Only a few weeks ago, rumours were circulating in the US that Microsoft would buy a stake in Tele-Communications Inc (TCI). Both TCI and US West are major shareholders in Telewest Communications, the UK's second largest cable company. TCI also owns Flextech, the UK cable and satellite programmer.
A spokeswoman for Microsoft said she could not respond to market speculation, although the company has in the past said it was talking to various cable companies about possible investments. US West also refused to comment.
However, industry observers said investing in US West would fit with Microsoft's declared stratgegy of buying into access providers.
In June this year, the company poured $1bn into an 11.5 per cent stake in Comcast, the fourth-largest cable television operator in the US. Microsoft said at the time that the deal would enhance Comcast's delivery of high- speed data and video services. It also marked Microsoft's growing interest in positioning itself as a content provider capable of controlling access to the internet and digital television.
The company recently acquired WebTV Networks for $425m, which allowed it to cash in on the public appetite for PCTVs - units which combine personal computers with television sets.
Last month, Microsoft's chief financial officer, Greg Maffei, said his company was talking to a number of cable operators. "We're investing in things that will help us further our strategy," he said.
For the year to the end of June, Microsoft announced revenues of $11.36bn, a 31 per cent increase year-on-year.
US West announced last week that it would split into two public companies in the middle of next year. The two groups will be US West Communications, the telephones business, and MediaOne Group, the third-largest cable televison operator in the US.Reuse content