(Updates with additional info on the value of the bid in the third paragraph).
By Alastair Stewart
Of DOW JONES NEWSWIRES
SAO PAULO -(Dow Jones)- Spain's Telefonica SA (TEF, TEF.MC) on Wednesday raised its bid for Brazilian telecommunications operator GVT Holding S/A (GVTT3.BR), clearly signaling to rival suitors such as France's Vivendi SA (VIVDY, VIVEF, VIV.FR) that it is determined to get the asset.
Telefonica unveiled a per-share bid of 50.50 Brazilian reals ($29.14) for the small alternative domestic operator, improving its previous offer of BRL48 and overshadowing the BRL42 offer made by Vivendi in September.
"The increased bid was made to ensure the success of the offer, while demonstrating our capacity [to secure the asset]," Telefonica said in a statement accompanying the bid that could cost up to 2.7 billion euros.
GVT is a relatively small operator, with around 2.6 million clients across Brazil's center-west, southern and northern regions. However, its business model concentrates on high-usage and high-margin customers, making it an ideal conduit for the expansion of Telefonica's fixed-line and broadband operations outside its base in Sao Paulo state. Meanwhile, for Vivendi, it presents a great opportunity to enter into the highly concentrated Brazilian fixed-line and broadband market.
Telefonica's strategy of pre-empting a second bid from Vivendi clearly indicates that it is prepared for a bidding war to take the asset, analysts said.
Indeed, according to a source close to Telefonica, the latest bid should not be considered as a best and final offer.
"There can be no doubt that the intention is to warn off Vivendi," said Alex Pardellas, telecom analyst at the Banif brokerage in Sao Paulo.
Vivendi hasn't publicly committed to a second bid, limiting itself to saying that it is reviewing its options.
On Wednesday, a Vivendi spokeswoman declined to comment on Telefonica's latest offer.
GVT's strong third-quarter earnings confirmed Telefonica's positive view of GVT's long-term outlook, opening the way for a higher bid, said the Telefonica statement.
However, the price outstrips analyst valuations of the asset.
"Telefonica were already offering a good price for the shares," said Banif's Pardellas. "The latest offer of BRL50.50 is very high for the asset."
Telefonica said that the only thing that changed from its previous offer is the price.
The Spanish company is due to hold an auction to buy GVT shares on Nov. 19, assuming it obtains preapproval of the deal from local telecom watchdog Anatel.
Shares in GVT moved higher following the offer, with investors adding a premium for the possibility of further bids.
GVT shares were 1.2% higher at BRL51.60 in recent trade on the Brazilian Stock Exchange, or Bovespa, while the benchmark Ibovespa index was 1.5% higher.
-By Alastair Stewart, Dow Jones Newswires; 5511 2847-4520; alastair.stewart@dowjones.com