Morgan Stanley (MS) downgraded its recommendation of Brazilian telecom operator GVT Holding SA (GVTT3.BR) to equal-weight from overweight, the investment house said late Monday in a research report for its clients.

"(We are) downgrading (GVT) following Telesp's offer to purchase 100% of GVT shares for 48 Brazilian reals ($28.00) per share," Morgan Stanley said. "We believe the stock price is fully valued at current levels and we see limited upside," it added.

On Friday, Telesp, which is the local unit of Spain's Telefonica SA (TEF.MC) requested regulatory approval for its $3.7 billion cash bid for GVT. The bid trumped an earlier bid by France's Vivendi SA (VIV.FR) of BRL42 per share.

On Friday, GVT's share closed up 0.85% at BRL47.25 on the Sao Paulo Stock Exchange, the BMFBovespa. On Monday, the local market was closed due to a national holiday.

-By Rogerio Jelmayer, Dow Jones Newswires; 5511-2847-4521; rogerio.jelmayer@dowjones.com