Vivendi is offering 2 billion euros ($2.9 billion) for Brazilian telecom operator GVT in a move that puts it head-to-head with Telefonica in Latin America's biggest market and could spark a counterbid.

The French entertainment and telecoms group said on Wednesday it would bid 42 reais per share for 100 percent of GVT's capital, a 15.8 percent premium over GVT's closing share price of 36.26 reais on Tuesday.

The move into Brazil, which GVT's controlling shareholders backed by agreeing to tender part of their holding, fits with Vivendi Chief Executive Jean-Bernard Levy's strategy of seeking growth in emerging markets.

Levy said the deal would boost earnings from next year and would not impact the firm's credit rating or dividend policy.

But some analysts said Telefonica, which already has a major presence in Brazil, or another player might also be interested in the business.

Telefonica could make a counterbid for GVT and we think it would be a better fit (than Vivendi), UBS analyst Polo Tang said in a note to investors.

Telefonica, whose spokesman declined to comment on the speculation, shares control of Vivo (VIVO4.SA), Brazil's No. 1 wireless carrier, with Portugal Telecom (PTC.LS). The Spanish company also owns Telesp, Brazil's No. 2 fixed-line phone company, which operates in wealthy Sao Paulo state.

MARKET SHARE

Telefonica's group has 31 percent market share in Brazil, according to UBS. Fixed-line telephone and broadband firm GVT has just 4 percent, with 2.3 million customers and revenue of $800 million last year, but is growing rapidly.

Vivendi said GVT's controlling shareholders Swarth Group and Global Village Telecom have agreed to sell it at least 20 percent of outstanding shares. They are also ready to vote to change GVT's bylaws to remove an anti-takeover provision.

Vivendi shares fell as much as 2.5 percent in morning trading and were 1.8 percent lower at 19.665 euros by 0940 GMT, putting them among the leading decliners on a broadly flat French CAC 40 index .FCHI. Telefonica was also flat.

Vivendi said its offer would only go ahead if it obtained at least 51 percent of GVT's capital. It is also subject to Vivendi board approval and undertaking due diligence before October 16.

Brazil is home to one-third of Latin America's fixed-line and mobile phone customers, according to market research firm Idate. Telecom revenue grew by 10 percent in Latin America last year.

Vivendi already holds a lucrative stake in Morocco's telecom operator and has looked at acquiring telecom assets across the Middle East and Africa.

Most European telecom operators, such as Vodafone and France Telecom, have adopted similar expansionist strategies, pushing up prices for emerging market assets in recent years.

In Brazil, Telecom Italia owns TIM Brasil, the No. 2 wireless company after Vivo. The Italian company also belongs to the controlling shareholder group of Brasil Telecom, Brazil's No. 3 fixed-line company.

(Additional reporting by Luciana Lopez and Elzio Barreto in Sao Paulo, Yinka Adegoke in New York)

(Reporting by Leila Abboud; Editing by Leslie Gevirtz, Valerie Lee, John Stonestreet)