Nov. 4 (Bloomberg) -- Telefonica SA, Europe’s second- largest phone company, boosted its offer for Brazil’s GVT (Holding) SA by 5.2 percent to about 2.7 billion euros ($3.99 billion) to fend off rival bidder Vivendi SA.

Telefonica’s unit Telecomunicacoes de Sao Paulo SA increased the offer to 50.5 reais ($29.20) per GVT share, from 48 reais earlier, it said today in a regulatory filing. Vivendi had offered 42 reais a share.

“The move is aimed at impeding a new Vivendi offer,” said Alberto Espelosin, who helps manage about $12 billion at Zaragoza, Spain-based Ibercaja Gestion and owns Vivendi and Telefonica shares. “Investors may well be disappointed if Vivendi enters a bidding war at these levels.”

Madrid-based Telefonica’s increased offer is aimed blocking a potential new rival in its second-biggest market after Spain, and to grow in a Brazilian region where it doesn’t currently operate. Telefonica offers fixed-phone lines and Internet services in Sao Paulo, the country’s richest state, while GVT operates in the country’s south. Vivendi’s bid for GVT is aimed at bolstering its presence in emerging nations, which are growing faster than its home market in Europe.

Vivendi reiterated yesterday that it’s reviewing its options for the Curitiba, Brazil-based telephone company. Its spokesman Antoine Lefort declined to comment today on Telefonica’s increased offer, as did a GVT spokeswoman.

GVT shares rose 1.3 percent to 51.65 reais in Sao Paulo trading, the steepest rise in more than two weeks. Vivendi rose 2.2 percent to 19.01 euros in Paris, its biggest gain in a month. Telefonica advanced 0.7 percent to 18.88 euros.

Vivendi’s Interest

GVT shareholders yesterday approved removing a so-called poison pill clause to pave the way for Telefonica’s original offer. Vivendi or any other potential bidder must under Brazilian law offer at least 5 percent more than Telefonica’s last bid, or 53.03 reais a share.

“Telefonica’s improved offer is also good news for Vivendi because it will allow the French conglomerate not to pursue the deal and to eventually request breakup fees,” Arnaud-Cyprien Nana Mvogo, an analyst at Aurel BGC in Paris, wrote in a note.

Vivendi, which owns Maroc Telecom, French mobile-phone operator SFR and the world’s largest music company, targeted GVT as part of its drive to expand in fast-growing emerging markets. When it made its bid on Sept. 8, Chief Executive Officer Jean- Bernard Levy said GVT would become “an essential part” of his group. Telefonica topped that bid on Oct. 7.

Vivendi has walked away from deals in the past on price. In July, it called off talks to buy Kuwaiti mobile operator Zain’s African assets after saying it “applied its usual criteria of profitability and financial discipline” to the potential deal.

GVT’s Growth

Unlike Vivendi, Telefonica, Spain’s largest phone company, is already a major player in Brazil. Its Telesp unit has a 27.6 percent market share for fixed-line services, according to data from IHS Global Insight, a market-intelligence firm.

GVT, which has 2.5 percent of the fixed-line market, offers regional cost savings to Telefonica.

GVT has almost tripled since its February 2007 initial public offering, compared with a 39 percent gain in the benchmark Bovespa index. Chief Executive Officer Amos Genish, a 49-year-old Israeli and GVT founder, helped build the company into Brazil’s fourth-biggest high-speed Internet provider, with a 15,000-kilometer (9,300-mile) fiber-optic network.

The company, controlled by Global Village Telecom (Holland) BV and Swarth Group, emerged during Brazil’s privatization of its telephone services at end of the 1990s.

To contact the reporters on this story: Paul Tobin at ptobin@bloomberg.net; Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net

Last Updated: November 4, 2009 15:17 EST