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* D.Telekom, Telefonica, T.Italia report lower Q1 revenues
* Telefonica total rev down 9 percent at 14.1 bln euros
* D.Telekom total rev falls 4.5 pct to 13.8 bln
* European telcos much lower valued than U.S. peers
* Telefonica shares down 0.9 pct, DTel up 4.6 pct
By Harro Ten Wolde and Clare Kane
FRANKFURT/MADRID, May 8 (Reuters) - Three of Europe'sbiggest telecom operators reported lower revenues on Wednesday,blaming the weak European economy and stiff regulation whileseeing some bright spots in markets abroad.
The figures from Spain's Telefonica SA, DeutscheTelekom AG and Telecom Italia chimed withrecent statements from peers such as France Telecom,Swisscom and KPN as European operatorsstruggle with an overcrowded market, tough regulations andrecession.
They complain such pressures are hampering their ability toinvest in faster networks, important for future growth.
Telefonica, Europe's biggest telecom group by revenue,reported a 11.7 percent drop to 6.7 billion euros ($8.8 billion)for its European operations in the first quarter, with totalrevenue down 9 percent at 14.1 billion.
Deutsche Telekom said revenue in Europe shrank 6.9 percentto 3.33 billion euros, while overall revenue fell 4.5 percent to13.8 billion.
And Telecom Italia also posted a fall in revenue in thequarter, down 8.1 percent at 6.79 billion euros, weighed on byits domestic business which was hit by stiffer competition andpricing pressures.
Reflecting the pressures the sector is under, Europeantelecom stocks are much lower valued than U.S. peers and tradeat roughly 11 times prospective earnings against 19 times forU.S. peers, according to Thomson Reuters data.
Telefonica's shares closed down 0.9 percent at 11.2 eurosafter reporting an increase in its debt despite being on adebt-cutting drive, as well as a weaker-than-expectedperformance in Spain.
Telefonica aims to cut debt to less than 47 billion euros byyear end but reported net debt of 51.8 billion at end-March,against 51.3 billion three months earlier. The company has soldall its treasury stock and 40 percent of its central Americanbusinesses to slash debt this year.
A 701 million payout for spectrum, the devaluation of theVenezuelan bolivar and seasonally more payments due in the firstquarter set back progress on debt reduction, though Moody'sanalyst Carlos Winzer said the company was still on track toreach its debt target of 2.35 times EBITDA by year-end.
However, Deutsche Telekom shares closed up 4.6 percent at9.56 euros, top of the sector gainers after reporting slightlybetter than expected core earnings and the first net addition ofcustomers in the United States since early 2009.
Telecom Italia closed 0.6 percent lower at 0.64 euros as thecompany put off making a decision on whether to open formalmerger talks with Hong Kong-based conglomerate Hutchison Whampoa, buying more time to win over its dividedshareholders.
Telefonica is the biggest shareholder in Telecom Italia.
CASH RESERVES
While Telefonica generated cash in some Latin Americancountries, it depleted its cash reserves in Europe, withoperational cashflow decreasing particularly in Britain, theCzech Republic and Ireland. Operational cashflow was 22 percentdown on a year ago at 2.6 billion euros, with cashflow in Europefalling 40 percent to 1 billion.
European telecom operators face particular challenges in their home markets.
In Telefonica's recession-hit domestic patch, revenue fell16 percent to 3.3 billion euros, though margins continued toimprove, reaching 47 percent following Telefonica's decision toscrap costly handset subsidies last year.
"It's a tough year ... because the domestic market continuesto suffer as a result of contraction in consumer spending," saidWinzer.
Deutsche Telekom meanwhile is facing a turf war in its homemobile market, the European Union's largest, where consumers arecatching up with the rest of the continent by switching tosmartphones from basic mobiles.
However, Deutsche Telekom said mobile service revenuesacross the group declined 0.1 percent during the quarter. "Thiswas the best figure since the fourth quarter of 2011 andunderlines the progress Deutsche Telekom has made compared withthe competition," the company said in a statement.
