Telefonica ups bid for Brazil GVT; Vivendi silent

By Guillermo Parra-Bernal

SAO PAULO (Reuters) - Spanish telecommunications company Telefonica (TEF.MC) raised its offer for Brazilian rival GVT (GVTT3.SA) on Wednesday by 5.2 percent, seeking to trump a potential counteroffer by French media group Vivendi (VIV.PA) and seal a deal by the end of the month.

Management at Telefonica's Telesp (TLPP4.SA) unit raised the offer in order to "ensure the success of its bid and to reinforce its intention" to buy GVT, according to a regulatory filing. Under the new terms, the bid was upped to 50.50 reais a share, valuing the deal at $3.9 billion, from 48 reais a share, or $3.7 billion, previously.

The move sent GVT shares as much as 1.4 percent higher to 51.70 reais -- above the improved Telefonica offer. They later backtracked slightly and were trading 1.2 percent ahead at 51.60 reais.

The decision to raise the bid was based on GVT's "encouraging" third-quarter results, the filing said. GVT, which is based in the southern Brazilian city of Curitiba, reported net income of 57.2 million reais ($33 million) for the quarter, compared with a loss of 14.8 million reais a year earlier.

Faced with eroding margins and saddled with fines for poor service in Sao Paulo state, Telefonica needs GVT to revive bottom-line growth. The decision to boost the offer highlights the company's willingness to grab GVT and trump any additional offer by Vivendi or any other suitor, analysts said.

"Telefonica is sending a message to any bidder, that much more money will be needed to trump them," said Valder Nogueira, a telecommunications and technology analyst with Itau Securities in Sao Paulo.

Telefonica closed 0.06 percent higher in Madrid at 18.82 euros. Telesp was up 0.3 percent at 43.26 reais in afternoon trading in Sao Paulo.

Vivendi surged 2.2 percent to 18.99 euros.