* Q3 profit 3.9 million euros vs 12.6 million euros yr earlier
* Targets for year achievable, churn rate a concern
(Adds details from conference call)
ROME, Nov 2 (Reuters) - Italy's No.2 broadband operator Fastweb said profit fell 70 percent in the third quarter, hurt by higher operating expenses and a loss of subscribers within a business unit.
The company, which is majority-owned by Swiss phone company Swisscom, on Tuesday reported net profit fell to 3.9 million euros in the third quarter, down from 12.6million euros in the year earlier period.
Fastweb said its targets for the year were achievable, despite the introduction of new revenue recognition rules that had a negative impact on its 2010 results.
Fastweb earlier this year was rocked by a money-laundering probe in which prosecutors alleged its executives knew of a more than 2 billion euro ring that laundered money via fake sales and purchases of phone services.
Fastweb founder Silvio Scaglia was arrested as part of the probe, but the company managed to avoid the threat of being put in the hands of a court-appointed administrator.
A trial for executives including Scaglia has been delayed to Nov. 23.
The company, on a conference call with analysts, said a high churn rate -- a measure of customer attrition -- remained an issue among broadband customers, though the level of churn was increasing at a lower rate than in prior quarters.
Fastweb revenues rose 5.5 percent to 470.5 million euros in the third quarter, as growth at its consumer unit and executive business unit helped offset a 7 percent slide in revenues at its small and medium enterprises unit due to a high churn rate.
Fastweb CEO Carsten Schloter also said there had been progress in industry efforts to develop a new high-speed Italian broadband network, but said former monopoly Telecom Italia -- which has been reluctant to join -- would have to play a role.
"We think such a project has to join all the players in the industry," he told the conference call. "This project doesn't make sense if one player stays apart."
Swisscom last month announced plans to buy the remaining Fastweb shares it does not own for 256 million euros, taking advantage of the Italian unit's battered share price to gain full control.
The offer will close on Nov. 12. (Reporting by Deepa Babington; Editing by Jon Loades-Carter)