UPDATE 2-Mediaset 1st quarter profit dips,ad sales up 3 pct

(Adds comments from executives)

MILAN, May 13 (Reuters) - Italy's biggest private broadcaster, Mediaset SpA (MS.MI: Quote, Profile, Research, Stock Buzz), reported a 2.8 percent drop in first-quarter net profit to 121 million euros, in line with expectations, as amortisations weighed down results, it said on Tuesday.

Mediaset, owned by Prime Minister Silvio Berlusconi, expected its full-year net profit to be higher than in 2007, but added that the size of the improvement would depend on advertising trends in its core Italian and Spanish markets.

In the first quarter, Mediaset's net profit was helped by a more lenient tax rate, but was hit by amortisations from the acquisition of Dutch content provider Endemol.

Mediaset said Italian advertising revenue rose 3 percent in the first four months of the year after similar growth in January-March mostly driven by the telecommunications and car sectors.

Luigi Colombo, managing director of the company's Italian advertising arm, Publitalia, said in a conference call with analysts that he expected growth in May to be broadly in line with the first quarter.

With the Italian economy forecast to grow just 0.3 percent this year and next by the International Monetary Fund, advertising revenues appear to be under pressure.

Mediaset's core free television business, which dominates of the market along with state broadcaster RAI, has increasingly had to compete for advertising with pay channels such as Sky Italia and with the Internet.

Analysts also believe Mediaset might suffer this year because rival RAI will screen both the European Soccer Championship and the Olympics.