Microsoft seeks to thwart AOL and AT&T deal

Microsoft could be drawn into a bidding war against AOL Time Warner for AT&T's broadband business.

The software giant increasingly views the ISP as a potential rival to its internet business and after Comcast's failed bid of £37bn, is intent on spoiling any deals between AT&T and AOL for the broadband unit, people close to Microsoft told the Financial Times.

Microsoft has officially denied that it is interested in getting into the cable business, but it may make investments in other cable operators to bolster competition to the merger.

This would give a much needed lift to the depressed US cable sector.

If AOL succeeds in acquiring AT&T's cable business, it would control a 40 per cent market share in the US cable market, undermining the potential for Microsoft to realise its own internet strategies.

The software giant's .Net strategy and its forthcoming XP operating system both have strong internet and ecommerce elements.