UPDATE 3-Telecinco, A3 profits fall but outlook brightens

* Telecinco management upbeat over H2

* Telecinco H1 net beats poll

* Some see worst over, highlight cost-cutting capacity

* Telecinco, Antena 3 shares both up around 7 pct

(Adds Telecinco management comment on H2)

MADRID, July 30 (Reuters) - Spanish broadcaster Telecinco (TL5.MC) posted a heavy fall in first-half profit on Thursday, hit by lower advertising revenues, but it beat market expectations and management tipped an improved second half.

Advertising revenues for private broadcasters like Telecinco are expected to get a lift thanks to a government plan to remove advertising at state-owned rival TVE.

"Because of this, we are more optimistic on the incoming period regarding audience, advertising and margins," General Operations Manager Massimo Musolino told a conference call.

Shares in both Telecinco and peer Antena 3 (A3TV.MC), which also reported on Thursday, rose sharply as some analysts also predicted the worst of the crisis was over.

"It seems like the worst is over and the flow of news in the coming months should be positive," said an analyst at brokerage ACF in Madrid.

Costs for the Mediaset (MS.MI) unit were helped by the reversal of a 30 million euros ($42.28 million) tax provision which the company said was no longer necessary.

Analysts at Banesto also highlighted Telecinco's resilience.

"We believe Telecinco can weather the storm thanks to its strategy centred on profitability and strong management, on cost control, a high degree of flexibility and its solid financials," Banesto said in a note to clients.

Net profit dropped 68.7 percent to 62.2 million euros compared with a Reuters poll of 11 analysts that had predicted net profit of 50.2 million euros.

Total revenues fell 43 percent to 320.8 million euros, missing estimates for 336 million, depressed by a 43.2 percent decline in gross advertising revenues.

But analysts at UBS sounded a note of caution.

"We expect a slight improvement (in the advertising market) in July given lower pricing pressure although the market remains very weak and visibility is still low," the broker said in a note.

Antena 3 said its first-half profit dropped 71.6 percent to 22.7 million euros, in line with expectations according to a Reuters poll.

The company fared better than Telecinco however in terms of advertising revenues, which suffered only a 26.2 percent decline versus a 29 percent fall in the sector in the first half according to consultancy Infoadex.

Telecinco was the leader in Spanish television audience share for five years, but lost dominance at the end of 2008 due to increasing competition from peers including Antena 3, state TV's La Primera, Cuatro (PRS.MC) and Sexta.

That has meant it can no longer charge as much for advertising.

At 1046 GMT, Telecinco shares were up 5.4 percent at 7.51 euros and Antena 3 shares rose 6.8 percent to 6.79 euros. ($1=.7069 euros) (Reporting by Elisabeth O'Leary and Tracy Rucinski; Editing by Mike Nesbit/Richard Hubbard)