PARIS (Reuters) - France's largest telecom operator Orange (>> ORANGE SA) inched closer in the second quarter to a long-awaited recovery as customers shifted to premium high-speed mobile and broadband services, allowing it to confirm annual profit, debt and dividend targets.

Its shares rose by as much as 3 percent in morning trading, and were up 2 percent at 0910 GMT.

Analysts welcomed what they said was a slight beat on revenue and core profit as strong commercial momentum in France and emerging markets offset weakness in Spain.

Quarterly sales stood at 9.89 billion euros (6.34 billion pounds), down 0.2 percent on a comparable basis but up 0.4 percent when the impact of regulatory changes is stripped out, marking the first increase since 2011.

Restated earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 0.4 percent to 3.29 billion euros, while the margin held stable at 33.3 percent.

The figures show Orange is putting a brutal price war that begin in 2012 when low-cost operator Iliad (>> ILIAD) entered the mobile market in France behind it, and benefiting from major investments in faster networks. It signed up a net 76,000 new customers to mobile contracts in the quarter, with more people using 4G mobile services that are priced at a premium.

Orange's nascent recovery reflects a broader trend among European telecom operators after five years of revenue declines because of regulatory pressure and tough competition. Analysts believe the sector is approaching an inflection point and see a return to top-line growth next year.

Orange shares had risen 5.7 percent this year before the results, making them among the worst performers in the 22-component STOXX 600 European telecoms index <.SXKP>, which is up 18.5 percent.

They were one of the best performers last year, however, as investors took heart from cost cuts and a recovery in France to send them up 57 percent compared with 7 percent for the index.

As part of its turn-around, Orange has been selling assets in mature European markets, such as its British mobile operator EE, jointly owned with Deutsche Telekom, so as to expand in emerging markets of Africa and the Middle East.

It disclosed last week it was in discussions to buy operations in four West African countries from Indian telecom group Bharti (>> Bharti Airtel Limited), which Deutsche Bank analysts said could be worth 1.2-1.5 billion euros.

Chief Financial Officer Ramon Fernandez said on Tuesday that due diligence was underway with Bharti and the group would know by autumn whether the deal would be completed.

But Orange said it would not over-spend on acquisitions to fuel its ambitions in the region, pledging to stay out of the continent's biggest markets of South Africa and Nigeria since deals there would be too costly.

Fernandez added the group would bring its key leverage ratio back down to around two times net debt to EBITDA next year by using proceeds of the EE sale.

(Additional reporting by Joseph Sotinel; Editing by Leigh Thomas and Mark Potter)

By Leila Abboud

Stocks treated in this article : ORANGE SA, ILIAD, Bharti Airtel Limited