UPDATE 2-TIM Brasil shares rise on margin prospects

* Executives see EBITDA margins improving

* Q2 results better than expected

* Non-voting shares up nearly 6 percent (Adds share prices, increase in subscriptions)

By Guillermo Parra-Bernal

SAO PAULO, Aug 4 (Reuters) - Shares of Brazilian mobile phone carrier TIM Participacoes posted their biggest gain in almost three months on Tuesday after executives said margins would climb in coming quarters, boosted by higher revenue from prepaid mobile phone plans and increased market share.

"The performance should be better in the prepaid market" during the third quarter, TIM executive Luca Luciani said in a conference call on the company's second-quarter results.

Non-voting shares of TIM gained 5.8 percent to 4.37 reais, their highest since June 30, 2008. Voting shares of the company gained 2.2 percent to 5.67 reais, the highest since July 15.

On Monday, TIM reported second-quarter earnings before interest, taxes, depreciation and amortization, a measure of cash flow and operational profitability known as EBITDA, rose 15.5 percent to 736 million reais ($401 million).

EBITDA as a proportion of sales, known as the EBITDA margin, should improve throughout the next few months, TIM executives said. EBITDA margin was 22.3 percent in the second quarter as the company cut costs related to interconnection and reduced customer bad debts and payroll expenses.

Despite reporting a second-quarter net loss of 15.2 million reais, compared with a loss of 66.3 million reais a year earlier, analysts said the numbers were positive.

Higher sales of handsets limited the net loss, the company said, while it was able to stop losing customers to rivals in the period.

TIM Brasil added about 42,000 new post-paid subscribers in the second quarter, compared with a 397,000 loss in clients the prior quarter. Yet average revenue per user, a key measure for revenue performance in the industry known as ARPU, fell to 26.6 reais from 30 reais in the same quarter of 2008.

"TIM's results were encouraging -- although some additional homework needs to be done -- and we reinforce our positive stance on the stock and better operating momentum," Itau Securities analyst Valder Nogueira said in a note to clients.

The company had 37.8 million subscribers at the end of June, up from 33.8 million a year earlier. It added a net 1.7 million users in the second quarter, the company said.

Luciani declined to reaffirm or give new guidance on the company's EBITDA forecast for the year, currently at 3.3 billion reais.

TIM, also known as TIM Brasil, is an affiliate of Telecom Italia . ($1=1.834 reais) (Additional reporting by Alberto Alerigi Jr. and Cesar Bianconi, editing by Gerald E. McCormick, John Wallace and Gunna Dickson)