The European Commission has today opened a full investigation of the proposed acquisition of a 29.7% stake in UK cable network Telewest by Microsoft.
The deal was announced in May last year when AT&T, which owns Liberty Media, took over Media One, which owns the stake. The EC said it expects to rule on the case by August.
At the heart of the EC's concerns are competition conditions in UK cable - the deal would give Microsoft and Liberty joint control of Telewest - and software for digital set-top boxes.
In a statement the EC said that it has "serious doubts as to the compatibility of the proposed acquisition of a joint controlling interest of Microsoft in Telewest because of its impact on competition in the market for software for digital set-top boxes and because of its possibility to strengthen Telewest's existing dominant position as an exclusive supplier of cable services to consumers within its franchise area."
The three companies are understood to have given undertakings to the EC intended to allow Telewest independence in choice of decoder operating systems and to ensure that content providers would be able to develop compatible products. But the EC said these were not good enough: "the undertakings could not remove the serious doubts raised by the notified operation in terms of foreclosure of the market."
Microsoft also has a 7.24% stake in rival UK cable network NTL.