Colt said it had agreed to share the costs of building Level 3 International's European network in exchange for Level 3's help in building Colt's German network, which will cover 2,600km. Level 3's network, linking Paris, Frankfurt, Amsterdam, Brussels and London, will cover 2,800km. The agreement is likely to raise speculation that the two companies might consider closer co-operation, such as a merger.
Level 3 International is a division of Level 3 Communications, based in Omaha, Nebraska, which is building an international fibre-optic phone and data network.
Both companies are unprofitable as they spend to build advanced networks able to carry data and voice traffic for businesses. "It makes enormous commercial sense for a lot of the cost to be shared," said Peter Roe, an analyst at Paribas Capital Markets, who rates Colt a "buy". But he added: "Just because two people are dancing, doesn't mean they're going to get married, but it will be an intriguing prospect for the market."
Shares in Colt, which is based in London, rose 23p, or 2 per cent, to 1,184p. Level 3 shares rose $1 to $88 on Nasdaq.
Colt, which operates a network in 13 cities in eight European countries, plans to provide a service in at least 24 cities by the end of 2000. The agreement with Level 3 "is a very cost-effective way of meeting our customers' needs," Paul Chisholm, Colt chief executive officer, said in a statement.
While Colt's networks focus on providing service within big cities, Level 3 is working on building a network between cities. It expects to complete its US intercity network during the first quarter of 2001.