Tesco buys digital music business for $17 million

A pedestrian passes a Tesco store in central London June 9, 2008.

LONDON (Reuters) - British group Tesco, the world's third-biggest retailer, has paid 10.8 million pounds to buy a digital music business, in a move which forms part of its plan to develop a presence in the online entertainment market.

The supermarket group, which recently launched a 1 billion pound recovery programme to stem a decline in its share of the British market, said on Thursday it would acquire a 91 percent stake in WE7, a free-to-listen, personalised internet radio service.

The acquisition will build on last year's purchase of online movie provider blinkbox, Tesco said, and was part of a strategy to build a foothold in the digital entertainment market.

Shares in Tesco, which accounts for about one in every 10 pounds spent in British shops, were up 0.3 percent to 304.9 pence at 1438 GMT, valuing the company at about 24.4 billion pounds.

(Reporting by Sarah Young; Editing by Dan Lalor)