* Q3 EBITDA 410 mln eur vs Reuters poll avg 379 mln
* Sales 1.09 bln eur vs poll avg 1.12
* 2012 forecast and dividend expectations reiterated
* Shares up 9 pct
(Adds analyst comment, detail, background)
By Georgina Prodhan
VIENNA, Nov 14 Cost cutting helped Telekom
Austria hold earnings steady in the third quarter, as
it battles to defend a leading position in its home market in
the face of a price war.
Shares in the group, which hit an all-time low this week,
jumped as much as 12 percent on Wednesday, offering some respite
to Mexican billionaire Carlos Slim, who invested in the firm
earlier this year as part of a European expansion drive.
However, some investors feared the good news might not last,
as Telekom Austria scraps with three other mobile operators in
the tiny Austrian market of 8.4 million people, where
all-inclusive monthly packages start at just 7.50 euros ($9.50).
"The numbers were a bit better than expected. It's a classic
short squeeze today. But I don't believe it's a long-term trend
reversal," said fund manager Guenther Schmitt of Raiffeisen, a
top 10 shareholder in the company according to Reuters data.
Telekom Austria has bet on emerging European countries to
offset declines in its mature and crowded home market. But there
has been little sign of this so far. In the last three months,
it has slashed its profit and dividend forecasts.
Investors have been hoping that competition might ease after
Hutchison 3G Austria, the smallest of the country's
four carriers, agreed to buy second-smallest Orange for
1.3 billion euros, in a deal that includes Telekom Austria
acquiring Orange budget brand Yesss for 390 million euros.
But an unexpectedly prolonged investigation into the deal by
European regulators has raised uncertainty about market
consolidation and delayed an auction for new frequencies that
will allow operators to offer faster services for higher prices.
"We're still very concerned about some of the medium-term
trends," said Espirito Santo telecoms analyst Andrew Hogley.
"You don't need very much of a hiccup before you're going to
think about forced asset sales or an equity injection from Mr
Slim," he said, adding he did not expect any such measures in
the next few months.
Telekom Austria shares have approximately halved in value
this year, despite the acquisition of a 26 percent stake by
Carlos Slim. Together with Dutch group KPN - Slim's
other European bet - Telekom Austria is the worst performer in
the European telecoms index.
At 1245 GMT, its shares were up 9 percent at 5 euros.
Telekom Austria said improvements in Belarus and some of its
smaller markets as well as a strong Austrian landline business
had partly offset mobile weakness in Austria and Bulgaria -
where it has been hurt by regulatory cuts to connection charges.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) slipped 0.6 percent to 410 million euros ($521 million)
in the third quarter, better than the 379 million average
forecast in a Reuters poll of 10 analysts.
The company reiterated its 2012 financial forecasts, which
it cut in August, and its intention to pay a dividend of 0.05
euros per share for 2012 and 2013, which it slashed in September
from 0.38 euros per share.
Quarterly sales fell 1.6 percent to 1.09 billion euros,
below the Reuters poll average of 1.12 billion.
"Increased competition in Telekom Austria Group's major
markets, such as Austria, Bulgaria and Croatia, has led to
further price erosion and is expected to persist for the
foreseeable future," the company said in a statement.
Austria was one of the first European markets to implement
regulatory cuts to the charges operators can charge one another
for connecting calls, making it a ripe market for the price wars
that are now raging. France, another early country to implement
such cuts, has seen the entry of discount operator Free Mobile.
Telekom Austria said it had cut its operating costs by 18.1
million euros in the quarter.
Revenues in Austria fell by 5 percent and core profit by 3
percent. But the group increased its number of fixed broadband
lines by 4 percent to 1.3 million and its average revenue per
line by 1 percent to 32.2 euros per month.
In its Austrian mobile business, it increased the number of
subscribers by 2 percent to 5.3 million, giving it 39 percent of
the market - as many customers have more than one contract - but
average revenue per user fell 9 percent to 18.3 euros.
($1 = 0.7867 euros)
(Additional reporting by Angelika Gruber; Editing by David
Cowell and Mark Potter)