UPDATE 2-ITV sees surprise ad revenue increase, shares jump

* Oct NAR down 3 pct, Nov down 1 pct, Dec up 4 pct * 9-month revenue 1.31 bln stg vs 1.47 bln stg

* Extends lead over BBC1 in peak time viewing

* Repays 75 mln stg of debt after convertible bond issue

* Shares up more than 8 percent

(Adds details from conference call, share price)

By Julie Crust

LONDON, Nov 5 (Reuters) - ITV Plc (ITV.L), Britain's biggest commercial free-to-air broadcaster, forecast a surprise upturn in advertising next month, sending its shares up more than 8 percent.

The company, home to shows such as X Factor and Coronation Street, said on Thursday its ITV1 channel was extending its lead over BBC1 [BBC.UL] in peak time viewing, helping lure advertisers and allowing it to forecast a 4 percent rise in net advertising revenue (NAR) in December.

The increase would be the first monthly gain since the first half of 2008 and could end a dismal period in which ITV seemed to be inexorably losing viewers and advertising revenue.