UPDATE 1-Telekom Austria warns on full-year sales, profit

* 2012 sales seen at 4.2 bln eur vs May forecast of 4.4 bln

* EBITDA seen at 1.4-1.45 bln eur vs 1.5 bln

* Q2 sales, EBIDTA fall 4.2 pct, beat estimates

VIENNA, Aug 16 (Reuters) - Telekom Austria warned its full-year profits and sales would not meet its targets, saying it could not maintain its outlook in the face of fierce price competition, regulation of fees it can charge other operators, and a tough economic environment.

The Austrian incumbent said on Thursday it now expected full-year earnings before interest, tax, depreciation and amortisation (EBITDA) to fall to 1.4 to 1.45 billion euros ($1.72 to $1.78 billion), versus a forecast in May of 1.5 billion euros.

Revenues are now expected to fall to 4.2 billion euros from 4.45 billion in 2011, against a previous expectation of 4.4 billion euros. The company also trimmed its forecasts for capital expenditure and operating free cash flow.

In June, Carlos Slim's America Movil agreed to buy 21 percent of Telekom Austria, as the Mexican billionaire exploits depressed valuations to establish his first positions in Europe. He has also bought a stake in Dutch KPN.

The second quarter was marked by customers in Telekom Austria's main markets of Austria, Bulgaria and Croatia switching to cheaper products, meaning that average revenue per user (ARPU) declined even where subscriber numbers rose.

"Telekom Austria Group expects this weak economic environment to continue and will lead to a strong negative impact on business performance, demand and consumer usage patterns across all of its operating markets," it said.

"Due to these negative effects, the outlook had to be revised," Chief Financial Officer Hans Tschuden said in a company statement.

In Austria and Bulgaria, which together account for more than half the group's total customers, ARPU fell by 9.3 percent and 14.8 percent respectively.

Hyperinflation continued to blight the company's performance in Belarus, although operations improved slightly on a local currency basis.

Overall, both sales and EBITDA fell 4.2 percent in the quarter to end-June but beat analysts' expectations, according to forecasts from Thomson Reuters StarMine, which weights analysts' estimates according to their past accuracy.

Sales were 1.06 billion euros versus expectations of 1.05 billion, while EBITDA of 365 million euros beat the weighted average forecast of 346 million euros.

It had EBITDA of 1.53 billion in 2011.

Telekom Austria maintained its target of paying a 2012 dividend of 0.38 euros per share.