4 MIN. DE LECTURA
* Spain commercial boost comes at expense of margins
* Purchases in Germany and Brazil help group's sales
* Net profit falls short of expectations (Adds CFO comments on O2, infrastructure portfolio, updates shares)
By Julien Toyer and Andrés González
MADRID, Nov 6 (Reuters) - Spain's Telefonica achieved its first rise in quarterly domestic sales since 2008 but its results failed to convince investors who had expected an even better commercial performance and higher margins.
The telecoms firm, led by Cesar Alierta for the past 15 years, has been going through a transformation since an economic crisis forced it to focus on fewer but bigger markets such as Germany and Brazil.
Returning to positive sales territory in Spain, albeit modestly at 0.2 percent, was a big landmark that had been anticipated and flagged for several months.
However, it was helped by Telefonica applying steep discounts to its premium TV packages to win clients. Telefonica added 275,000 contracts in the three months between July and September compared to 90,000 between April and June but margins dropped 1.4 percentage point as a result.
Shares in Telefonica were down 2.1 percent at 12.1 euros at 1500 GMT, underperforming the European telecoms sector and partly erasing gains of 10 percent over the last month.
"Group numbers came in slightly ahead of estimates thanks to Germany and Brazil that had already reported. Spanish margins are under pressure but commercial activity has been very strong," said Kepler Cheuvreux analyst Javier Borrachero in a note to clients.
Debt fell to 49.7 billion euros at end-September from 51.2 billion euros three months earlier.
The company's debt is no longer a major concern but this could change if an agreed sale of its British 02 business to Hutchison Whampoa for 10.3 billion pounds ($15.6 billion) fails to get a green light from European antitrust authorities.
Telefonica is potentially a buyer of more businesses in Brazil, Mexico and Europe although the more difficult macroeconomic situation in Latin America could dampen activity.
But its Chief Financial Officer Angel Vila said on Friday that if the O2 deal was to fail, it had other divestment alternatives, including selling infrastructure assets like mobile phone masts or data centres.
Although Telefonica's net profit fell 1.9 percent to 884 million euros ($961 million), missing analysts' forecasts, Telefonica started to reap the benefits of its purchases of E-Plus in Germany and GVT in Brazil.
The acquisitions boosted the group's sales by 11 percent in the third quarter, but a lower Brazilian currency and falling margins in all key markets beyond Spain weighed on results.
Core profit (OIBDA) came in at 3.7 billion euros, up 2.9 percent and in line with expectations.
Telefonica reiterated its full-year targets of growing sales by more than 9.5 percent, curbing the erosion of OIBDA margins to 1.2 percentage points and having a Capex/sales ratio of 17 percent.
It also affirmed its policy of paying a 0.75 euros per share dividend in 2015 and 2016. ($1 = 0.9195 euros) (Reporting by Julien Toyer and Andres Gonzalez; Editing by Jane Merriman and Keith Weir)