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The contract is Microsoft's biggest yet in Europe, and second-largest globally. In June of last year, BT signed up Microsoft to use the same platform for what is now emerging as BT Vision.

The technology allows connected users to access regular TV channels via an Internet connection both in standard and HD formats. It also supports interactive features, paid-for and on-demand services.

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'In recent months, the experts at T-Online have run the Microsoft TV platform through extensive tests, and we are convinced that we will be able to offer excellent-quality IPTV services that will expand as we need them to,' said Kai-Uwe Ricke, chairman of the Board of Management for Deutsche Telekom AG.

'IPTV delivered via VDSL will enable better, more service-oriented, more interactive and, above all, more customized television. With this advanced television service, Deutsche Telekom and Microsoft are writing another chapter in our longstanding cooperation, tapping new markets and together exploring exciting new growth opportunities.'

T-Com and T-Online are Deutsche Telekom's fixed line and broadband divisions.

BT Vision will launch in the Autumn.