Italian broadcaster Mediaset has reported a smaller-than-expected fall in nine-month net profit and said the decline in Italian advertising will narrow in the fourth quarter. The mainly free-to-air TV broadcaster, owned by Prime Minister Silvio Berlusconi, posted a net profit of E184.2 million, down 48 per cent but topping analysts' expectations for E171 million.

The company said it still expects 2009 operating and consolidated net profit to be down markedly from 2008.

Competition with News Corp has recently heated up as the Mediaset rival launched a new free digital channel that adds to its pay-TV satellite broadcasting business Sky Italia.

Mediaset has challenged Sky Italia's dominance in the Italian pay-TV market with an offer on digital terrestrial frequencies. Revenue at its pay operations rose 40 per cent in the first nine months of the year.

In 2012 Italy will switch off completely the analogue TV signal.

In a conference call, a Mediaset executive reaffirmed the target for its pay-TV operations was breaking even in 2010 and said customers would rise back to 3.6 million by the end of December, one month ahead of target. Some 1.8 million pay-TV cards expired at the end of June.