The battle for Brazilian broadband and pay TV provider GVT heated up on Thursday after Telecom Italia launched a takeover bid and Telefonica sweetened its offer.

Telecom Italia, which operates in Brazil as TIM Brasil, has followed through on its interest in GVT by offering parent Vivendi €1.7 billion in cash for a minority stake in GVT as well as a 15% stake in the combined GVT/TIM entity. It has also offered Vivendi a 20% stake in Telecom Italia. In all, the operator said its bid is worth €7 billion.

"The offer provides for the creation of a new leading player in the ICT and media and entertainment sectors through the integration of the respective Brazilian operations and the entry of the French group [Vivendi] into the capital of Telecom Italia," said Telecom Italia, in a statement.

However, Telefonica, which made an offer for GVT in early August worth €6.7 billion, is not about to give up the fight.

The Spanish incumbent still hopes to merge GVT with its Brazilian arm Vivo and on Thursday it increased the cash component of its cash and stock bid to €4.7 billion from €3.9 billion. The offer of a 12% stake in the combined entity and the option for Vivendi to take an 8.3% stake in Telecom Italia remains unchanged. In total, Telefonica said its new bid is worth €7.5 billion.

Telecom Italia said its offer is valid until 20 September, while Telefonica said its offer expires on 29 August.

While the outcome is not certain, Telefonica's bid might prove more tempting to Vivendi.

The French conglomerate is making a concerted effort to exit the telecoms market and focus instead on the TV and music industries. Telecom Italia's offer comes with less cash and a sizeable stake in a European incumbent operator.

By comparison, Telefonica's offer comes with a larger cash component that Vivendi could invest in its core media and entertainment business.

"The Vivendi supervisory board, which meets today, will examine the two offers in the best interests of Vivendi shareholders and GVT employees, and will decide what actions to take as a result," said a statement