UPDATE 2-Belgacom raises profit forecast as it reins in costs

Fri Aug 1, 2014 7:10am EDT

* Q2 core profit 491 mln euros vs 437 mln expected

* Says international carrier business recovering

* Sees 2014 core profit down 1-2 pct vs 3-4 pct before

* Shares rise 6 pct to three-year high (Adds share reaction, analyst comments, detail on costs)

By Robert-Jan Bartunek

BRUSSELS, Aug 1 (Reuters) - Belgian telecoms group Belgacom said on Friday its profit would fall by less than initially forecast this year after cost savings drove second-quarter earnings up by more than expected, sending its shares to a three-year high.

Profits in the telecoms sector have been under pressure due to tough competition on the Belgian market, the Internet eroding traditional income from calls and text messages and EU-wide regulatory caps on using mobile phones abroad.

Belgacom, Belgium's largest telecoms operator, said its 2014 core profit would now drop by between 1 and 2 percent, versus previous guidance of a decline of 3-4 percent.

Its shares traded up 6.2 percent, reaching their highest since May 2011 and making them the strongest performer in the FTSEurofirst 300 index of leading European stocks.

Second-quarter core profit rose 14 percent to 491 million euros ($657 million), well above the 437 million forecast in a Reuters poll of eight analysts, albeit inflated by one-off gains such as from the sale of buildings.

The company spent less on employees as it sold a unit in France and did not replace some 350 staff who left the company. Overall, some 1,200 employees departed during the quarter.

Belgacom's shares have gained some 20 percent since the start of 2014, outperforming its Belgian peers Mobistar and Telenet.

"Even if you adjust for all the one-offs, costs are still lower than expected," said Bank Degroof analyst Bart Jooris.

Revenues in the consumer business unit, the largest in Belgacom, fell 2.4 percent, with a strong performance of its digital TV and broadband products outweighed by falls in its mobile and fixed-line telephone business.

Belgacom said it added 2,000 new domestic mobile customers and 32,000 new business mobile users. It said its troubled international carrier business, which gives wholesale access to telecom operators for routing international calls, was performing better after it won back some contracts.

It now expected the unit, called BICS, to show a revenue drop of between 5 and 10 percent in 2014, an improvement on its estimate in May of between 10 and 15 percent.

On Thursday, cable operator Telenet, whose mobile offerings have shaken up the Belgian market, said it added 41,000 mobile customers in the second quarter.

Belgium's number two, Mobistar, said it lost 52,700 customers in the quarter, a slower rate of decline from the first quarter, when 79,000 customers left. (Editing by Philip Blenkinsop and Tom Pfeiffer)