UPDATE 2-Colt Q3 earnings rise, comfortable on year

* Q3 underlying earnings up 9.7 percent, ahead of forecast * Says remains comfortable with year expectations * Says seeing no material impact from financial downturn

(Adds executive comments, analyst reaction, shares)

By Paul Sandle

LONDON, Oct 23 (Reuters) - Britain's Colt Telecom Group SA (COLT.L) posted a 9.7 percent rise in underlying earnings on Thursday and said it was comfortable with its full-year expectations, sending it shares up 1 percent. "We are yet to see any material impact from the financial downturn, and key indicators continue to show growth," Chief Executive Rakesh Bhasin said in a conference call with reporters.

Despite increasingly uncertain markets, Colt continued to make progress with further data revenue growth and improved earnings, he said.

Shares in the Luxembourg-based group, which hit a six-year low of 76.75 pence on Wednesday on worries about the corporate telecoms specialist's exposure to financial markets, were up 1 percent to 82.5 pence at 0754 GMT as the results met analysts' expectations.

Dan Gardiner at broker Teathers said Colt's shares were trading at their lowest historical rating of about 2.3 times 2009 underlying earnings, and he was tempted to upgrade his "hold" stance.

"However, there remain significant uncertainties about the extent that the deteriorating economic environment will impact forecasts and, while the company has only net debt of 10 million euros, the refinancing of the company's outstanding debt," he said.

Bhasin, however, said Colt had a "very diverse" revenue stream, which included utilities, and less than 20 percent came from the financial sector.

2009 MORE UNCERTAIN

Acting Finance Director Tony Bates said he was "reasonably comfortable" that full year underlying earnings would be around the market consensus of just over 300 million euros, but 2009 was harder to forecast.

"Next year is a bit uncertain. That's true of the top line and capex," he said.

Costs in the third quarter jumped 5.7 percent as the group focused on increasing its higher margin data revenue, which grew to 55 percent of revenue from 51 percent a year ago.

"The key thing is data revenue growth," Bates said. "But clearly in the current market we are watching (costs) carefully."

Colt posted earnings before interest, tax depreciation and amortisation of 76.7 million euros ($98.6 million) for the three months to the end of September, compared with analysts' expectations of 76.0 million.

Revenue increased by 0.3 percent to 420.7 million euros, with higher margin data revenue up 8.2 percent to 232.3 million, it said.

Pretax profit was 18.6 million euros against 8.7 million euros for the same period a year ago, and ahead of a company-supplied analyst consensus of 14.7 million. (Editing by Paul Bolding)