Brazil opening hearings on Telefonica's GVT bid

* Hearings opened on objections to GVT buyout

* Telefonica service had five glitches, sales suspension

* Federal prosecutors see deal as threat to competition

By Guillermo Parra-Bernal and Alberto Alerigi Jr.

SAO PAULO, Nov 10 (Reuters) - Brazilian federal prosecutors on Tuesday said plans by Spain's Telefonica to purchase rival GVT could limit competition and reduce service quality, and they opened public hearings that could slow the possible tie-up.

Investors see Telefonica (TEF.MC) as the likely buyer of GVT (GVTT3.SA) even as giant French media company Vivendi (VIV.PA) is also eyeing the company in a move that could bring a new player to south-central Brazil's broadband market, currently dominated by local conglomerate Oi (TNLP4.SA).

But the Prosecutor General's office worries that the acquisition, which could cost Telefonica up to 7 billion reais ($4 billion), could further worsen service in its home Sao Paulo state market, which has already suffered five major outages this year.

"Considering the repeated Telefonica service glitches that took place during the year, the office wants to know whether the acquisition would endanger capital expenditures, hinder the carrier's commitment, and whether blocking the entry of a new competitor could also jeopardize service quality in Sao Paulo," it said in a statement.

The entry of a new player has long been seen as a welcome opportunity to break the near-stranglehold on broadband in Sao Paulo held by Telesp and rival Net Servicos de Comunicacao (NETC4.SA). Telesp subscribers suffered five service blackouts or similar incidents between July 2008 and June this year.