Europe's leading internet service provider (ISP) T-Online has surprised analysts by reporting better-than-expected profit in the third quarter, putting it on track for its first profitable year.

The ISP, part of German telecoms giant Deutsche Telekom, had a core profit of 35.6m euros ($35.9m; �22.6m) in the three months to September, but net losses more than doubled to 273m due to write-offs.

Italy's Tiscali, another big European ISP, reported a core loss of 3.6m euros in the quarter, compared with a 44.8m loss for the same period last year.

Revenues at T-Online were 383m euros in the quarter, in-line with expectations, up from 270m a year ago, while at Tiscali they slipped to 179.9m from 190.1m the previous year.

"The operating success of this year is based on sustainable and profitable subscriber growth, longer usage times and more revenues in advertising, e-commerce and services," the company said in a statement.

T-Online provides internet access to 11.85 million people, mainly in the German market.

It has also cut losses at its French and Spanish units, but still trails the local market leaders, France's Wanadoo and Spain's Terra Lycos.

Online troubles

Tiscali has lost 600,000 customers in the last four quarters and last quarter cut its full year profit forecast.

The company said it was on track to break evne by the end of this year.

In the first quarter it became the first European ISP to achieve a core profit, but fell back into the red in the second with a loss of 9.5m euros.

The company's growth via acquisitions has been criticised because of its small cash reserves and high operating costs.

But despite a 56% fall in its share price this year, rumours the company is a takeover target have stopped.

T-Online shares have fallen 36% this year, roughly similar to that of its main rival, Wanadoo.