Jan 23 (Reuters) - India's Zee Entertainment Enterprises ZEE.NS reported a sharp rise in third-quarter profit and margins on Thursday, boosted by cost cutting measures which offset lower advertisement revenue.

Shares of the broadcaster closed up 2.4% after the results.

Zee reported a profit of 1.64 billion rupees ($18.96 million) for the three months ended Dec. 31, compared to 585 million rupees a year ago.

Its subscription revenue rose 6.6% to 9.8 billion rupees, benefiting from the implementation of a 2022 tariff order which gave broadcasters more leeway to increase prices of TV channels.

However, ad revenue declined 8.5%, due to what the company described as a "sluggish festive season" that resulted in lower marketing spend by consumer facing companies. As a result, total revenue declined 3%.

With recovery in ad revenues still elusive, the company has in recent quarters sharpened its focus on cutting costs and reducing losses in its streaming business Zee5.

Zee reported third-quarter core profit margin of 16.1% compared to 10.2% a year ago. It has said it is targeting a margin of 18%-20% by fiscal year 2026.

Its operational costs declined 16% year-on-year driven by lower programming and technology cost, while total expenses fell 10%.

Meanwhile, core losses in Zee5 narrowed to 1.36 billion rupees from 2.4 billion rupees a year ago, and revenue rose 8% as it attracted more paying customers with a new slate of content.

India's $28 billion media and entertainment sector has witnessed intense competition in recent years, with the likes of Netflix NFLX.O and Sony 6758.T striving to strengthen their foothold.

Zee previously said that the merger of media assets of Reliance Industries RELI.NS and Walt Disney DIS.N would likely give the combined entity more advertising leverage due to their larger market shares.

($1 = 86.4825 Indian rupees)

(Reporting by Ananta Agarwal and Aleef Jahan in Bengaluru; Editing by Varun H K)

((Ananta.agarwal@thomsonreuters.com;))