Telecom Italia (TI) has made a bid of around €7 billion to acquire Brazilian fixed operator GVT from French media company Vivendi, with Telefonica submitting an improved rival offer worth €7.45 billion.

The offer from TI, which has been rumoured for some time, includes €1.7 billion in cash, 16 per cent of its own share capital (21.7 per cent of voting rights), and a 15 per cent share in TIM Brasil, the Italian incumbent’s mobile business in the country.

According to TI’s statement, the deal would first see TIM acquire a minority stake in GVT, after which the two Brazilian-based companies would merge.

The offer will be submitted to TI’s shareholders meeting and expires on 20 September. It also includes an exit clause in the event of GVT losing significant value.

Telefonica improved on its €6.7 billion bid made on 4 August. The new offer includes a much bigger cash element than TI’s offer (€4.66 billion), along with a 12 per cent stake in Telefonica Brasil, which operates under the Vivo brand.

If it decides to proceed with the offer, Vivendi will have an option to exchange a third of the Telefonica Brasil shares for 5.7 per cent of share capital and 8.3 per cent of the voting rights in TI.

This offer, which Telefonica said would be funded through a capital increase in Telefonica Brasil, expires on 29 August, just 24 hours after it was lodged.

The short timeframe is because the Telefonica offer does not require approval from its shareholders, unlike the TI bid which needs to be ratified, a Vivendi representative told Mobile World Live.

Vivendi said both offers include proposals for content partnerships.

The Vivendi Supervisory Board is due to meet today to examine which of the two offers best serve the interests of Vivendi shareholders and GVT employees.

Telefonica’s original bid is thought to have been motivated by a need to satisfy Brazilian competition regulator Cade, which requires the Spanish group to either end its interest in TIM (via its stake in TI), or find a new partner for Vivo.

With TI opposing a break-up of TIM, Telefonica submitted its €6.7 billion offer for GVT earlier this month.

A potential complication is that Oi, the Brazilian integrated operator, is preparing to bid for a majority stake in TIM. With Telefonica and TI both wanting to add GVT to their businesses, Oi will want to ensure it does not end up as a minor player in the country’s mobile market.

Oi could face a rival in the form of Vodafone, which was linked with acquiring a Brazilian operator last week, with TIM thought to be its favoured target.