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Microsoft gives up joint control over Telewest

Software giant backs off in face of EC investigation

Microsoft has withdrawn its request with the European Union for authorisation of its planned investment in U.K. cable operator Telewest.

The withdrawal follows an agreement by Microsoft to renounce its voting rights in the investment while maintaining its 23.7 percent stake in Telewest.

This means that the software giant has given up the joint control over Telewest it shared with Liberty Media, a subsidiary of AT&T. By relinquishing legal control, the venture no longer requires EU approval, the Commission explained in a statement.

"This means that Microsoft no longer has joint control over Telewest, leading it to withdraw its notification of the original deal, under which it was acquiring control with Liberty Media Corporation. Consequently, the Commission will not take any further action with regard to this operation," the Commission said in a statement.

Microsoft had initially notified the European Commission of its plans to purchase a 23.7 percent share in Telewest in February of this year.

Citing concerns over the impact of the acquisition on the U.K. cable market, the Commission opened an in-depth four-month investigation into the deal in March.

Under EU merger control rules, the Commission must prevent any operation from creating or reinforcing a dominant market position.

The new offer follows clear signs that the Commission would block the acquisition over concerns that it would reduce competition in the digital cable industry, in particular regarding the supply of software for digital television set-top boxes in the U.K.

The Commission feared that if Microsoft acquired joint control over Telewest, the U.S. software vendor could then determine technology decisions in the emerging digital cable industry in the U.K., which the Commission described as "highly concentrated." Currently, only Telewest and NTL, in which Microsoft already has a minority share, provide cable services.

"The end result is that this could have substantially reduced the technological alternatives available to customers and led to potentially higher prices for households, which are expected to embrace digital TV as the main means to access the Internet and e-commerce," the Commission said in a statement.

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