Telecom Italia shares rise after sales growth at home

MILAN (Reuters) - Telecom Italia (TIM) shares rose 2 percent on Thursday after Italy's biggest phone group reported better than expected growth in first-quarter domestic sales, lifted by solid mobile operations and broadband take-up.

The stock was up 1.2 percent at 0.78 euros by 0820 GMT, outperforming a 0.14 percent rise in Milan's blue-chip index.

Domestic sales at the former telecoms monopoly, which is seeking new sources of income as its traditional phone services lose appeal amid competition from Internet rivals, rose 1.7 percent in the quarter, slowing only marginally from the 2 percent growth recorded in the preceding three months.

Analysts had forecast growth of 0.4 percent.

The domestic sales rise was "boosted by a surprisingly strong wireless unit. It was the fourth growing quarter in a row after eight years of decline," Morgan Stanley, which has an 'overweight' rating on the stock, said in a note.

In the first set of results after activist fund Elliott wrestled board control from top shareholder Vivendi, TIM said comparable earnings before interest, tax, depreciation and amortisation (EBITDA) fell 4.9 percent to 1.89 billion euros ($2.23 billion).

Profits were hit by provisions made for fines Italy imposed on the phone group as part of the so-called golden power decree which the group is appealing.

Excluding the non-recurring items, underlying core earnings were broadly in line with market consensus.

TIM said late on Wednesday that Vivendi was no longer a party exercising control and coordination over the company.

The French group's control and coordination started after Vivendi appointed two-thirds of TIM's board last year and named its own CEO as the Italian company' executive chairman. Vivendi lost control of the board after a shareholder vote on May 4.

Following the proxy fight that ended in Elliott winning two-thirds of the board seats, the focus shifts again to TIM's operational challenges, including its 25.5 billion euros of net debt and new rivals appearing in both broadband and mobile.

Management is due to hold a call with analysts at 1200 GMT.

(Reporting by Agnieszka Flak; Editing by Keith Weir)