UPDATE 2-Western Union profit beats as lower fees boost transfers
* Second-quarter EPS 36 cents vs 44 cents year ago
* Revenue down 3 percent to $1.38 bln
* Company cuts prices to fend off competition
* Shares jump 9.5 pct to highest in almost a year
(Adds analyst comments; updates stock move)
July 30 (Reuters) - Western Union Co, the world's largest money-transfer company, posted a better-than-expected in quarterly profit as cheaper remittance fees tempted more people to use its services, sending its shares up as much as 9.5 percent.
The company has been cutting prices and investing heavily in its online and mobile business to compete with traditional rival MoneyGram International Inc and new arrivals Boom Financial Inc and Xoom Corp.
The lower fees boosted remittance volumes for Western Union but ate into profits. Analysts, however, say the fall was less than expected and the company was moving in the right direction.
"Western Union's second-quarter results were not impressive in an absolute sense, but show encouraging signs that management's efforts to reset the business are taking hold," Morningstar analyst Brett Horn said.
Western Union charges about $8.00 to remit $100 from most cities in the United States to Mexico for its fastest money transfer service. In contrast, MoneyGram charges nearly $10.00 for its 10-minute cash transfer service to Mexico, according to the company's website.
First Analysis Corp analyst Larry Berlin said the biggest price cuts were as much as 20-25 percent.
Western Union's second-quarter transaction volumes rose 3 percent from a year earlier and 9 percent from the first quarter. Remittances totaled at $20.5 billion for the quarter, up from $20.1 billion a year earlier.
Janney Capital Markets analyst Thomas McCrohan said the results indicated that customers were responding well to the lower fees.
The company's online money transfer business, Westernunion.com, fared well during the quarter, clocking revenue growth of 26 percent.
Western Union said in June it expects revenue from its digital business to triple to $500 million by 2015, from $150 million currently.
Susquehanna International Group analyst James Friedman called the online business a "hidden asset" that could be valued at $6 per share, based on the share price of Xoom.
Total revenue fell 3 percent to $1.38 billion as the company earned less from remittance fees.
Net income fell to $198.6 million, or 36 cents per share, in the quarter ended June 30 from $271.2 million, or 44 cents per share, a year earlier.
Analysts on average had expected earnings of 34 cents per share on revenue of $1.37 billion, according to Thomson Reuters I/B/E/S.
Englewood, Colorado-based Western Union's shares, which have gained about 16 percent since the company's reported first-quarter results in March, jumped to $18.60, their highest in almost a year, before easing back to $18.51.
(Additional reporting by Anil D'Silva in Bangalore; Editing by Joyjeet Das and Robin Paxton)