BT is likely to further enrage its rivals by announcing a co-branding and joint advertising campaign with the world's biggest software company Microsoft.

The two companies will each invest several million pounds to push MSN 8, Microsoft's new online subscription service, as part of a plan to work together to cross-promote Microsoft software and services and BT's high speed internet packages.

MSN 8, which launches in the UK this week, is Microsoft's latest attempt to take on AOL by launching a package of online services for which users will pay a £60 annual subscription.

For their money, they will get online access to a range of Microsoft software online, plus child safety features, enhanced email and other services.

Because the package does not include internet access, BT hopes to sell it jointly with its own direct access broadband product.

The deal, expected to be announced later this week, will be backed by a multimillion pound marketing campaign.

BT has already spent £31m on a campaign backing its broadband services, which chief executive Ben Verwaayen has identified as the key area of growth for the company. It hopes to have supplied 1m broadband connections by next summer and 5m by 2006.