Ericsson to acquire Microsoft's IPTV unit

Swedish telecommunications equipment maker Ericsson AB said on Tuesday it will acquire Microsoft Corp's Internet protocol television unit Mediaroom.

While analysts said the move will help Ericsson further explore the Chinese market, concerns were expressed among Mediaroom's employees in China.

"The acquisition will help us further integrate technology resources and enrich our production line," said Gao Junliang, vice-president of Ericsson China and director of the company's broadcasting and new media department.

Gao said acquiring Mediaroom was a part of Ericsson's overall strategy in the broadcasting sector, and the company has high expectations for the sector.

"We hope the China market will register a high growth rate in the future," he added.

The acquisition is due to be completed in the second half of this year.

After the acquisition, Ericsson will become the top player in the IPTV sector, with a global market share of more than 25 percent, the company said.

Currently, Mediaroom powers 22 million set-top boxes in 11 million subscriber households worldwide, said a separate statement from Microsoft.

"With the sale of Mediaroom, Microsoft will dedicate all its TV resources to Xbox," said the United States-based company.

Overseas IPTV providers have a limited presence in emerging markets, including China.

Mediaroom's market share in China was "next-to-nothing" because the product only targets high-end customers, according to Zhang Fan, a researcher at Beijing-based Internet consultancy Analysys International.

"Ericsson's long-time relationship with Chinese telecom carriers and TV broadcasters will help the company expand in the nation," said Zhang.

Ericsson entered China's broadcasting sector about four years ago and is operating in 17 provincial-level regions. The company has a research and development team in Shanghai, specializing in broadcasting projects.

Mediaroom employees in China are worried that the acquisition may impact their future.

"There was a little excitement at the beginning and then lots of concern," said an anonymous source at Microsoft who is familiar with the matter.

The source added that few of the Mediaroom employees will be fully focused on their work over the next few months until the deal is completed.

"It's too early to discuss staff arrangements because we have only reached an agreement, and the details are yet to be settled," said Gao from Ericsson.

Mediaroom has about 40 full-time employees and 40 to 50 outsourcing vendors in China.

Analysts said overseas IPTV providers will face intense competition from local players.

Zhang from Analysys International said China's IPTV market remains in its infancy as every player is busy beefing up its presence.

"It will be impossible to estimate the market scale of IPTV in China because Internet companies, provincial-level telecom carriers and companies such as Microsoft are rolling out similar Internet TV platforms and do not disclose sales figures," he said.

Earlier this year, Chinese online video portal LeTV.com started to sell the LeTV box, an Internet TV platform similar to Apple Inc's Apple TV. LeTV.com said it sold 50,000 sets on the first day.