Ericsson has bought Microsoft's Mediaroom business and TV application which provides Internet TV service to about 13 million customers across the globe.
Ericsson said the transaction has expanded its capacity to become the world's largest IPTV middleware technology and applications provider.
Ericsson Support Solutions Business Unit SVP and head Per Borgklint said that by incorporating Mediaroom into the company's portfolio it will offer better services to its customers.
"IPTV subscribers alone are predicted to grow by over 18% each year to reach 105 million subscribers and revenue of $45bn by 2015," he added.
Mediaroom's 400 employees are expected to be integrated into Ericsson's business unit for support solutions, which will be named as Ericsson Mediaroom.
The California-based Mediaroom's IPTV platform holds 25% of the global market share.