European shares flat; poor updates weigh as BT rallies

* STOXX 600 little changed

* RBS (LSE: RBS.L - news) , Valeo (LSE: 0RH5.L - news) drop as results disappoint

* BT rallies after regulator price decision

* Subsea 7 (LSE: 0OGK.L - news) up on JV talks with Schlumberger (Euronext: SLB.NX - news) (For a live blog on European stocks, type LIVE/ in an Eikon news window)

By Danilo Masoni

MILAN, Feb 23 (Reuters) - European shares steadied on Friday as investors digested a flurry of company results, including disappointing updates from Royal Bank of Scotland and Valeo, while BT rallied after Britain's telecoms regulator set network access prices.

RBS declined 4 percent after posting its first full-year profit since 2007. Traders said the underlying result missed expectations, while the lack of an update on a settlement with the U.S. Department of Justice for mis-selling toxic mortgage-backed securities also weighed.

"It's taken a while but after many false dawns over the past decade, RBS has finally managed to return an annual profit, albeit a minor one... and for that we can thank the fact that the bank hasn't settled its outstanding dispute with the U.S. Department of Justice," said CMC Markets (LSE: CMCX.L - news) analyst Michael Hewson.

French auto parts maker Valeo slumped 9 percent to a six-month low, making it the biggest faller on the STOXX 600 . Its second-half profit fell on adverse exchange rates and raw materials prices, prompting UBS (LSE: 0QNR.L - news) to cut its price target on the stock

The STOXX was up 0.06 percent by 0936 GMT. Among country indicators, the UK's FTSE dipped 0.2 percent and Germany's DAX was up 0.06 percent.

The STOXX is on course to end the week flat as markets stabilise and volatility calms following a turbulent start of the month that sent the index to a near-six-month low. It has since risen 3.5 percent from that level.

Elsewhere among financials, Standard Life Aberdeen rose 1 percent after agreeing to sell the bulk of its insurance business to Phoenix Group for 3.24 billion pounds, while Swiss RE (LSE: 0QL6.L - news) rose 2.1 percent after reporting better than expected 2017 net income.

Oil services firm Subsea 7 jumped 5 percent after news of joint venture talks with larger rival Schlumberger , which also supported shares in rival Saipem (LSE: 0NWY.L - news) , up 2 percent.

Elsewhere in the energy sector, Neste (LSE: 0O46.L - news) hit a record high following an upgrade from Barclays (LSE: BARC.L - news) , which said demand for renewable fuels should continue to increase.

Telecoms were lifted by a 4 percent rise in BT Group (Other OTC: BTGOF - news) , after Britain's telecoms regulator OFCOM set a more generous cap on prices the company can charge rivals to use its fast broadband service.

Berenberg analysts upgraded BT to buy from hold saying clarity over the investment case was set to improve and that its share prices already reflected "fairly negative" outcomes on regulation, its pension review, and capex risk.

The sector, which has been underperforming the broader market in the past few years on worries over competition, regulation and costly investment plans, was also boosted by gains in Telecom Italia (Amsterdam: TI6.AS - news) on heavy newsflow about possible dealmaking.

Three sources told Reuters that the Italian former phone monopoly had chosen Goldman Sachs (NYSE: GS-PB - news) and Credit Suisse (IOB: 0QP5.IL - news) to work on a spin-off of its fixed-line network.

Another source said Telecom Italia could ditch a proposed joint-venture with Canal+, the pay-TV arm of its top shareholder French media group Vivendi (LSE: 0IIF.L - news) . (Reporting by Danilo Masoni; editing by Tom Pfeiffer and John Stonestreet)