(Adds CEO comments, details of 3Q balance sheet)

By Ana Mano

SAO PAULO, Oct 25 (Reuters) - Telefonica Brasil SA , the biggest telecommunications company in the country, said third-quarter net income rose by 9.6 percent from a year earlier amid signs of an economic recovery and a more efficient investment allocation.

According to a securities filing on Tuesday, Telefonica Brasil, which operates under the Vivo brand name, posted net income of 953 million real ($306.3 million), slightly below an average forecast of 1.053 billion reais in a Reuters poll of analysts.

Sales of pre-paid mobile services rose for the first time in two years, indicating the worst of Brazil's economic woes was over, said Chief Executive Officer Amos Genish in remarks after the results were released. As the company focuses on data streaming and high-paying customers in the post-paid segment, Vivo boosted average revenue per user by 15 percent in the quarter, the filing said.

In August, Telefonica Brasil, a unit of Spain's Telefonica SA, outpaced its competitors by registering 46.7 percent of net customer additions in the post-paid segment. But net operating revenue was virtually stable at 10.6 billion reais in the quarter, up 1.1 percent from a year ago.

São Paulo-based Telefonica Brasil also continued to capitalize on cost efficiencies from its acquisition of broadband company GVT from France's Vivendi, which helped it reduce capital spending and boost free cash flow generation by 43 percent in the nine months through September to 4.8 billion reais.

"Our free cash flow figure was astronomical, this is the data that the market really wants to see," Genish said.

As of the third quarter, Telefonica had captured about two-thirds of expected best-case-scenario synergies of 22 billion reais from the GVT acquisition, the filing said.

As a result, the company will be the highlight of Telefonica SA's global results, Genish said, adding those numbers would be issued on Thursday.

($1 = 3.1110 Brazilian reais) (Reporting by Ana Mano; Editing by Daniel Flynn and Peter Cooney)