(Telecompaper) Telekom Austria reported a sharp fall in third-quarter profits as it struggled to contain costs to face tough competition in its markets. Revenues were down 5.3 percent year-on-year to EUR 1.036 billion, and EBITDA fell 12.8 percent to EUR 357.9 million. The company said cost savings of EUR 112.9 million in the year to date could not offset a rise in costs in Austria to win over customers, while operations in Croatia and Bulgaria were under pressure from the weak economic conditions and regulatory effects. Net profit plunged 48.3 percent to EUR 51.3 million, and free cash flow was down 20.4 percent to EUR 0.30 per share. The company said it will focus on generating organic cash flow in order to improve its balance sheet, after it recently suffered downgrades in its credit ratings from S&P and Moody's. While net debt is down 16.6 percent since the start of the year, the recent EUR 1 billion purchase of spectrum in Austria is expected to push debt to 3.0 times EBITDA by year-end. The group aims to return to a stable BBB rating in the medium term. Telekom still maintained its guidance for capex for EUR 650-700 million over the full year, after EUR 493 million in the first nine months, and confirmed an annual dividend of EUR 0.05 per share. Annual revenues are still forecast at around EUR 4.1 billion.