The cash offer by France's Vivendi SA (VIV.FR) for Brazilian telecom operator GVT Holding SA (GVTT3.BR) could shake up the local industry, which most thought had settled into a three player model.

Alternative operator GVT already had aggressive expansion plans and, with the considerable ballast of Vivendi behind them, it could accelerate the growth of its fixed-line telephone and Internet services into cities dominated by the competition.

"This deal will give GVT much greater firepower to expand. We weren't expecting a new outside player to come in," said Luciana Leocadio, telecom analyst at the Ativa brokerage in Rio de Janeiro.

However, the Vivendi offer is far from a done deal as minority investors could reject it or a local competitor could make a rival bid, analysts said.

Late Tuesday, Vivendi said it had made a friendly all-cash offer of approximately EUR2 billion for GVT.

The news caught investors by surprise as most believed the Brazilian telecom industry would be dominated by three groups from hereon in -- Spain's Telefonica (TEF), Mexico's Telmex (TMX) and Brazil's Oi (TNE). These firms were expected to consolidate and gradually snap up assets as the opportunities arose.

Indeed, Telefonica had been linked with a possible bid for GVT.

As a result, analysts do not think a rival bid is out of the question.

"(In terms of margins), we would prefer to see consolidation in Brazil's telecom industry, with incumbents participating in M&A, rather than new entrants," said Vera Rossi, telecom analyst at Morgan Stanley in New York.

GVT is a leading alternative telecom operator in Brazil with 2.3 million lines in service at end-June, offering fixed-line voice and broadband.

The company operates in 72 cities in center-west, northern and southern Brazil, and has plans to expand into the rich southeast of the country.

Vivendi can bring valuable experience in running alternative carriers. In France's Neuf Cegetel, it has perhaps Europe's most developed market for alternative carriers.

Meanwhile, Vivendi's strong media wing will open up interesting possibilities once IPTV regulations are in place, analysts said.

"The new firm would be a real competitor to (Brazil's leading cable TV provider) Net Servicos de Comunicacao S.A. (NET) (which is part owned by Telmex), creating more competition," said Alex Pardellas, telecom analyst at Banif Investimento.

Brazil offers obvious prospects for Vivendi, with a growing middle class and broadband Internet at just 5% of the population.

It also has an expanding cell phone market, although Vivendi says it has no plans to develop a wireless network.

However, it is unclear if minority investors will sell as they may demand a greater premium for waiving a poison pill clause in the company's statutes.

GVT's controlling shareholders, Israeli investor Shaul Shani's Swarth Group and Global Village Telecom (Holland) BV, have agreed to tender a minimum of 20% of GVT's outstanding shares from the 30% they own, but Vivendi's tender offer, priced at 42 Brazilian reals ($22.95) per share or a 15% premium on Tuesday's close, must still attract enough small investors for the French firm to secure a 51% stake.

"We think there is a possibility that this tender offer may not take place at BRL42 per share, either because minority shareholders do not approve the transaction under the current terms, demanding a higher price, or due to a potential new offer from one of the current telecom payers in Brazil," said Morgan Stanley's Rossi.

-By Alastair Stewart, Dow Jones Newswires; 5511 2847-4520; alastair.stewart@dowjones.com