Level 3 Communications will pay $135 million (£69.4m) to acquire the content delivery network (CDN) division of Savvis, improving its ability to deliver rich media such as web-based videos over its internet backbone, the companies said yesterday.

Level 3 sells space on its global fibre optic network to customers like cable and internet service providers who host internet protocol (IP) services, colocation, voice traffic, voice over IP (VoIP) and broadband internet connections.

Buying hosting specialist, Savvis' CDN business will allow Level 3 to host rich media such as video, web 2.0 applications, multiplayer online gaming and software as a service, company president and chief operating officer Kevin O'Hara said.

"Level 3 already has a strong brand and capabilities in video distribution through its Vyvx business. With native CDN capabilities and Level 3's highly scalable, industry-leading IP backbone, we believe that Level 3 will be able to bring additional value to all video-centric companies by delivering video in a more intelligent and comprehensive way to a broader range of destinations," he said.

Level 3 also hopes to become the only network provider to offer a full portfolio of CDN, IP transit, wavelengths, metro transport and colocation. The company will gain network elements, customer contracts and intellectual property from Savvis. Level 3 expects the deal to close in the first quarter of 2007, pending government approval.

Savvis' CDN group was founded in 1996 as Sandpiper Networks. Today, the division's 50 employees are based in Thousand Oaks, California, where they design services that improve the reliability and scalability of online content for customers, including Microsoft.

This is the third purchase in recent months by Level 3, which bought voice and data provider Broadwing for $1.4 billion in October, and internet access provider TelCove for $1.2 billion in May.

Savvis will use the sale to finance a $200m move to increase its managed hosting and colocation services. The company announced plans on Tuesday to develop four new data centres in Atlanta, New York, Washington DC and Santa Clara, California by the fourth quarter of 2007.