Telefonica SA's (TEF) Brazilian unit Wednesday made an all-cash bid for Brazilian telecommunications company GVT Holding SA (GVTT3.BR) that could amount to a total investment of around $3.7 billion, potentially trumping an earlier bid from France's Vivendi SA (VIV.FR).

In a filing to the Spanish market regulator, Telefonica said its Telesp unit would offer 48 Brazilian reals ($27.2)0 a share for GVT, topping the BRR42 a share offer made by Vivendi Sept. 9.

"The price Telefonica is offering seems too high, but if Vivendi gained a foothold in Brazil, this would be a blow and is best avoided," Norbolsa analyst Adrian Serrano said.

A Vivendi spokeswoman said she wasn't immediately able to comment on Telefonica's offer for GVT.

Telefonica said the offer was contingent on it acquiring 51% of GVT's shares and the Brazilian regulator approving the deal.

At 1413 GMT, Telefonica shares traded 1.2% lower at EUR19.12, worse than the overall Spanish market.

"GVT would expand our footprint in Brazil and is complimentary to our existing operations," a Telefonica spokesman said.

Telefonica already operates fixed line and broadband provider Telesp, but its presence is limited to the state of Sao Paolo. GVT started business in 2000 and operates in the Brazil's Midwest and Southern regions, as well as some Northern states.

Telefonica also operates Brazilian mobile operator Vivo with Portugal Telecom SGPS SA (PT).

Telefonica has relied increasingly on the strong revenue growth in its Latin American markets as an economic downturn hits its mature markets in Europe, especially in Spain.

Telefonica is Spain's largest telecommunications company by market value and customers.

Company Web site: www.telefonica.com

-By Jason Sinclair, Dow Jones Newswires, 34 913958127, jason.sinclair@dowjones.com

(Ana Garcia and Ruth Bender contributed to this article.)