UPDATE 1-PeopleSupport rejects Philippine firm's raised offer

(Adds details, background and share movement)

Jan 31 (Reuters) - PeopleSupport Inc PSPT.O said it rejected a sweetened offer from IPVG Corp (IP.PS: Quote, Profile, Research) and AO Capital Partners to acquire the outsourcing firm for $17 a share in cash on financing concerns.

PeopleSupport said Philippine IT and gaming group IPVG and Hong Kong-based AO Capital were either unwilling or unable to provide any evidence on their ability to fund the potential transaction.

The offer, which values the deal at about $403.8 million, is 17.6 percent more than PeopleSupport's closing share price of $14.03 Thursday on Nasdaq.

IPVG and AO Capital had previously offered $15 a share to acquire the company.

PeopleSupport shares were down more than 5 percent at $13.22 in morning trade after the company turned down the revised offer.

"Despite numerous requests... they did not provide us with any evidence that they could obtain sufficient financing for this transaction," PeopleSupport Chief Executive Lance Rosenzweig said in a statement.

Los Angeles-based PeopleSupport, whose customers include Expedia Inc (EXPE.O: Quote, Profile, Research), Washington Mutual Inc (WM.N: Quote, Profile, Research) and Travelocity.com LP, provides business process outsourcing services from the Philippines.

In December, IPVG had signalled that it would not go hostile on the bid, adding that it was in advanced takeover talks with several U.S.-based outsourcing companies.

IPGV had also said it hoped to sign two deals before the end of the year and that the deals would have roughly the same price-tag as the PeopleSupport bid. (Reporting by John Tilak and Saumyadeb Chakrabarty in Bangalore; Editing by Amitha Rajan)