(Adds CEO quote, comments on M&A options; refiled to add dropped word "also" in paragraph 10)
* New business plan lifts investment to 14.5 bln euros
* Company's annual revenue and core profit fall
* Executives cool on prospects of any imminent M&A deals
* Says network investment driving Italian sales recovery
By Danilo Masoni and Pamela Barbaglia
MILAN/LONDON, Feb 20 (Reuters) - Telecom Italia posted a further fall in sales and profits on Friday but said the pace of decline was slowing as it steps up spending on faster fixed and mobile networks in Italy and Brazil.
Outlining its new investment plan, the heavily indebted company said it would spend 14.5 billion euros ($16.4 billion) in the next three years on laying more fibre optic cables in Italy and upgrading its mobile network in Brazil.
As a result it warned it would have to husband cash resources, so there would be no resumption in dividend payments to ordinary shareholders and it would take longer to cut its net debt of 26.65 billion euros, down by just 156 million last year.
Chief Executive Marco Patuano on Friday also played down the prospects of making any acquisitions, either in Italy or in Brazil, where it is controlling shareholder of TIM Participacoes , the country's second-largest mobile network operator behind Telefonica Brasil's Vivo.
Having lost out to Telefonica in bidding for broadband operator GVT last year, Patuano was asked by his board to look at the possibility of instead buying Oi, the smallest of the country's four mobile operators but owner of the biggest fixed line network.
But he said on Friday he had not found any compelling attractions for Oi.
"We only took 45 days to perform due diligence on GVT, while we've been working on Oi for four months and we concluded that creating value was not so obvious."
However, he did not rule out Telecom Italia ending up as a seller in Brazil.
"You wouldn't exit Brazil, given the market opportunity there, but this doesn't mean if someone puts the right value on it we wouldn't sit down and talk," he added.
Last year Oi said it was considering making a bid for TIM but the also heavily indebted firm has yet to make any definite move, concentrating most recently on selling its PT Portugal subsidiary.
Telecom Italia's shares closed down 1.4 percent on Friday at 1.013 euros. The Stoxx Europe 600 telecoms sector index closed up nearly 1 percent.
The share price has risen 18 percent in the last 12 months, buoyed by hopes of industry consolidation and improved market prospects, but the stock is still undervalued compared to its peers, due to concerns about the company's debt.
Investment spending last year rose 13 percent to 4.98 billion euros but the company said on Friday it needed to go on spending on building out faster networks and meeting a growing demand for bundled services.
By the end of last year it had a 4G mobile broadband network which covered 80 percent of the Italian population and reached 131 cities with fibre optic cables.
But Chairman Giuseppe Recchi said on Friday there was little chance currently of acquiring fibre broadband company Metroweb to give a boost to its expansion programme.
Group revenue in 2014, which includes the consolidation of its Brazilian business, fell 7.8 percent to 21.6 billion euros while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 7.9 percent to 8.8 billion euros.
Under its new spending plan the company said it expected to have domestic EBITDA growing again in 2017, when adjusted net debt would be down to 2.5 times EBITDA from the current multiple of three. In its previous plan it had aimed to have debt down to 2.1 times EBITDA in 2016. ($1 = 0.8818 euros) (Additional reporting by Sudip Kar-Gupta in London; Editing by Greg Mahlich)