Colt Telecom is launching a share issue to raise £400m and hand a majority stake to its largest investor.
The London-based voice and data provider wants the cash injection to complete its network roll-out.
American-based fund manager Fidelity will be able to increase its stake in Colt from 47% to as much as 72%, depending on how many other investors take shares.
Such an increase would normally oblige Fidelity to make an offer for the company but Colt wants the Takeover Panel to waive such a requirement.
Shares in Colt rose by 48% to 92p in early trading after falling to a record low of 62p last night.
The company has added to the optimism by saying demand for its services from corporate customers has been healthy, despite the slower pace of economic growth.
The share offer, which will see 650 million shares issued at 62p, is being underwritten by Fidelity and will depend on shareholder approval at an extraordinary general meeting on November 14.
Colt says the move is a significant landmark as it safeguards the completion of its business plan, which includes creating 32 city networks by the end of the year; completing its long-distance network next year; and expanding its range of services.
Chief executive Peter Manning says: "Our fully-funded status reinforces our ability to offer our customers first-class quality of service and continue to grow our business."
The share issue comes a month after Colt bought back £115m worth of bonds in an attempt to cut around £47m from its net debt figure.