UPDATE 1-Telecom NZ Q1 profit down, holds forecast

* Q1 net profit drops 33.8 pct, smaller decline than forecast

* Tougher competition, tighter margins

* Maintains expectations of a 5-8 percent fall in EBITDA for the 2009 year (Updates with details, background, company comment)

WELLINGTON, Nov 7 (Reuters) - Telecom Corp of New Zealand Ltd (TEL.NZ) posted a 33.8 percent fall in first-quarter net profit, due to a government-enforced split, increased competition and higher spending, though the result beat analyst forecasts.

The former state-owned monopoly, which has been forced by the government to open its network to competitors, gave a breakdown of its retail, wholesale and network arms for the first time.

Telecom, which competes with Australia's Telstra (TLS.AX) and British mobile company Vodafone (VOD.L), reported July-September net profit of NZ$149 million ($93.7 million) against NZ$225 million a year ago, and an average of NZ$121 million according to eight analysts polled by Reuters.

The result showed the company was positioning itself to take advantage of new technology and earnings streams said Chief Executive Paul Reynolds.

"The key drivers of revenue growth were broadband and IT services, which both delivered double-digit growth compared with the same quarter last year," Reynolds said in a statement.

Shares in Telecom have fallen nearly 48 percent this year through Thursday, compared with a near 30 percent drop on the NZSX-50 index .NZ50.

On Oct. 15, Telecom said 2008/09 full-year profit would be NZ$460-500 million, down from a previous forecast of NZ$500-540 million, after announcing it would spend NZ$574 million building a next-generation mobile network.

CEO Reynolds has said Telecom's plan is to invest heavily in next-generation fixed and mobile technology, which it hopes will restore earnings growth from the year starting July 2009.

Capital expenditure for the quarter was NZ$340 million, up 63 percent on the previous year.

First-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) fell to NZ$466 million from NZ$482 million last year, but beat analysts forecasts of NZ$436 million.

Telecom reiterated the guidance it gave when it downgraded its annual net profit forecast, saying EBITDA would fall 5-6 percent in the current financial year.

Telecom said fixed line and mobile earnings declined, offsetting the rise in Internet and ICT earnings.

Telecom's Australian arm, AAPT, reported a 24 percent decline in EBITDA on lower revenues and higher costs.

Telecom will pay a dividend of 6 cents a share, compared with 7 cents a share last year. ($1=NZ$1.69) (Reporting by Adrian Bathgate, Editing by Ian Geoghegan)