BT Group confirmed this morning that it is to buy the Californian telecoms group Infonet Services Corp for $965 million (£520m).

The news followed reports which said that the UK telecoms company was poised to make a bid for the American group, which operates in 70 countries providing managed network communications for multi-national companies.

Shares in Infonet closed 6 per cent higher in New York on Friday on speculation that a deal would be announced. The company's value soared to more than $10 billion during the height of the dot.com boom of the 1990s but its value plummeted when investors fled the sector. The group made a loss of $67 million in the year to April, but sports an impressive list of large clients.

BT is offering the stockholders of Infonet - which include Royal KPN NV, TeliaSonera AB, Telefonica SA, Swisscom AG, KDDI Corp of Japan and Telstra - $2.06 a share. The figure represents a 23 per cent premium to the average price of Infonet shares over the past three months.

BT said the deal would "greatly extend" its global reach and will deepen the company's presence in North America and the Asia Pacific region.

The move for Infonet marks BT's third major foray into the lucrative US market. A previous bid for MCI collapsed while its joint venture with AT&T, called Concert, ended in discord when the venture was abandoned.

BT already employs around 1,800 people in the US, where revenues grew by 60 per cent last year.

It added that it had identified cash synergies of $150 million in the third year following the acquisition.

"The transaction is expected to be cashflow neutral for BT in the first year following acquisition and positive thereafter," the company said.

"In the first year it will dilute BT's net earnings by around 0.5p per share; thereafter it will be accretive," it added.

Earlier, Royal KPN NV said it had agreed to sell its 18 per cent stake in Infonet for $170 million in cash.

"We believe the case for an Infonet acquisition is balanced, but those who bought BT shares recently for imminent positive newsflow on higher shareholder remuneration may be disappointed," analysts from Dresdner Kleinwort Wasserstein said. The broker repeated its "hold" recommendation on the stock.

Shares in BT fell 4p to 188.25p on the news.

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