UPDATE 2-Brazil's Vivo Q4 net falls slightly on taxes

* Q4 profit down slightly as ARPU falls, taxes rise

* Sales rise 1.2 pct vs 15 pct growth in mobile users

* Average revenue per user down 10.3 pct yr/yr

* Vivo shares slip 0.8 pct (Adds analyst comments, share performance)

By Guillermo Parra-Bernal

SAO PAULO, Feb 10 (Reuters) - Vivo VIVO4.SA(VIV.N), Brazil's largest wireless carrier, said on Wednesday fourth-quarter net income fell slightly from a year earlier after its tax payments almost tripled and customers cut back on spending for some telecom products.

Net income slid to 221.6 million reais ($120 million) from 222.1 million reais in the year-earlier period, Vivo said in a securities filing. Its profit was 340 million reais in the third quarter.

Vivo reined in sales and discounts in the fourth quarter, a fact that probably helped slow revenue growth in the period. But, with operating margins growing faster than those of its rivals as the carrier controls costs, Vivo looks better positioned to reap the benefits of a recovering economy as competition heats up, analysts said.

"Despite having a quarter with greater sales volumes and even considering the strong contribution from net additions, there wasn't a negative impact on the company's profitability," Beatriz Battelli, a telecommunications analyst at the Brascan brokerage, said in a report.

Average revenue per user, or ARPU, a key measure of revenue in the telecom industry, tumbled 10.3 percent to 26.1 reais from a year earlier, and 1.1 percent from the prior quarter.

Net revenue and costs rose 1.2 percent, helping operating margins remain stable in a year-on-year basis. Tax payments rose to 220 million reais from 71 million reais in the fourth quarter of 2008.

Profit jumped 120 percent to 857.5 million reais in 2009, compared with 389.7 million reais in the previous year.

Revenue at Vivo, a joint venture owned by Portugal Telecom (PTC.LS) and Spain's Telefonica (TEF.MC), rose slightly even as the number of mobile phone users jumped 15 percent to 51.74 million people.

To stay profitable, Vivo has been trimming provisions for delinquencies and using its size to push down the cost of equipment and phones it sells, analysts said.

EBITDA, RIVALS

The company has growth potential for the quarters ahead as revenues from data on wireless modems and smartphones are poised to jump. That segment gained 65 percent in the period, the filing said.

Goldman Sachs analyst Stephen Graham said growth in that area, which now represents 16 percent of Vivo's service revenue, is not pressuring capital expenditures.

By contrast, fourth-quarter revenue at Claro, which is owned by Mexico's America Movil (AMXL.MX) and is one of Vivo's main rival in Brazil, tumbled 17 percent. Analysts also expect revenue and net income to decline at Oi TNLP4.SA, the Brazilian carrier that was the product of a government-sponsored merger between Telemar and Brasil Telecom last year.

Vivo's earnings before interest, taxes, depreciation and amortization, a measure of operational profitability known as EBITDA, edged higher to 1.41 billion reais from 1.39 billion reais reais. EBITDA as a proportion of sales, a measure of profitability commonly followed by analysts called EBITDA margin, was unchanged at 32.7 percent.

The company's preferred shares slipped 0.8 percent to 53.42 reais after the results were disclosed. Vivo has gained 58 percent in the 12 months through Feb. 9.

Vivo also set aside 818.8 million reais for 2009 dividends. ($1=1.846 reais) (Additional reporting by Elzio Barreto in Sao Paulo; Editing by Tim Dobbyn)