Shares in Colt, which is majority-owned by US Fidelity Investments, touched a new high of 1,325p on Friday, driven by strong demand from US buyers - more than four times the initial sale price of 275p.
Fibre networks sold to City corporate accounts offer the highest margins in telecommunications. There are few European competitors, compared with the many that have driven down prices in long-distance services, leaving providers with "laser-thin margins", said James Enck, analyst at Nikko Securities International.
"If you assume that residential voice service is in the process of becoming a commodity service, then this is the right end of the market for investors to be in," said Mr Enck.
Shares in Energis Group, which also targets business customers with service over its long-distance fibre optic network, have risen 70 per cent since they were listed last December. By contrast, other recent telecom stock sales have disappointed. Shares in Ionica Group, a fixed and mobile service provider, have fallen 82 per cent to 70.5p from a sale price of 390p in June. Investors in Telewest have seen the value of their shares fall 57 per cent to 77.5p, compared with a sale price of 182p.
Colt is one of two companies in Europe that build digital fibre networks in financial centres and pick off the most lucrative business customers by undercutting local telephone companies. The other one is WorldCom Corp, whose aggressive expansion through acquisition in the past two years has been a significant factor in buoying the lesser-known Colt's share price.
Colt's share price has benefited from premiums paid by WorldCom and AT&T in buying US-based companies who operate similar services to Colt. Worldcom paid $14bn (pounds 8.75bn) in stock for MFS Communications, a competitor to Colt in Europe. That was a 59 per cent premium on its share price just prior to the announcement of the sale. Colt's shares have been boosted by speculation that AT&T, which bought Teleport Communications Group for $12.9bn in January, will also acquire Colt - the other telecommunications property in Fidelity's stable.
Deregulation in European telecommunications has opened unprecedented opportunities for new telephone companies. Colt, which is already operating in Berlin, Frankfurt, Hamburg, London, Munich and Paris, plans to double the number of its networks by the end of the year. It will expand in Zurich, Milan, Madrid and Brussels.
Although Colt is the only company attempting such a spread of fibre networks across Europe, others are expected. The European telecommunications market has become a key target for investment by providers, following deregulation.
The introduction of full competition has been smooth, giving Colt a better-than-expected financial performance. "Providing metro area networks is something we understand well," said Jim Hynes, chairman of Colt. "We have proved that the concept can be transported from the US and work overseas."