Dutch telecoms group KPN hails faster network as profit fall slows

* Q3 core profit down 15 pct, rate of decline slows

* Expects performance to stabilise by year-end

* Shares (Berlin: DI6.BE - news) up 2.7 percent (Recasts, adds CEO, analyst comments, shares)

By Robert-Jan Bartunek

BRUSSELS, Oct 28 (Reuters) - Dutch telecoms group KPN (Amsterdam: KPN.AS - news) 's strategy of investing in faster networks is slowly starting to bear fruit, it said on Tuesday after reporting revenue and profit falling at a slower than expected pace in the third quarter.

The group, in which Mexican billionaire Carlos Slim's America Movil has a 21.4 percent stake, said the improvement was most noticeable in its consumer mobile and business operation, though core profit still fell by 15 percent.

KPN cut its dividend to zero last year, opting to focus on investment in its fixed and mobile networks, with capital expenditure equivalent to about 17 percent of expected 2014 revenue. It also sold its German business E-Plus to Spain's Telefonica in a deal valued at 8.6 billion euros ($11 billion).

Third-quarter mobile subscriber numbers rose at the fastest rate for five years, KPN said, increasing by 84,000 thanks to its fast mobile broadband 4G network and more users opting to buy home broadband with a mobile subscription.

"KPN has put the right promotions on the market. There are still price pressures, but they get the benefits of people starting to use 4G," ABN Amro analyst Marc Hesselink said.

The company competes with Vodafone and Deutsche Telekom for mobile customers in the Netherlands, while its home broadband and digital TV business faces competition from cable groups such as Ziggo and UPC .

Ziggo, which is being bought by UPC's owner Liberty Global (NasdaqGS: LBTYA - news) , posted a 3.4 percent rise in third-quarter core profit this month, citing sales of high-margin products such as internet access.

SHARES BUOYED

Shares in KPN rose as much as 3.7 percent on Tuesday to 2.49 euros, still well below the average of about 3.24 euros paid by America Movil, which reduced its stake after failing to take complete control of the group in 2013. By 1053 GMT the shares were up 2.7 percent

For KPN as a whole, core profit, adjusted for restructuring costs, fell 15 percent to 650 million euros, slightly above the 635 million euros expected in a Reuters poll of five analysts.

KPN repeated reiterated that it expects financial performance to stabilise towards the end of the year, with capital expenditure at less than 1.4 billion euros, though Chief Executive Eelco Blok would not elaborate further.

"I don't want to say whether, at the end of the year, there will be a small plus or a small minus because I want to have the leeway to take the commercial measures necessary to continue our strong operational performance in the fourth quarter," he told reporters.

Promotional measures in the third quarter included price cuts on its home broadband and digital TV offerings, which performed worse than in the second quarter as revenue dipped by 2.5 percent year on year.

KPN's net debt was 2.3 times core profit at the end of the quarter and the company said it would buy back up to 2 billion euros of bonds to reduce gross debt. It also announced a dividend of 0.07 euros for the full year, with 0.02 euros paid this month and the rest to be paid in April.

Rivals Deutsche Telekom and Vodafone are due to announce quarterly results on Nov. 6 and 11 respectively. (1 US dollar = 0.7880 euro) (Editing by David Goodman)