WRAPUP 3-European telcos hold up despite economy slowdown

* Telefonica, F.Telecom confirm outlooks

* Spanish units hold up after Vodafone warning

* Analysts question BT targets, shares slump

* France Telecom to pay first interim dividend

(Recasts, adds analyst comment, details on BT)

By Tracy Rucinski and Astrid Wendlandt

MADRID/PARIS, July 31 (Reuters) - Telefonica (TEF.MC) and France Telecom (FTE.PA) reported resilient earnings despite slowing economic growth and confirmed their full-year forecasts but BT Group (BT.L) shares slumped on doubts its targets were too ambitious.

Some analysts said fears that carriers would be hit badly by economic weakness were overdone but others noted that a slowdown in Spain affected results, although not as strongly as with Vodafone (VOD.L) which last week blamed Spain for a cut in its full-year outlook.

"Revenue trends were never going to be as weak as for Vodafone, but revenue guidance for Spain still appears at risk with macro indicators worsening," Credit Suisse analysts said about Telefonica.

France Telecom, facing concerns it might pursue diluting acquisitions after an abortive attempt to buy Swedish rival TeliaSonera (TLSN.ST), said it will pay its first ever interim dividend to underscore its financial solidity.

Finance Director Gervais Pellissier said the group, which trades mainly as Orange, planned no major acquisition for now.

Shares in BT slumped 12.5 percent on a host of divisional problems and as analysts questioned whether targets set by its previous chief executive were now too lofty.

"BT looks a bit sick," said one analyst. [ID:nL1576639]

BT shares were a drag on the DJ Stoxx telecoms index for European shares .SXKP that fell 0.7 percent by 1104 GMT.

France Telecom rose 2.1 percent and Deutsche Telekom (DTEGn.DE) was also among the gainers. Telefonica shares were flat.

Vodafone shares fell 1.5 percent after analysts said rivals' performance in Spain suggested that macro-economic weakness was only part of Vodafone's troubles there.

The world's biggest mobile group by sales knocked confidence in the sector last week by warning that its full-year revenue would be at the lower end of forecasts, mainly hit by a sharp fall in the Spanish market.

CAUTION

Companies remained cautious about the wider economy.

Telefonica Europe head Matthew Key said the firm was "certainly not immune to the economic backdrop, but resilient".

France Telecom linked its 2008 performance in Spain to the wider economy and Carphone Warehouse (CPW.L), Europe's biggest independent mobile phone retailer, said it remained cautious on the outlook for consumer spending. [ID:nL1545676]

"The drop in the Spanish economy is much stronger than it is in other European countries such as France," France Telecom said.

Telefonica, which generates more than 40 percent of its core profit in Spain, said revenue there was flat in the second quarter but rose 2.1 percent in the first half of the year, driven by a 10.4 percent rise in mobile clients.

Telefonica exceeded expectations for its overall first-half core and net profit and reiterated its 2008 forecast for operating income before depreciation and amortisation (OIBDA) to increase 7.5 to 11 percent. [ID:nMDT005453]

France Telecom saw its mobile revenue rise 0.2 percent on a historical basis in Spain and 2.3 percent on a like-for-like basis, which compared with a 4.8 percent rise in France on a historical and comparable basis.

Its first-half underlying profit rose 2.7 percent, slightly surpassing expectations. [ID:nL1397631] (Additional reporting by Mark Potter and Kate Holton in London and Blaise Robinson in Paris; Writing by Niclas Mika; Editing by David Cowell)