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* Q2 Organic service revenue down 1.5 percent
* Compares with near 4 or 5 pct falls in the last sixquarters
* Beats consensus expectation of 2.8 pct fall
* To offer retail broadband and TV in Britain
* Shares up 6 percent, hit highest in six months (Adds details, link to Breakingviews comment)
By Kate Holton
LONDON, Nov 11 (Reuters) - Vodafone, the world'ssecond-biggest mobile operator, nudged up its full-year earningsforecast on Tuesday as improving demand in its big Europeanmarkets and an investment push into new products helped reduce adrop in revenue.
Faced with increased competition from entertainment groupsand fixed-line providers, Vodafone also said it plans to launcha broadband and TV service in its British home market to competewith rivals who offer a wider range of products.
The improvement in trading, which sparked hopes of a returnto growth in its key revenue measurement by early next yearafter more than two years of falls, sent its shares up 6 percentto a six-month high.
"There is growing evidence of stabilisation in a number ofour European markets," said Chief Executive Vittorio Colao. "Ourtwo-year, 19 billion pound investment programme is well underwayand customers are beginning to see the benefits."
Vodafone has embarked on a programme to either build or buysuperfast fixed-line broadband networks across Europe, to enableit to compete with rivals offering mobile contracts alongsidetelevision, broadband or fixed-line deals.
Vodafone said it would launch a consumer broadband offeringwith a TV package in Britain supported by its Cable & Wirelessfibre network which it currently offers to corporate customers.The additional services will help it to compete with BT which is due to launch a consumer mobile service next year.
Vodafone said it was not looking to spark a price war in itshighly competitive home market but to defend its position andkeep hold of existing customers.
DATA TRAFFIC
Analysts said the move into more services such as fixed-linetelephony, TV and faster 4G mobile had helped the overallresults. Customers signing up to faster 4G mobile services werewilling to pay for bigger packages, with data traffic up 80percent, while demand for 3G in India boosted results there.
The update echoes Dutch rival KPN, which in Octobershowed revenue and profit falling at a slower than expected paceas its strategy of investing in faster networks bore fruit.
Analysts at Hargreaves Lansdown said the outlook forVodafone was more positive than for some time.
"The increased use of data services, particularly in theupgrade from 3G to 4G, is supportive and there is still muchheadway for growth as those networks roll out in the key Indianmarket and Europe respectively," they said.
Vodafone reported second-quarter organic service revenue,which strips out items like handset sales and currencymovements, down 1.5 percent, compared with near 4 or 5 percentfalls it recorded in the last six quarters. It also beat theconsensus expectation of a fall of 2.8 percent.
It now expects full-year core earnings to be between 11.6billion pounds and 11.9 billion, compared with previous guidanceof 11.4 billion to 11.9 billion. (Editing by Clara Ferreira Marques and David Holmes)
