UPDATE 1-ECI Telecom quarterly earnings exceed forecast

(Adds details, dateline, CEO comments)

JERUSALEM, Aug 1 (Reuters) - Israeli telecoms equipment maker ECI Telecom ECIL.O, which is the midst of a takeover, reported higher-than-expected quarterly earnings, helped by steady growth in cellular subscribers in emerging markets.

Second-quarter net income rose to $24.8 million, or 20 cents a share, from net income of $9.6 million, or 8 cents a share, a year earlier.

Excluding one-time items, net income was $10.6 million, or 9 cents a share, compared with $10.7 million, or 9 cents a share, in the year-ago quarter and beating the average forecast of 8 cents a share from Reuters Estimates.

Revenues in the Transport Networking Division rose 15 percent to $109 million, while revenues in the Broadband Access Division slipped to $50 million from $66 million a year ago.

Rafi Maor, ECI's chief executive, said the transport business posted its 16th straight quarter of growth. Much of ECI's growth in optical networking has come from countries such as Russia, the Ukraine, China, India and the Philippines.

"This division continues to benefit from ... steady growth from cellular subscribers in emerging markets, a transition in our customers' business in connection with their desire to offer new Ethernet-based services and the need for advanced optical solutions to better manage the optical backbone of the network," Maor said in a statement.

ECI's brodband access business has suffered of late, because it is heavily dependent on two customers, Deutsche Telekom (DTEGn.DE) and France Telecom (FTE.PA), which have experienced delays in installing new networks partly due to regulatory issues.

But Maor said he expected healthy demand from the two companies and that ECI's focus was to expand its customer base in the sector.

ECI said it would record gains of $40 million from the initial public offering of subsidiary Veraz Networks (VRAZ.O), in which it sold 2.25 million shares on Nasdaq as part of an initial public offering in April.

ECI now holds 23 percent of Veraz on a diluted basis.

ECI in July said it had agreed to be acquired for about $1.2 billion by a group of investors led by the Swarth Group, and the transaction is expected to be completed in the fall of 2007.

The deal is subject to shareholder and regulatory approvals.

"This transaction will allow us to refocus our efforts ... and better position us to achieve ECI's long-term strategic goals," Maor said.

(Additional Reporting by Aditi Samajpati in Bangalore)