The joint venture service, set to be available by the end of this year, is one of the first in the world and will put Hong Kong at the forefront of the convergence of the television and the computer, the South China Morning Post said.

Officials from Microsoft and Hongkong Telecom were not immediately available for comment.

But Hongkong Telecom said last week its chief executive Linus Cheung would co-host a news conference with Microsoft chairman and chief executive officer Bill Gates in Hong Kong at 2:45 pm local Tuesday on a ``strategic cooperation plan.'' It gave no further details.

According to the newspaper, the new service would allow users to rent a wide range of software from Hongkong Telecom's computer at low cost for one-time use, the newspaper said without naming anysources.

Applications such as Microsoft Word could be downloaded almost as quickly as if the software was on the home computer's hard drive, it said.

Users would not need to buy software which can cost thousands of (Hong Kong) dollars and may only be used a few times. The low cost of individual rental also made piracy less economically attractive.

The newspaper said the alliance would help Hongkong Telecom, the territory's leading telecommunications provider, cement its domination of the internet service provider market in Hong Kong, of which it holds more than 50 per cent of the market share and move into the still-untapped realm of electronic commerce.

Hongkong Telecom, which is a unit of Cable and Wireless Plc, had been searching for new sources of revenue after the recent deregulation of its long-distance phone monopoly, the Post said.

Shares of Hongkong Telecom rose 8.9 per cent to HK$14 on rumours of the alliance with Microsoft.