"Microsoft is not scared of Google," stated Steve Ballmer, CEO of Microsoft, at a press event in Mumbai on Monday.

Though Ballmer was caught off guard, he pulled himself together and went on record: "Oh no, not at all. Why should we be? We are the market leaders. Every day is a day of opportunities for us and we are eager to take those opportunities."

Google has started breathing down Microsoft's neck and the two are battling it out on fronts including Web search, free e-mail and better ways for searching individual computers. Analysts say that's evidence Microsoft should -- and likely is -- taking Google much more seriously.

Ballmer's comments came on a day when Reliance Communications [Get Quote] and Microsoft announced a strategic partnership to launch IPTV in India, a contract worth $500 million. Reliance Communications Chairman Anil D Ambani was also present on the occasion.

Reliance IPTV service, to start in 2008, will roll out in Mumbai and Delhi and then will spill over to 30 Indian cities.

This new service will include video-on-demand, digital video recording, instant channel changing and personal media sharing.

"As consumers today are becoming more sophisticated, they are demanding more compelling and personalised entertainment to suit their individual needs and preferences," said Ambani.

"Until now, TV has been a broadcast, `one-size-fits-all' experience. Backed by powerful Microsoft Mediaroom software, IPTV promises to offer subscribers more choice, control, and convenience, and at the end of the say, a unique and more satisfying user experience.

We are excited to partner with Microsoft to unlock the potential of television and offer Indian subscribers the very best TV and connected entertainment experiences."

According to Ballmer, "Reliance is about to change the way consumers experience television.

"TV is the only major digital device that has been left out of the networking revolution, and Microsoft and Reliance are now making the TV a first class citizen in the connected entertainment landscape. By connecting the TV to an intelligent two-way network and adding powerful software, new connected and personalized experiences will become possible here in India."