Microsoft and Reliance Communications agreed a $500 million (£240 million) deal yesterday to launch India’s first high-definition internet television service to “tens of millions of homes”.

The internet protocol television (IPTV) service will launch in March next year in 30 cities, starting with Bombay and Delhi, on the Indian group’s fibreoptic cable network.

Microsoft is licensing its Mediaroom software under its first exclusive deal with a service provider abroad.

ÁIt will allow Reliance Communications to provide interactive, personalised TV with features such as video-on-demand, digital video recording and media sharing.

Both companies declined to specify how many subscribers were being targeted or how much the service would cost. “We expect to be in tens of millions of households, not thousands,” Anil Ambani, chief executive of Reliance Communications, said.

Steve Ballmer, Microsoft’s chief executive, claimed the scale of the roll-out was “unique” and in keeping with the US software’s mission to create a “digitally inclusive society” in India. In a country of 1.1bn people, just 110 million have TV sets and 40 million access to the internet. But the numbers are growing fast as the economic boom brings unprecedented prosperity.

Palaniappan Chidambaram, the finance minister, yesterday said per capita income would double every nine years to reach $4,000 by 2025, from $797 last fiscal year, making India “a middle-income country”.

The IPTV deal followed discussions between Mr Ambani, one of India’s richest men, and Bill Gates, the Microsoft founder, who is focused on building broadband capability in rural India to deliver healthcare and education.

Mr Ballmer, who was a Stanford classmate of Anil’s estranged brother Mukesh, said: “This has got to be a technology that can reach out broadly to the masses. If you ask me where we will have the most IPTV, it will be in the US and in India.”

Reliance Communications, India’s second-largest telecoms group, is aiming to build the world’s largest IP network. It is spending $ 1.5bn to lay an extra 50,000 kilometres of undersea optic fibre cable eventually reaching 60 countries. By the end of 2009, the group’s total optic fibre assets extend to 230,000 kilometres. Its mobile network reaches 13,000 towns and 500,000 villages in India.

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