Microsoft and AT&T Form $5bn Internet and Cable TV Alliance with Telewest Stake

Strategic Insights -

As part of a major deal, Microsoft, the US software giant, will acquire a 29.9% stake in Telewest, Britain's second-largest cable operator, as part of a broader agreement with AT&T, the American long-distance telephone operator. This move comes on the heels of Microsoft's recent purchase of a $500m stake in NTL, Britain's other major cable operator, and marks the biggest corporate move to date by Bill Gates in the UK. The alliance between Microsoft and AT&T aims to provide full broadband TV, Internet, and voice services throughout the United States, with Microsoft's Windows CE software being used in set-top boxes installed by AT&T in millions of US homes.

Key Takeaways:

  • Microsoft will acquire a 29.9% stake in Telewest, Britain's second-largest cable operator, as part of a $5bn Internet and cable TV alliance with AT&T.
  • The deal marks the biggest corporate move to date by Bill Gates in the UK, following Microsoft's recent purchase of a $500m stake in NTL, Britain's other major cable operator.
  • The alliance between Microsoft and AT&T aims to provide full broadband TV, Internet, and voice services throughout the United States.
  • Microsoft's Windows CE software will be used in set-top boxes installed by AT&T in millions of US homes.
  • The deal raises regulatory concerns, particularly in the UK, where it may lead to further consolidation in the cable industry.
  • The alliance is part of Microsoft's broader strategy to diversify into media and communications businesses, reflecting Bill Gates' conviction that the technology underpinning the computer software and telecommunications industries will increasingly converge.
  • The deal may lead to the emergence of a single player in the UK cable industry, potentially big enough to square off against both BT and Rupert Murdoch.
  • AT&T's chairman, Michael Armstrong, has hailed the alliance as a "major force" in the American cable industry, and the company is awaiting the outcome of a court battle with the US Justice Department over allegations that Microsoft's position in the PC software market breaches US anti-trust rules.
  • Telewest, whose shares soared 31.5p to 287p on the news, was already in talks with Cable & Wireless before the deal.

Statistics:

  • $5bn: The value of the Internet and cable TV alliance between Microsoft and AT&T.
  • 29.9%: The stake in Telewest that Microsoft will acquire as part of the deal.
  • $500m: The amount Microsoft paid for its stake in NTL, Britain's other major cable operator.
  • 31.5p: The increase in Telewest's share price following the news of the deal.
  • 287p: Telewest's share price following the news of the deal.
  • 16 million: The number of customers AT&T will have following its takeover of MediaOne.
  • 3%: The stake in AT&T that Microsoft will acquire through its backing of the company.

Sources:

  • The Financial Times (exact source and date not specified)
  • Bloomberg (exact source and date not specified)
  • The Guardian (exact source and date not specified)