UPDATE 2-Polish telco TPSA plunges on dividend cut, weak outlook

* Dividend halved to 0.50 zlotys per share

* Warns of "steep" 2013 revenue fall

* Shares hit record lows (Wraps TPSA stories, adds market reaction and comment)

By Adrian Krajewski and Pawel Bernat

WARSAW, Feb 12 (Reuters) - France Telecom's Polish arm TPSA shocked the market with another dividend cut on Tuesday, warning of a "deep fall" in 2013 revenue amid a brutal price war among mobile operators.

Shares in TPSA, Poland's top telecoms group, plunged by as much as a third to record lows after it also reported an unexpected 86 percent drop in fourth-quarter earnings. Shares in its French parent shed 2 percent.

The business has lost more than half its market capitalisation since an October profit warning and has had its cash pile eaten away by a combination of factors, including the wider economic slowdown and mandatory cuts to connection fees.

The former state monopoly is also fending off what it called "irresponsible price wars" in the mobile sector, where some of the more aggressive rivals have offered flat-fee plans.

Poland's smallest operator Play was the first to offer no-limit plans for a flat monthly fee, forcing TPSA and rivals including Deutsche Telekom's T-Mobile and Plus to follow suit.

TPSA said on Tuesday that it would pay a dividend of only 0.50 zlotys ($0.16) per share, half the amount it flagged four months ago, to protect it from market volatility ahead of expected heavy spending on new mobile spectrum to be auctioned later this year.

"The lower dividend is the most shocking news," Espirito Santo analyst Konrad Ksiezopolski said. "In October the planned payout was cut by 33 percent. One could understand that then, as the market was worsening."

"But after four months, the management, with a full overview of what's happening at the company, cuts the dividend plan by another 0.5 zlotys. This strongly undermines trust in the management."

Before the recent turmoil, most investors held the stock for its dividend yield, making the shares vulnerable to reductions in the amount of cash it plans to hand back to shareholders.

The company, which recently rebranded itself to Orange, also said it would continue to cut costs, including a further 1,700 job losses as it contends with a shrinking telecoms market weighed down by the econonomic slowdown.

The revenues of Polish operators have also been shrinking because of the regulator-imposed reductions to connection fees. These are the fees companies charge rivals for calls to customers on their own network.

"We anticipate a steep decline of our revenue in 2013, driven down by the MTR (mobile intercharge fees) cuts, as well as by the impacts stemming from the ongoing price war in the mobile market," TPSA's Chief Financial Officer Jacques de Galzain said.

"We will significantly accelerate our cost-saving measures, striving to transform into a leaner and more agile organisation. We do not exclude outsourcing or asset disposals as means to increase efficiency."

TPSA intends to rein in investments in 2013 to below 2 billion zlotys ($643 million), planning to cap future expenditure at 12-13 percent of annual revenue.

In a bid to sweeten the slew of negative signals, TPSA confirmed that it has launched the sale of its Internet portal Wirtualna Polska, valued by analysts at 500-600 million zlotys. ($1 = 3.1100 Polish zlotys)

(Editing by Chris Borowski and David Goodman)