Bermuda-based Project Oxygen Ltd. yesterday signed a $450 million contract with Korea's Hyundai Mipo Dockyard Co. Ltd. to build 13 ships the company is going to use in building and maintaining a global telecommunications network.

Project Oxygen Ltd. is building a $10 billion fibre-optic network that aims to dramatically lower global telecommunications costs through using Internet type pricing.

After the signing ceremony at the Hamilton Princess with Hyundai, Project Oxygen chairman and chief executive officer Neil Tagare said the agreement with Hyundai marked the first of two major contracts necessary to get the building of the network underway.

He expects the next one, the supply contract of the cable and equipment, will be signed in the next few months.

Hyundai Mipo Dockyard President Jeong Ihl Lee and Hyundai Corp. USA president and chief executive officer Dong Soo Han were at the signing ceremony yesterday.

The contract commits Project Oxygen to 13 ships with options for ten more. The 8,000 ton ships will be used for the installation of Project Oxygen's undersea cable with delivery to begin in June 2000. Mr. Tagare said Project Oxygen decided to purchase its own ships to guarantee that the company could provide a high quality of service to all countries no matter what size of market they represented.

"We made the decision to buy our own ships even though our core business is telecommunications because early on we were trying to find people that could do our maintenance and found they were bureaucratic, expensive and had a very, very bad service,'' he said.

He said Project Oxygen wanted to be able to provide quality service to its lines anywhere in the world, whether it was to the US, Nigeria, India or China.

Mr. Tagare said Project Oxygen subsidiary Project Ozone will lay about 50 percent of the company's cables in the initial phases of building the network until the company could fully take over once all the ships were delivered.

Project Oxygen has set up its headquarters in Bermuda at the corner of Parliament and Front Streets. About 15 people are initially slated to staff the company's headquarters with more added as the company expands operations.

Mr. Tagare, chief financial officer Michael Choniski, head of marketing Bradley Holmes, vice president of operations Joe Brown, and Project Ozone president Larry Cahill, among others, will be located at the office.

Mr. Tagare said he will be moving to the Island in a few months.

"We are attracted to Bermuda because its policies are business friendly,'' he said. "We like the general business climate and we are finding qualified people here.'' Project Oxygen has embarked on a mission to build a network linking 78 points around the world with 105,000 miles of fibre optic cable. Mr. Tagare founded the company with a vision of revolutionising the way bandwidth is bought and sold internationally.

Most international lines are currently owned by big telecommunications companies that lease capacity from one point to another. A telephone service provider sending telecommunications traffic from the US to Europe must contact one of the international companies and lease bandwidth on the route, often for up to 25 years.

Project Oxygen aims to charge telephone companies one price for access to the network, much like Internet rates. Companies will lease a certain amount of capacity and send traffic anywhere on the Oxygen network at any time.

The company claims it will offer bandwidth 67 times cheaper than satellite circuits and 100 times cheaper than existing submarine cables. Mr. Tagare has called the Project Oxygen network the "super Internet'' of the future.

"The Internet has caused obsolescence in the traditional way of forecasting and pricing international traffic,'' he stated on the company's Web site.

"Carriers that adapt to the new business model will benefit significantly.'' The company is currently raising the $3 billion to build the first phase of the network, which will connect the US, Europe, Africa, South America and the Caribbean and loop back to the US. The Atlantic ring is scheduled to begin operation next year.

Financing, policy and administration will be done from the Bermuda headquarters. The network will be privately owned by backers, which include some of the largest companies in the US, Europe and Japan.

Project Ozone will maintain the cable and operate 23 cable ships.

Mr. Tagare, 37, is the entrepreneur who authored the feasibility study that led to the creation of the Flag undersea cable from Europe through to the Middle East and Southeast Asia.

Flag was originally set up as a Bermuda company and at 15,000 miles was the longest submarine cable in the world and the first to be privately financed, according to the company.