May 7, 2015 / 6:21 PM / 4 years ago

UPDATE 1-Telecom Italia earnings dip, upbeat on domestic prospects

* Q1 EBITDA 2.03 bln euros, down 7.7 pct year on year

* Q1 domestic revenue 3.63 bln euros, down 2.6 pct

* Sees progressive recovery ahead (Adds detail, background)

MILAN, May 7 (Reuters) - Telecom Italia posted a 7.7 percent drop in first-quarter core profit on Thursday, hit by an economic slowdown in Brazil, but said pressure on its domestic business eased thanks to a greater focus on broadband and mobile internet services.

Chief Executive Marco Patuano is seeking to bring the Italian telecoms group’s domestic business back to growth in 2017 and to do so is spending more on faster networks while teaming up with content providers to make its services more attractive.

Earnings before interest, tax, depreciation and amortisation (EBITDA) at the former phone monopoly were 2.03 billion euros ($2.3 billion) in the first three months of the year, matching market expectations.

Domestic revenue, which accounts for 72 percent of the group’s turnover, fell 2.6 percent to 3.63 billion euros — a slower pace of decline compared with the previous quarter, which it said confirmed its expectations for a steady recovery.

The improvement in domestic trends comes as the heavily indebted group steps up spending on broadband networks and the Italian economy shows tentative signs of recovery after going through its worst recession in 60 years.

Telecom Italia invested 1 billion euros in the quarter as its fibre-optic network reached more than 140 cities and its 4G network covered more than four fifths of the Italian population.

Group revenue fell 2.6 percent to 5.05 billion euros in the quarter, while adjusted net debt stood at 27.43 billion euros.

As part of Patuano’s strategy, Telecom Italia has set its sights on buying a stake in fibre-optic network provider Metroweb but discussions have been hampered by issues such as technology choice, regulation and governance.

Thursday’s results statement made no reference to Metroweb.

Sources close to the matter said last month that the state owner of Metroweb had rejected a proposal by Telecom Italia to gradually take full ownership.

Telecom Italia’s Brazilian business TIM Participacoes posted a 16 percent drop in first-quarter profit on Thursday, weighed down by rising expenses and lower consumer spending amid expectations of a sharp economic slowdown. ($1 = 0.8879 euros) (Reporting by Danilo Masoni; Editing by David Goodman)

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