Microsoft and BT unite in UK broadband venture

BT chief executive Ben Verwaayen has struck a deal with Microsoft chief Steve Ballmer to work together to grow the UK broadband market.

"Make no mistake, this alliance is not window dressing. Our relationship with Microsoft in Europe is moving on to an unprecedented and level that will bring real benefits for the customers of both companies," said Mr Verwaayen, who has promised to have signed up 5 million broadband customers by 2006.

The joint venture, which brings together the world's leading computer company and the UK's dominant telecoms group, is bound to further enrage rivals worried about BT's position in the market.

Last month the two companies announced they would work together to develop broadband services for Microsoft's X-Box games console and co-operate on internet services.

Under the new agreement, which was negotiated over the summer, Microsoft will work with BT to develop a range of business and home services based around its .Net division, which founder Bill Gates hopes will become the standard for the next generation of computers.

"We are taking this step because BT is a company that delivers - it has a proactive broadband strategy and a passionate focus on customer satisfaction. This alliance with BT is very important to Microsoft," said Mr Ballmer.

The two companies are already working on about 30 projects, the latest is designed to make Microsoft the software and digital content partner for BT Home Computing.

As revealed by MediaGuardian.co.uk in July, BT has plans to enter the computer retail market, selling broadband-ready PCs to customers and providing online tutorials and support.

The announcement of a formal alliance puts BT's relationship with Microsoft on the same footing as the US software giant's similar agreements with Korea Telecom in Asia and Verizon in the US.