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Microsoft Takes Stake in Japanese MSO Titus

Microsoft Corp. jumped back into the international cable game last week, announcing its acquisition of MediaOne International's 60 percent interest in Japan's No. 2 MSO, Titus Communications Corp.

The value of the purchase was not disclosed, but Japanese press reports pegged it at near $1 billion.

Microsoft had long been negotiating to buy into Titus, its first Japanese cable investment. Titus is also the latest MediaOne International property to be unloaded and the second bought by Microsoft.

Last year, MediaOne International sold the computer-software giant its 29.99 percent stake in British MSO Telewest Communications Inc. It also sold its half-interest in Dutch operator A2000 to United Pan-Europe Communications N.V.

Microsoft said the purchase was part of an effort to participate in the development of broadband services in Japan.

In addition to cable TV, 92,000-subscriber Titus provides telephony service and high-speed Internet access. It has more than 20,000 high-speed-data customers.

The deal signals Microsoft's continued interest in international broadband properties under CEO Steve Ballmer, who assumed day-to-day control of the company in January. Last year, Microsoft invested about $4 billion to buy stakes in operators in the U.K., continental Europe, Canada and Brazil. But at least one report indicated those moves were driven more by the goals of chairman Bill Gates, who passed the baton to Ballmer to become Microsoft's chief software architect.

In March, Microsoft agreed to buy a minority stake in Malaysian direct-to-home platform Measat Broadcast Network Systems. Microsoft didn't return calls seeking comment.

Five-year-old Titus, headed by former AT & T Corp. executive Lee Daniels, has put considerable effort behind offering a "triple play" of voice, video and telephony services.

"Titus'leadership in integrating video, telephony and Internet access, combined with the advanced state of its broadband network, make it an ideal match for Microsoft's endeavors to help speed the development of broadband networks and lay the groundwork for next-generation services," Microsoft vice president of consumer strategy and partnerships Hank Vigil said in a statement.

Japan is one of only two international markets where Microsoft is marketing its Web TV service. Last year, Microsoft and Japanese mobile-phone-network operator NTT Mobile Communications Network Inc. formed a partnership to develop and market mobile data services.

The software giant also owns part of network operator Global Crossing Asia, which aims to build a significant Japanese presence.

Japan, considered one of the world's more complicated pay-TV markets, has only about 3 million cable subscribers out of 47 million households, according to Jupiter Telecommunications Co. Ltd., the country's biggest MSO.

That number is expected to grow to 8 million in five years, however, thanks to increased demand for broadband interactive services and better market positioning by the cable industry.