Bloomberg said the transaction could be announced as soon as the coming few weeks.
Both Microsoft and Ericsson declined to comment on the report.
Internet protocol television (IPTV) uses the same technology that powers the Internet to transmit multimedia content over telecom and cable networks.
Ericsson, the largest maker of wireless networks, wants to cater to phone companies that are competing with cable, satellite and web-based media providers.
Microsoft, the biggest software maker, intends to focus on delivering TV through its Xbox games console, a person familiar with the plans told Bloomberg.
Microsoft's website says its Mediaroom IPTV platform is offered by more than 40 of the world's leading operators, delivering services to more than eleven million households.
© Thomson Reuters 2013