Microsoft plans to invest $1 bn in Murdoch co

News Corp previously has held talks with various potential investors in Sky Global, including Yahoo! Inc, France’s Vivendi SA and cellular-phone giant Nokia Inc. People close to News Corp said the talks with Microsoft are progressing smoothly and both sides are serious, but cautioned that a deal isn’t imminent and could still fall apart. Spokesmen for News Corp and Microsoft declined to comment on the talks.

For Microsoft, a deal with News Corp could offer it a chance to deploy interactive-television software it is developing across another company’s network. Microsoft has already struck deals with cable giants such as AT&T Corp and United Pan-Europe Communications NV in the Netherlands, which are slated to use Microsoft TV technology in TV set-top boxes. That software, though, has run into development snags and is behind schedule.

Sky Global’s principal assets include Hong Kong satellite-TV broadcaster Star TV and News Corp’s 40 per cent stake in United Kingdom satellite-TV system BSkyB, as well as News Corp’s investments in Latin American satellite-TV platforms. Sky Global was created earlier this year by News Corp to help make its satellite assets more attractive to potential investors.

In addition, News Corp hopes to use Sky Global as a vehicle to make other large-scale acquisitions, such as an acquisition of or investment in Hughes Electronics Corp’s DirecTV unit, a US satellite TV broadcaster. Rupert Murdoch, chief executive of News Corp, last month estimated Sky Global’s value at $40 billion, but some analysts said its value might have fallen since then as the value of tech stocks have deflated. The Microsoft investment would peg Sky Global’s total value at about $35 billion.

Microsoft already partners with DirecTV through its UltimateTV service, which is scheduled to make its debut by the end of this year. And Microsoft might like even closer ties to DirecTV, which is the largest satellite broadcaster in the U.S. Microsoft’s rivals already are trying to horn in: America Online Inc., developing its own TV system, last year invested $1.5 billion into Hughes, a unit of General Motors Corp.

While News Corp. executives have been adamant that they don’t need partners in Sky Global to make it fly, they nonetheless have acknowledged that the presence of some big-name investors would bolster the venture’s reception on Wall Street.

As envisioned by News Corp. executives, Sky Global will evolve beyond simply being a provider of satellite-delivered entertainment, movie, news and sports channels. The ring of satellite networks and systems making up the Sky Global platform eventually will be able to deliver wireless broadband Internet access to home computers and hand-held devices, News Corp. executives say. For this reason, some analysts have dubbed Sky Global "the dream beam."

A deal with Nokia would provide a valuable link to wireless technology and networks, and a partnership with Yahoo could hep distribute Sky Global news and entertainment services widely over the Internet. Yet despite such strong relationships as those between Yahoo co-founder Jerry Yang and James Murdoch, the chief executive of Star TV and younger son of Rupert Murdoch, News Corp. has been unable to quickly persuade potential partners that Sky Global will be a viable two-way wireless broadband service.