FRANKFURT (Reuters) - Telefonica Deutschland confirmed its guidance for 2018 as it reported modest growth in mobile service revenues and a gain in core profits in the first quarter after stripping out the impact of regulation.

Germany's No.3 mobile operator, controlled by Spain's Telefonica, said mobile service revenues grew by 0.4 percent in the first quarter, adjusted for regulatory effects.

Reported revenues declined by 0.2 percent to 1.767 billion euros (1.5 billion pounds), in line with expectations in a poll of analysts, but after stripping out regulatory effects they were up 0.4 percent.

Operating income before depreciation and amortisation (OIBDA), adjusted for exceptional effects and excluding regulatory effects, rose 5.4 percent to 422 million euros, just beating analysts' expectations.

The company, which operates under the O2 brand, continues to reap cost savings from its 2014 merger with E-Plus, but has also announced a digital transformation push that should boost mid-term core earnings.

Telefonica reiterated its guidance for broadly stable revenues this year and flat to slightly positive OIBDA, after stripping out the drag from regulation - chiefly European Union rules on roaming fees.

(Reporting by Douglas Busvine)