Italy's Mediaset expects local advertising sales to improve in Q2

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MILAN, May 12 (Reuters) - Italy's biggest commercial broadcaster Mediaset (Other OTC: MDIUY - news) expects domestic advertising sales to improve in the second quarter after returning to profit in the first three months of this year, it said on Tuesday.

Italy's economy is showing tentative signs of recovery after a deep recession although the company, controlled by former prime minister Silvio Berlusconi, said it was difficult to make a prediction for the full year.

Mediaset said first-quarter net profit was 0.7 million euros ($785,000), against a loss of 12.5 million euros a year ago, as net revenue rose 1 percent to 828.8 million euros, driven by strong results in Spain.

A Mediaset executive told a conference call the company was aiming for second-quarter advertising sales in Italy in line with the same quarter last year. In that quarter, advertising sales in Italy were 526.7 million euros, according to Reuters calculations. They fell 1.6 percent in the first three months of 2015.

Mediaset, which raises the lion's share of its revenues from advertising sold in Italy, has been cutting costs to face the long economic downturn. It returned to paying a dividend on its 2014 results in a sign of confidence over its prospects.

However, it faces harsh competition from online rivals and after winning exclusive rights to broadcast Champions League soccer matches in Italy last year it is seeking to sell a stake in its pay-TV arm Mediaset Premium.

As the global media industry consolidates there has been speculation that Mediaset could consider mergers with companies such as Sky, Vivendi and Telecom Italia .

But Chief Financial Officer Marco Giordani said on the conference call that Mediaset was not working on a pay-TV merger with Sky. When asked about possible "equity deals" with Vivendi and Telecom Italia he said there was nothing under discussion.

Earlier this month the company's Spanish unit Mediaset Espana beat forecasts with a 74 percent rise in its quarterly profit.

($1 = 0.8894 euros) (Reporting by Danilo Masoni; editing by Susan Thomas)