By Nathan Gill and James Attwood

     Oct. 7 (Bloomberg) — Cia. de Telecomunicaciones de Chile SA fell to the lowest in a month in Santiago trading after minority shareholders blocked an offer by controlling shareholder Telefonica SA to buy shares it doesn’t already own.

     Telefonica Chile, as the country’s biggest fixed-line carrier is known, dropped 4.1 percent to 870 pesos. The stock had risen 7.5 percent before trading was halted for today’s vote in Santiago.

     About 56 percent of shareholders accepted a company rule change required to allow the bid to proceed, falling short of the required two-thirds acceptance. Madrid-based Telefonica SA was seeking to buy the 55 percent of Telefonica Chile it doesn’t already own for 1,000 pesos a share for series A shares and 900 pesos for series B stock.

     “It was a generous offer, in line with what the company was worth on the market, according to all the analysts, but in the end shareholders decided to reject the proposal,” Telefonica Chile Chairman Emilio Gilolmo told reporters. “We continue to have responsibility for management of the company and we continue as enthusiastically as before.”

     Europe’s second-largest telephone operator aimed to bring its ownership of the Chilean unit into line with its control of other Latin American units, Jorge Abadia, Latin American corporate development director, said by phone Sept. 11, when the deal was announced. The Chilean unit is increasing spending on pay television and Internet services to make up for declines in it telephone business. Profit fell by half last year.

     “I think they’ll keep trying to reach some kind of agreement with the pension fund administrators that both sides think is fair,” Natalia Aranguiz, an analyst at FIT Research Corredores de Bolsa SA said, by phone from Santiago today.

     Telefonica SA’s press representative in Chile declined requests for comment on the possibility of another offer.