Microsoft may sell Telewest stake

LONDON, England (CNN) -- Microsoft has withdrawn its directors from the board of UK cable group Telewest in a move that could clear the way for the U.S. software giant to sell its stake in the company.

Telewest (TWT) said on Wednesday three non-executive directors from Microsoft (MSFT), which already owns 23.6 percent of the company, were stepping down to enable the company to better evaluate its position in the debt-laden company.

Its shares dropped 10 percent to 8.22 pence in midday London trading on Wednesday. The company is under pressure to slash its £5.3 billion debt. Rival NTL has swapped two-thirds of its $17 billion debt for stock -- effectively handing the company over to bondholders. Fears that Telewest could do the same has sent its stock plunging more than 80 percent this year.

"Microsoft has given up on cable... they've lost quite a lot of money," Nikkel Hofstee, a telecom analyst at ABN Amro, told CNN.

Instead, he said Microsoft is expanding its partnerships with Internet service providers, which it believes will provider bigger profits on its software products.

Microsoft said in a statement it had "no current plan" for its stake in Telewest but added but it wants to examine its options.

"At present, we believe that we will be in a better position to manage our relationship with, and investment in, Telewest without board representation," the company said.

"Microsoft expects to continue to evaluate Telewest on an ongoing basis and, in that regard, will continue to consider, among other things, purchasing or selling Telewest securities or engaging in possible strategic transactions involving Telewest. "

Liberty Media is the other main shareholder in Telewest. There has been speculation that the U.S. cable group, run by John Malone, may make a bid to take control of Telewest.

Telewest, the UK's second-largest cable operator, has built up its debt through rapid expansion and has seen revenues due to a weak market and global economic slowdown.

Earlier this month, Telewest said its first quarter loss declined to £166 million ($243 million), or 5.8 pence a share, from £209 million, or 7.2 pence, a year ago. It also said it planned to reduce its workforce from 10,500 to 9,000 -- a move that would save the company about £50 million a year.