Deutsche Telekom has offered Microsoft a 25 per cent stake in its T-Online internet service provider (ISP) business, according to Germany's Capital magazine, which reported that the telco wanted the tie-up to boost its share price.
If the deal goes ahead it would create a powerful anti-AOL alliance. T-Online is the biggest ISP in Europe.
The two companies are already working on next-generation mobile phone services, in readiness for the day when the fast data services finally arrive in Europe.
According to the report, Deutsche Telekom wants Microsoft to buy 24.9 per cent of T-Online for between €3bn and €4bn (£1.9bn and £2.5bn).
T-Online lost €797m in 2001, double the previous year's deficit, and Deutsche Telekom is wrestling with debt problems of its own.
Microsoft's money might help T-Online in its aim to reduce its debts to €50bn from the current €67.3bn, analysts said.
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