UPDATE 2-Telecom Italia skips dividend to fund investment
* Sees signs of recovery in Italy
* Lower Italian sales, Brazil currency weigh on 2013 results
* Shares end 2.6 percent lower in volatile trading (Adds quotes, context, shares)
MILAN, March 7 (Reuters) - Telecom Italia scrapped its annual payout to most shareholders for the first time on Friday, to help fund the massive investment its network needs to better compete with rivals.
However, Italy's largest phone company by market share said it will pay all shareholders a dividend from next year, reflecting signs of recovery in domestic demand after a deep recession and easing competition in the mobile phone market.
Under new Chief Executive Marco Patuano, the heavily indebted group is selling non-core assets and investing in faster networks to compete against rivals such as Britain's Vodafone, the second-largest operator in Italy.
Scrapping the 2013 dividend on ordinary shares will save Telecom Italia about 290 million euros ($402 million), a fraction of the approximately 3 billion euros a year it plans to invest in Italy over the next three years.
European rivals have also reduced their payouts to investors. Deutsche Telekom cut its dividend for 2013 and beyond by nearly one third because it needed cash for investments in its U.S. and European networks.
"Suspending dividends on the ordinary shares means more funds for fibre and LTE (faster 4G network) in Italy," Patuano, who took the helm in October, said on a conference call after the company announced full-year results. Continuación...