UPDATE 1-Thai TAC Q3 profit beats forecast, upbeat outlook

* Net profit down 11 pct on year, but up 19 pct on quarter

* Revenue down 3 pct on year, EBITDA up from previous quarter

* Raises 2009 cash flow target to 13 bln baht from 12 bln

* Shares down 0.65 pct before Q3 announcement (Adds details)

By Khettiya Jittapong

BANGKOK, Oct 28 (Reuters) - Thailand's second-largest mobile phone operator, Total Access Communication PCL DTAC.BK (TACC.SI) (TAC), reported an 11 percent fall in net profit on Wednesday, hurt by a weak economy, but it beat market forecasts.

Controlled by Norway's Telenor (TEL.OL), TAC is expected to see a stronger fourth quarter, usually its best, thanks to a firmer economy after earnings bottomed in the second quarter.

Its outlook hinges on an auction of third-generation mobile-phone licences that will change the way operators pay regulatory fees, create a new payment structure and potentially reduce costs for the Thai telecoms industry.

Thailand's telecoms regulator plans to open a much-awaited auction of four 3G licences in the middle of December, though legal wrangling over the regulator's licencing authority might delay this to the first quarter of next year.

TAC has about 30 percent of Thailand's mobile phone market. Advanced Info Service ADVA.BK has about 50 percent.

TAC posted a July-September net profit of 1.63 billion baht ($49 million), or 0.69 baht per share, down from 1.83 billion baht a year earlier, but up 19 percent from 1.37 billion in the previous quarter.

Ten analysts surveyed by Reuters had forecast 1.47 billion baht for the third quarter.

Hit by the economic downturn, third-quarter revenue fell 3 percent from a year earlier, but rose 1 percent from the previous quarter, it said in a statement.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 6 percent from the previous quarter due to improved revenue, lower network connection fees, and improvement in operating expenses.

The company also raised its 2009 target to generate free cash flow to 13 billion baht ($389 million) from 12 billion baht after it posted a healthy operating cash flow in the first nine months of this year. [nBKK394486]

"As the overall economy slowly recovers, we'll try to maintain our revenue growth momentum while keeping operating expenses under control," Chief Executive Officer Tore Johnsen said, adding the 2-billion baht cost reduction target by 2010 is well on track.

The company added about 70,000 net new customers in the third quarter, bringing its subscriber base rising to 19.9 million at the end of September.

Before the announcement, TAC shares, valued at $2.7 billion on the Thai bourse, ended down 0.65 percent at 38.50 baht, while the overall market fell 1.48 percent.

In the last three months, the stock has risen 11 percent, underperforming a 16 percent rise of the market. ($1=33.43 Baht) (Reporting by Khettiya Jittapong; Editing by Jason Szep)