Microsoft to enter internet telephony race

Microsoft is preparing to introduce an internet telephone service allowing calls from PCs to fixed-line or mobile telephones, extending the rapid advances by internet rivals such as Yahoo and Google into the communications business.

The software company will on Wednesday announce the acquisition of Teleo, a small private company whose voice-over-IP (VoIP) technology will extend the range of Microsoft's existing internet communications services. The deal echoes the acquisition by Yahoo two months ago of Dialpad and comes a week after Google launched a service called Google Talk that connects users over the PC.

The big internet companies' moves mark an attempt to upgrade their instant messaging systems into full-blown communications platforms.

The Microsoft and Yahoo acquisitions will let users of their instant messaging services connect to the wider telephone network, overcoming a factor that had limited the services' value.

Google, while not yet adding such a feature, has said it plans at least to link to other instant messaging services.

Teleo's telephone service will be built into the instant messaging service run by MSN, the software company's internet arm. Brooke Richardson, an MSN product manager, said the company had yet to decide how to charge for net telephone calls but said options included looking at charging subscriptions and fees or linking ads to the service.

Teleo's technology includes a feature that lets users start a call by clicking on a number listed on any website, a service that could be linked to the ?pay per click? advertising model that supports Google and other search engines.