were completely planned. To avoid unsightly TV aerials, every home is equipped with cable and regular terrestrial TV is broadcast over those cables, Orr said.

The two franchises together pass through 300,000 homes and have about 80,000 subscribers, according to BT.

Other potential buyers include cable operators Telewest, NTL, and Cable & Wireless Communications PLC, according to various reports. BT may prefer Microsoft over other potential purchasers, since Microsoft would most likely not seek to offer voice telephony services that would compete with BT.

"We have two objectives: to get a good price and to ensure that there is no disruption to customers. We've obviously had interest from a number of companies, and we are now providing detailed information (to those potential buyers)," Orr said.

And the deal would make sense for Microsoft, since it seeks to expand its WebTV business. The software giant is currently trialing Internet services via set-top boxes in the U.K. in conjunction with BT, Orr said. Also, Microsoft has followed a strategy of expanding into the cable TV market with its $1 billion investment in Comcast Corp. in 1997.

Confirmation of the purchaser's identity won't come for several weeks, according to Orr.

British Telecom can be reached in London at +44-171-356-5000 or on the World Wide Web at http://www.bt.com/. Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080 or at http://www.microsoft.com/.

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