* Q3 EPS from cont ops, excl charges, C$0.14 vs C$0.12 yr ago
* Q3 digital rev up 26 pct
* Steeper-than-expected print rev drop worries analysts
* Shares rise as much as 28 pct (Adds analyst comments, details, updates shares)
By Bhaswati Mukhopadhyay
Nov 3 (Reuters) - Telephone directory publisher Yellow Media Inc's quarterly online revenue grew 26 percent suggesting that its digital push was gaining ground, but analysts warned the growth was not strong enough to offset the slide in its print business.
Shares of the Canadian company -- which is struggling to sell advertising space in its traditional Yellow Pages and business directories -- rose as much as 28 percent as overall revenue fell less than what investors were expecting.
The company has been scrambling to reduce debt as it pours money as well as efforts into moving from print to digital media, and its online revenue not only grew in the third quarter, but accounted for a larger share of total revenue.
"In terms of print, we are seeing the rate of erosion starting to slow down and not accelerate (and) we are pretty much near or at the peak of print erosion," Chief Executive Marc Tellier said on a conference call with analysts.
But analysts were not quite convinced that the company had turned the corner.
"Online needs to get bigger before we can start not to worry about print. It is still 27 percent of revenue," said analyst Aravinda Galappatthige of Canaccord Genuity.
Galappatthige estimated that online revenue grew about 9-10 percent organically, while print revenue fell about 17-18 percent -- much steeper than the 12-percent drop he expected.
S&P's credit analyst Madhav Hari said Yellow Media would have to keep spending money if it wanted to see its online business grow at 25-percent-plus levels.
Overall revenue fell 9 percent to C$323.4 million, while analysts' were expecting revenue of C$335.6 million, according to Thomson Reuters I/B/E/S. Advertiser renewal rates were flat at just over 87 percent.
EBITDA for the quarter fell a steeper-than-expected 14 percent to C$166.0 million.
Although revenue and EBITDA came in below market expectations, analysts said it was not as bad as what investors were bracing for.
"I think some retail investors were concerned that the decline (in revenue and EBITDA) would be steeper," said analyst Robert Bek of CIBC World Markets.
The company's shares, which have slumped more than 90 percent so far this year, were trading up 28 percent at 44 Canadian cents in afternoon trade on the Toronto Stock Exchange.
The company, which published its first directory in 1908 and went public in 2003, was valued at as much as C$17 a share in early 2006.
Since then, its business has eroded in the face of declining demand for print ads and difficulties in selling online ad space in the face of growing competition from giants such as Google Inc .
The company has pulled its outlook for this fiscal year and suspended share buybacks as it struggles to manage its net debt, which was about C$1.7 billion at end September. Last month, it said it would stop paying dividends after October.
In the July-September quarter, Yellow Media's net loss from continuing operations was C$2.8 billion, including an impairment charge of C$2.9 billion.
Excluding the charge, it earned C$74.6 million, or 14 Canadian cents a share, up from C$65.6 million, or 12 Canadian cents a share, a year ago. (Editing by Gopakumar Warrier and Savio D'Souza)