UPDATE 1-Brazil's TIM posts solid profit, sees tough competition

Thu May 8, 2014 6:49pm EDT

(Adds details of earnings, executive's comment)

SAO PAULO May 8 (Reuters) - TIM ParticipaƧoes SA , Brazil's second-largest wireless phone company, posted a stronger profit on Thursday on robust data revenue and tighter expense controls, but it warned of tough competition ahead.

First-quarter net income rose 22 percent from a year earlier to 372 million reais ($168 million), roughly in line with an average estimate of 366 million reais in a Reuters poll of analysts.

"In coming quarters, we expect an ongoing outlook for more challenging growth given the intense competitive environment," Chief Executive Rodrigo Abreu said in the earnings release.

Four foreign-backed phone companies are fighting over Brazil's wireless market, which has stagnated over the past year, stoking rumors of possible consolidation.

Since late last year, persistent media reports have pointed to the breakup and sale of TIM, which could ease antitrust issues facing Telefonica in Brazil after it tightened its grip on TIM's parent, Telecom Italia.

The companies involved in the reports have denied any negotiations about the matter.

TIM's net revenue slipped 0.2 percent in the first quarter, as strong data revenue offset plunging interconnection rates for calls to mobile phones. The company cut administrative expenses 6 percent from a year earlier.

Earnings before interest, taxes, depreciation and amortization, rose 8 percent to 1.317 billion reais, just above an average estimate of 1.299 billion reais.

A stronger cash position and higher interest rates helped to cut TIM's net financial loss by 50 percent to 36 million reais.

($1 = 2.21 Brazilian reais) (Reporting by Brad Haynes; Editing by Steve Orlofsky)