Telefónica is putting the screws on Vivendi in Brazil. The Spanish operator had already topped the French media group’s proposal to buy local telecom upstart GVT. Telefónica has now raised its bid by a further five percent to $3.8bn in total. That increase – combined with the idiosyncrasies of Brazilian takeover law - leaves Vivendi even further in the dust.

Vivendi was the first foreigner to covet GVT back in September. But Jean-Bernard Levy’s camp did not make a formal bid – rather, it floated a proposal for an eventual R$42 ($24) a share tender offer. That left the door wide-open for Telefónica’s local operation, Telesp, to launch the first official bid of R$48 a share on October 7.

Many assumed it was a done deal – after all, Telesp had synergies that new entrant Vivendi did not. Citigroup estimated potential cost savings of at least R$1bn, or R$8 a share, thanks to tax assets and backbone savings. And Telefonica had an additional first-mover advantage as Brazilian takeover law meant that any new bid by Vivendi had to be five percent above the current offer, setting the bar at a high R$50.4.

Now, adding insult to injury, Telefónica raised its bid to R$50.5 a share. It credits GVT’s stronger-than-expected results but also a desire to ensure the success of the bid. Vivendi now seems even further behind, and would have to offer at least R$53 a share. That would be 26 percent more than it first intended to pay. Telefonica looks with this move to have ended a bidding war before the canons even sounded.

Telefónica’s decision to outbid itself underlines the attractions of the fast-growing Brazilian market. But it remains unclear how binding Vivendi’s agreement with GVT’s controlling shareholders - allowing it to buy at least 20 percent of GVT – may be. So Vivendi might still have an ace up its sleeve even if, for the moment, its Brazilian ambitions look shattered.

Breaking Views