* Broadcaster confirms encouraging outlook for final quarter

* Milan-listed shares rise more than 7%

* CFO says pan-European TV project receiving 'lot of interest'

* Analysts see scope for M&A opportunities

MILAN, Nov 23 (Reuters) - MFE-MediaForEurope, the commercial broadcaster controlled by Italy's Berlusconi family, on Thursday beat forecasts with a marginal increase in nine-month operating profit as lower costs offset falling advertising sales.

Earnings before interest and tax (EBIT) came in at 98.3 million euros ($107.2 million), up from 97.6 million a year before and above an 81-million-euro analyst consensus provided by the company.

Like its European peers, MFE is wrestling with falling advertising spending due to sluggish economic growth in the region, and as high inflation squeezes profit margins.

However, the company stuck to a forecast for a positive operating result and cash flow this year and confirmed an encouraging sales trend for the final quarter, crucial for broadcasters as they strive to capture corporate advertising spending in the run-up to Christmas.

MFE said it expected sales in November to grow 8% in its key domestic market, replicating a similar increase seen in October.

"We upgraded our estimates early in November for the better Q4 trend, (and) there may still be small residual upside," JPMorgan analysts said in a research note.

Both classes of Milan-listed MFE shares rallied more than 7% after the results to top a broadly flat all-share index .

Total gross advertising revenue, which includes sales from the group's Spanish TV business, fell to 1.83 billion euros in the nine months to September from 1.85 billion euros a year before.

Total operating costs fell 2.1% to 1.76 billion euros, thanks to savings stemming from the internal merger of its Spanish operations.

EUROPEAN DRIVE

MFE sees European expansion as the way to resist the increasing dominance of U.S. streaming giants such as Netflix , and to help offset the flight of advertising budgets to the likes of Facebook.

In the post-results conference call, CFO Marco Giordani played down any imminent move, saying the company has "nothing to announce in coming weeks or months" on the M&A front.

He added that MFE is receiving a "lot of interest" in its pan-European project. The group holds a 29% stake in German peer Prosiebensat.1 and has repeatedly said it considers its investment as strategic for its ambition to built a pan-European TV platform.

"At some point it could increase its stake in ProSiebensat.1 to above 30% to test the regulatory and political waters which would trigger a mandatory offer," JPMorgan analysts said.

"MFE could be a beneficiary from pan-European consolidation and cyclical pressures could present opportunities to buy assets at attractive prices", they added.

($1 = 0.9168 euros) (Additional reporting Giancarlo Navach; Editing by Valentina Za, Alvise Armellini, Miral Fahmy and Jan Harvey)