(Adds executive comments, earnings details, merger background)
By Brad Haynes and Alberto Alerigi
SAO PAULO, Nov 13 (Reuters) - Brazilian telecom operator Oi SA is open-minded about merger options, its chief executive officer said on Thursday, as it reported third-quarter profit plunged, further evidence of increased pressure in a crowded market.
CEO Bayard Gontijo said stiff competition, tougher regulations and more costly investments were squeezing the profitability of carriers in Brazil.
"The best way to repair this is through consolidation, and we think it's the right time for that in Brazil," Gontijo told analysts on an earnings conference call. "We are ready to lead the process and we have no prejudice to how it is going to happen."
Oi has approached Telefonica SA and America Movil SAB about making a joint bid for TIM Participaçoes SA, the local unit of Telecom Italia SpA. But the Telecom Italia CEO said last week his company should also consider making an offer to buy Oi.
Oi net profit fell 96 percent from a year earlier to 8 million reais ($3 million), it said in a securities filing on Thursday. Analysts in a Reuters poll looked for a net loss of 254 million reais, on average.
The company was able to avoid a net loss due to accounting changes and more modest investments. Oi reversed provisions related to tax settlements, retirement plans and its merger with Portugal Telecom SPGS, contributing to a one-time boost of 628 million reais in the quarter.
Oi's merger with Portugal Telecom lifted revenue by 25 percent, but the combined company cut investments by 14 percent on a pro-forma basis and reduced capital spending by 7 percent in Brazil alone.
Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, rose 41 percent to 3.003 billion reais, well above the average estimate of 1.896 billion reais. EBITDA slipped 2 percent, including Portugal Telecom results a year earlier.
Financial expenses jumped 50 percent on a consolidated basis as interest payments surged 62 percent. Net debt totaled 47.8 billion reais in September, up from 46.2 billion reais in June. ($1 = 2.57 Brazilian reais) (Editing by Jeffrey Benkoe)