The Government has leased a fifth of the international telecoms capacity that it bought from Global Crossing to a British internet company in a deal worth several million euros to the State, writes Jamie Smyth, Technology Reporter.

PacketExchange, a London-based firm with a corporate headquarters in Bermuda, will use the telecoms capacity to provide a range of technology services to internet service providers, content providers and businesses.

The deal represents the first big sale of capacity by the Government on the Global Crossing undersea cable in three years, reflecting a slight upturn in the international telecoms market.

PacketExchange has bought 32 STM 1 circuits, which represent about a fifth of the total telecoms capacity that the State bought in an $80 million (€67 million)deal in 1998.

The British company has also agreed to establish an international internet exchange that will link with five internet data centres in Dublin. The exchange, which is called I2X, will enable businesses to connect their systems reliably to a range of European and US cities at low cost.

PacketExchange has already signed significant deals with some of the world's biggest technology firms, including Yahoo, Google and Microsoft. Its deal with Microsoft enables the software firm to distribute its content over the internet at faster speeds and more cheaply than previously.

PacketExchange chief executive, Mr Kieron O'Brien, said the firm's decision to link into five Irish internet data centres would allow businesses here to compete more effectively with those in cities like London or Frankfurt

He also said that PacketExchange was in the process of switching its corporate headquarters from Bermuda to Ireland in a move that will create new jobs.

Large amounts of the State's capacity have been left unused due to a glut of telecoms capacity on world markets after the bursting of the internet bubble in 2001.