TIM Participacoes (NYSE:TSU)
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After months of suiting, Brazilian mobile-phone company TIM Participacoes SA (TSU) clinched the deal to purchase local long-distance provider Intelig late Thursday in a deal that will allow it to cut network leasing costs and offer a short cut in creating its own fiber optic network.

In buying full control of Intelig for a price in the region of 700 million Brazilian reals ($320 million), according to market estimates, TIM - a subsidiary of Telecom Italia S.p.A. (TI) - has ready made backbone for its third generation data transfer services.

"The purchase solves TIM's infrastructure problem and brings them back on an equal footing with some of its rivals," said Julio Puschel, telecom analyst at the Yankee Group in Sao Paulo.

TIM is primarily interested in Intelig's fiber optic network, which covers 14,500 kilometers and links 18 capitals. It will use this as a backbone to meet the expected explosion in demand for 3G services over the next few years.

"Intelig would allow us to save time and money in setting up a optic backbone...the market will be all about transfer of data in the future," said TIM Chief Executive Luca Luciani said at a press conference in February.

TIM recently relaunched its service, vowing to focus more on value added services.

In 2008, TIM spent between BRL600 million and BRL700 million on network leasing.

"We believe that this deal could reduce these costs by at least 10%," said Beatriz Battelli, telecom analyst at the Brascan brokerage in Rio de Janeiro.

TIM didn't give details about whether it would inherit Intelig's debt. That debt could be as much as BRL550 million, said UBS Pactual in a report.

Investors did not get excited about the announcement, with TIM stock down 0.3% at BRL3.25 on the Brazilian Stock Exchange, or Bovespa, in early afternoon trade. The benchmark Ibovespa index was 0.15% lower.

Certainly, it appears that TIM may have paid a high price for the asset but, strategically, the deal makes perfect sense, Brascan's Battelli said.

Intelig has net revenues of approximately BRL700 million, according to market estimates.

The deal must still be approved by local antitrust and telecommunications regulators.

-By Alastair Stewart, Dow Jones Newswires; 5511-2847-4520; alastair.stewart@dowjones.com