* D.Telekom, Telefonica, T.Italia report lower Q1 revenues
* Telefonica total rev down 9 percent at 14.1 bln euros
* D.Telekom total rev falls 4.5 pct to 13.8 bln
* European telcos much lower valued than U.S. peers
* Telefonica shares down 0.9 pct, DTel up 4.6 pct
By Harro Ten Wolde and Clare Kane
FRANKFURT/MADRID, May 8 (Reuters) - Three of Europe's biggest telecom operators reported lower revenues on Wednesday, blaming the weak European economy and stiff regulation while seeing some bright spots in markets abroad.
The figures from Spain's Telefonica SA, Deutsche Telekom AG and Telecom Italia chimed with recent statements from peers such as France Telecom, Swisscom and KPN as European operators struggle with an overcrowded market, tough regulations and recession.
They complain such pressures are hampering their ability to invest in faster networks, important for future growth.
Telefonica, Europe's biggest telecom group by revenue, reported a 11.7 percent drop to 6.7 billion euros ($8.8 billion) for its European operations in the first quarter, with total revenue down 9 percent at 14.1 billion.
Deutsche Telekom said revenue in Europe shrank 6.9 percent to 3.33 billion euros, while overall revenue fell 4.5 percent to 13.8 billion.
And Telecom Italia also posted a fall in revenue in the quarter, down 8.1 percent at 6.79 billion euros, weighed on by its domestic business which was hit by stiffer competition and pricing pressures.
Reflecting the pressures the sector is under, European telecom stocks are much lower valued than U.S. peers and trade at roughly 11 times prospective earnings against 19 times for U.S. peers, according to Thomson Reuters data.
Telefonica's shares closed down 0.9 percent at 11.2 euros after reporting an increase in its debt despite being on a debt-cutting drive, as well as a weaker-than-expected performance in Spain.
Telefonica aims to cut debt to less than 47 billion euros by year end but reported net debt of 51.8 billion at end-March, against 51.3 billion three months earlier. The company has sold all its treasury stock and 40 percent of its central American businesses to slash debt this year.
A 701 million payout for spectrum, the devaluation of the Venezuelan bolivar and seasonally more payments due in the first quarter set back progress on debt reduction, though Moody's analyst Carlos Winzer said the company was still on track to reach its debt target of 2.35 times EBITDA by year-end.
However, Deutsche Telekom shares closed up 4.6 percent at 9.56 euros, top of the sector gainers after reporting slightly better than expected core earnings and the first net addition of customers in the United States since early 2009.
Telecom Italia closed 0.6 percent lower at 0.64 euros as the company put off making a decision on whether to open formal merger talks with Hong Kong-based conglomerate Hutchison Whampoa , buying more time to win over its divided shareholders.
Telefonica is the biggest shareholder in Telecom Italia.
While Telefonica generated cash in some Latin American countries, it depleted its cash reserves in Europe, with operational cashflow decreasing particularly in Britain, the Czech Republic and Ireland. Operational cashflow was 22 percent down on a year ago at 2.6 billion euros, with cashflow in Europe falling 40 percent to 1 billion.
European telecom operators face particular challenges in their home markets.
In Telefonica's recession-hit domestic patch, revenue fell 16 percent to 3.3 billion euros, though margins continued to improve, reaching 47 percent following Telefonica's decision to scrap costly handset subsidies last year.
"It's a tough year ... because the domestic market continues to suffer as a result of contraction in consumer spending," said Winzer.
Deutsche Telekom meanwhile is facing a turf war in its home mobile market, the European Union's largest, where consumers are catching up with the rest of the continent by switching to smartphones from basic mobiles.
However, Deutsche Telekom said mobile service revenues across the group declined 0.1 percent during the quarter. "This was the best figure since the fourth quarter of 2011 and underlines the progress Deutsche Telekom has made compared with the competition," the company said in a statement.