European shares flat at midday; telcos higher

* FTSEurofirst 300 index flat

* BA, Iberia higher on merger talks

* Telcos up; TeliaSonera, BT Group rise

By Brian Gorman

LONDON, Nov 12 (Reuters) - European shares were flat at midday on Thursday, with telecom companies boosted by upbeat results and merger news, and euro zone output data suggesting economic recovery is on track, but with banks and miners lower.

At 1145 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was flat at 1,014.09 points.

On Wednesday, the index hit its highest close in three weeks and is up more than 57 percent from its lifetime low of March 9, as investors have become more confident on the prospects for economic recovery.

"We think the upwards trend for equity markets is fully on track," said Tammo Greetfeld, equity strategist at Unicredit Group.

"Earnings season is almost over and it was mostly positive. Macro data will now gain in importance. Order intake and production data should signal that recovery is on track."

Higher production of capital, intermediate and non-durable consumer goods drove euro zone industrial output in September to its fifth straight month of month-on-month gains, pointing to continued economic recovery. [ID:nLC146020]

Telecom groups featured among the biggest movers. TeliaSonera (TLSN.ST) gained 5.6 percent after it said it had agreed with Russia's Alfa Group to combine holdings in mobile operators MegaFon in Russia and Turkcell (TCELL.IS) in Turkey.

Britain's BT Group (BT.L) rose 4.9 percent after it increased its revenue and dividend forecast for the full year after stringent cost cuts helped the former telecoms monopoly to beat second quarter core earnings expectations. [ID:nLB181504]

"The boost in full-year 2010 guidance across many key fronts -- top-line performance, cost-control performance and free cash flow generation -- will play strongly in the market and boost sentiment towards BT," Daiwa analyst Michael Kovacocy said.

Spain's Telefonica (TEF.MC), the biggest company in the European sector by market capitalisation, was up 0.8 percent after reporting flat nine-month earnings as expected [ID:nMDT008779

Vodafone (VOD.L), which fell earlier in the week after its results, was up 1.8 percent.

British Airways PLC BAY.L was up 6.8 percent after it confirmed it was considering a merger with Iberian Airways ILBA.MC, up 9.2 percent. [ID:nWLA8041]

Across Europe, the FTSE 100 index was up 0.2 percent, Germany's DAX was 0.2 percent higher and France's CAC 40 was 0.1 percent up.

MINERS, BANKS FALL

The dollar picked up from 15-month lows, hurting metals prices. Anglo American (AAL.L), Antofagasta (ANTO.L), Vedanta (VED.L) and Xstrata (XTA.L) were down between 0.8 and 1.3 percent.

Banks were mostly lower. Societe Generale (SOGN.PA), HSBC (HSBA.L) and BNP Paribas (BNPP.PA) were down 0.4 to 1.3 percent.

Pharmaceuticals were mostly higher. GlaxoSmithKline (GSK.L) was up 1.6 percent after UBS raised its target price to 1,550 pence, from 1,450.

Among other companies reporting results, AB InBev (ABI.BR) dropped 2.3 percent after a mixed third-quarter picture, with lower revenue than expected but higher core profit and guidance described as "solid" by one analyst. [ID:nLA37810]

Danish shipping and oil group A.P. Moller-Maersk (MAERSKb.CO) fell 5.1 percent after reporting a deeper-than-forecast net loss for the first nine months of the year, hit by a global slump in freight, and said it would lose $1 billion in 2009. [ID: nLB221630]

At 1330 GMT, investors' attention will turn to the release of U.S. weekly jobless claims.

"U.S. jobless figures are going to be crucial to the level of confidence coming through. I suspect it is still going to show a little weakness but not quite as bad as expected. Justin Urquhart Stewart, director at Seven Investment Management."

Futures for the Dow Jones DJc1, S&P 500 SPc1 and Nasdaq NDc1 were down between 0.3 and 0.4 percent. (Additional reporting by Joanne Frearson; Editing by Hans Peters)