Cable & Wireless has said it is to buy business telecoms provider Energis for an initial £594m ($1.1bn) in cash.
Corporate phone and data networks are big business
The deal will lead to 700 job cuts by early 2008 under plans to cut costs by £80m within three years.
The takeover will make C&W the UK's biggest telecoms network provider after British Telecom.
It saw off a last minute counter-bid by Scottish-based Thus, which revealed its proposal on Monday, just hours before C&W's deadline to Energis creditors.
C&W also faced down Energis creditors, who had pushed for a higher offer. C&W refused, and set a deadline of 1700 BST on Monday.
Buying Energis would "accelerate the strategic transformation that we have undertaken in the last 15 months" by developing the group's UK business, said C&W chief executive Francesco Caio.
However, he said he was "realistic about the short-term prospects of the combined business".
Energis specialises in providing voice and data communications to big companies. Such services were seen as among the most appetisingly lucrative sectors of the telecoms market, giving rise to tough competition among a host of specialist companies.
Competition has squeezed prices at the same time as players need to invest in rapidly developing technologies.
C&W said the merger would create a stronger player with the scale needed to succeed.
C&W's takeover of Energis will take the form of buying the entire share capital of its parent company, Chelys.
It will pay an initial £594m in cash for Energis, and inject a further £35m into the company to meet its short-term need for working capital, but expects to recover this money within the first year.
It will make a further payment of up to £80m in three years, though the exact sum will depend on how its share price performs.
Energis debts have been the focus of tough negotiations. Energis will remain responsible for finance leases worth £37m, C&W said.
However, after the takeover, Energis will distribute to £126m in cash to its debtholders.
Thus wished C&W well, saying telecoms sector consolidation would bring about "sustainable competition".
Thus had proposed to offer more money initially - £800m - but was rebuffed by Chelys, which considered C&W's offer to be better value and more securely funded.