M&A

6 November, 2009

UPDATE 1-Telefonica bid for GVT a blow to Vivendi-sources

Faced with eroding margins and saddled with fines for poor service in its home Sao Paulo state market, Telefonica needs GVT to revive bottom-line growth. The decision to boost the offer highlighted the company's willingness to block rivals, analysts said. [ID:nN30326429]

Telefonica's decision to raise the bid was based on GVT's "encouraging" third-quarter results, the Spanish company said. GVT 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.

GVT's focus on high-usage and high-margin customers has long been seen as attractive to bigger rivals eager to expand their geographic reach in the country.

GVT's "state-of-the-art telecom network" has a backbone of more than 15,000 kms (10,000 miles), allowing it to serve high-end residential and corporate clients, Barclays Capital said in a September report.

Vivendi closed down 0.2 percent to 19.29 euros on Friday. Telefonica also fell 0.2 percent to 19.155 euros.

In recent weeks, investment firms including Nomura International, Morgan Stanley's Morgan Stanley Uruguay and Eton Park made purchases of GVT stock that, combined, amount to a 19.9 percent stake in the Brazilian company.

(Additional reporting by Cesar Bianconi in Sao Paulo; Editing by Todd Benson, Leslie Gevirtz and Bernard Orr) ($1=1.72 reais)

Source: http://www.reuters.com