Microsoft has bought a minority stake in Qwest, America's number four long distance telephone company, to help the operator accelerate the development of its broadband Internet service.
Microsoft will invest $200 million in Qwest, representing a 1.3 per cent stake in the Denver, Colorado based operator. This would value Qwest at around $15.4 billion. Microsoft holds minority stakes in two other US communications companies, Comcast and Roadrunner.
Qwest said the investment will help it launch a high speed corporate Internet service in the second quarter of 1999, supporting applications such as electronic transactions, Web application hosting, streaming media and virtual private networking.
"By working with Microsoft, we will further the development of broadband applications and accelerate growth in the adoption of complete Web enabled solutions," said Joseph Nacchio, chief executive of Qwest in a statement.
"We believe that we will be able to accelerate by as much as 12 months our plans for the delivery of Web enabled applications," Nacchio added.
Qwest said it expects the new service to generate approximately $150 million in turnover during the first two years. The service is expected to make a pretax loss in 1999, but return to profit in 2000, Qwest said.
Last year, Microsoft spent $1 billion on an 11.5 per cent stake in Philadelphia based cable operator Comcast and $212.5 million on a 10 per cent stake in Roadrunner, the Internet over cable venture lead by Time Warner and Mediaone.
In Europe, Qwest last month announced a joint venture with Dutch telco KPN that will link the European carrier's pan European fibre optic backbone with Qwest's fibre optic network in north America. The Internet was at the heart of the deal, in particular bringing to life Eunet, the European Internet business acquired in April by Qwest.
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