UPDATE 1-Czech Telefonica unit Q1 net profit down 35 pct

Tue May 7, 2013 4:09am EDT

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PRAGUE May 7 (Reuters) - Telefonica Czech Republic posted a 35 percent drop in net profit in the first quarter due to falling prices and one-off factors related to asset sales and restructuring costs, it said on Tuesday.

The company, majority-owned by Spain's Telefonica, said its net profit fell to 1.05 billion crowns, below the 1.16 billion forecast in a Reuters poll.

"Without (one-offs), net profit fell 10.9 percent," the company said in a statement.

The extraordinary factors included the sale of an information line business in 2012 that raised the comparative base and a restructuring charge in the first quarter this year.

Telefonica stock dropped 1 percent after the result versus Monday's close, underperforming the Prague PX index, which had gained 0.46 percent by 0755 GMT.

The company said it had signed 78,700 new mobile contracts in the first quarter, reversing a drop of 3,700 in the same period a year ago.

The Czech mobile market has been facing growing competitive pressure, especially in recent weeks, with the arrival of alternative operators and the potential entry of a fourth full-fledged operator after a frequencies auction later this year.

That has triggered a price war between the three main players Telefonica, T-Mobile and Vodafone.

Telefonica said revenue had dropped 4.4 percent to 11.9 billion crowns, a touch below the 11.96 billion estimated in the poll.

Telefonica confirmed its 2013 outlook for a small drop in its OIBDA (operating income before depreciation and amortisation) margin from last year's 41.4 percent and investments below 6 billion crowns. (Reporting by Jan Lopatka; Editing by Michael Winfrey)

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