* Net profit beats forecasts
* Revenues meet forecasts, but advertising still weak
* Aggressive cost-cutting improves performance
* Rival Antena 3 advertising revenue improves sharply in Q3
* Shares up 7 percent, Antena 3 up 12 percent after short squeeze
(Adds comment on ad prices from conference call, share prices)
By Elisabeth O'Leary
MADRID, Oct 29 (Reuters) - Nine-monthly advertising spend dropped more than 40 percent at Spanish broadcaster Telecinco, but sharp cost-cutting helped it post forecast-beating profit and its managing director said the ad decline would end next year.
Net profit fell to 62.2 million euros ($92.28 million), much better than forecasts in a Reuters poll for 41.3 million euros, while total net revenues fell 41.2 percent to 432.3 million euros compared with a forecast for 431 million euros.
Television advertising income, the mainstay of free-to-air TV, remained weak and fell 41 percent to 406.5 million euros.
But in a conference call Telecinco executives were cautiously upbeat about the outlook given that Spanish state TV (TVE) is to stop showing advertising on its channels from January, and it hopes to benefit from higher prices as it soaks up some of TVE's slots.
"We think that the decline in (advertising) prices will stop next year," Managing Director Massimo Musolino told a conference call.
Musolino declined to quantify any price rises Telecinco might charge advertisers after a fall in prices of about 30 percent in the past year and as Spain's recession deepens.
Telecinco has suffered a slump in its audience share as it has battled to keep up with competitors during the recession, but recently has fought back and in September was the most-watched channel for the first time in nine months.
Shares in Telecinco and smaller rival Antena 3, which also posted results on Thursday, were sharply higher after the news, helped by a short squeeze and the perception that the outlook was improving, analysts said.
By 1350 GMT Telecinco was 7 percent higher at 7.50 euros while Antena 3 was up 12 percent at 6 euros.
Antena 3 announced separately a 73.6 percent fall in net profit in the nine months to September to 18.9 million euros.
Advertising income was still weak, but improved to a 11.6 percent fall in the third quarter versus a 26.6 percent fall in the second, marking a sharp contrast with Telecinco.
Costs at Telecinco fell nearly 15 percent as the company tightened its belt to compensate for recession-hit advertising, allowing the firm to maintain profitability margins, it said.
Earnings before interest, tax, depreciation and amortisation fell 73 percent to 88.96 million euros, beating the consensus forecast for 83.5 million euros. ($1=.6740 Euro) (Reporting by Elisabeth O'Leary; Editing by Simon Jessop and Jon Loades-Carter)