UPDATE 1-Telekom Austria cuts costs to slow profit decline

Thu May 8, 2014 2:11am EDT

* Q1 EBITDA 320 mln eur vs Reuters poll avg 319 mln eur

* Saves 57 million euros in operating expenses in Q1

* Expects America Movil takeover offer in mid-May (Adds details on cost savings, Austria, background)

VIENNA, May 8 (Reuters) - Telekom Austria slowed profit declines in the first quarter by cutting costs, especially handset subsidies in Austria, and said on Thursday its turnaround strategy was starting to work.

The company said it expected a mandatory takeover offer in mid-May from America Movil after the Mexican group signed a shareholder deal with Austria, which is expected to lead to a renewed focus on eastern European expansion.

Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 5 percent to 320 million euros ($446 million) - after a fall of 11 percent in the fourth quarter - in line with market expectations.

"The numerous remedial measures which we put in place in the first quarter 2014 to improve our earnings power will bear fruit in the further course of the year," said Hannes Ametsreiter, who will stay on as chief executive under America Movil's control.

Competition with smaller Austrian rivals, Deutsche Telekom's T-Mobile and Hutchison Whampoa's Drei, has abated somewhat since Drei bought Orange Austria in 2013, allowing the carriers to start raising mobile prices.

Telekom Austria said it would continue its initiatives to raise tariffs, focusing on existing customers.

The company saved 57 million euros in operating expenses in the first quarter, mainly by cutting handset subsidies in Austria - which accounts for most of its sales and profits - and said it planned to save a total of 100 million euros this year.

Telekom Austria reiterated it expected full-year revenues to decline 3 percent after a fall of 7 percent in the first quarter, and capital expenditure to remain stable at around 700 million euros. ($1 = 0.7183 Euros) (Reporting by Georgina Prodhan; Editing by Michael Shields)

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