UPDATE 1-Axiata eyes Millicom's Lanka, Cambodia assets -sources

* Axiata may bid for Millicom assets in Cambodia, Sri Lanka

* Assets worth at least $500 million - sources

* Funding a concern for Axiata - analysts (Adds analysts quotes, details on Axiata's finances)

By Saeed Azhar and Julie Goh

SINGAPORE/KUALA LUMPUR, July 8 (Reuters) - Malaysian telecom firm Axiata (AXIA.KL) has expressed interest in buying the Sri Lankan and Cambodian assets of Luxembourg-based telecom operator Millicom (MICC.O) (MICsdb.ST) worth at least $500 million, sources with direct knowledge of the deal told Reuters.

Axiata, which raised $1.47 billion from shareholders in April to reduce debt and fund its overseas operations, has said its strategy is to pursue consolidation in countries where it has operations rather than expanding into new markets.

The firm, Malaysia's second-biggest mobile phone operator, is among a number of bidders that have expressed interest in buying the Asian assets of Millicom, one of the sources said on Wednesday.

JPMorgan (JPM.N) is advising Axiata on the Sri Lankan assets and Bank of America-Merrill Lynch on the Cambodian assets, a second source said. Both the assets could be worth at least $500 million, the sources said. The sources declined to be identified because of the sensitivity of the negotiations.

JPMorgan, Merrill Lynch and Axiata declined comment. A spokeswoman from Axiata said the company would make an announcement if "any corporate action is made."

Millicom said last week it had appointed Goldman Sachs (GS.N) to advise it on a strategic review of its Asian business and several potential investors were eyeing the assets. [ID:nL2531588]

Millicom's Asian assets include Celltel in Sri Lanka and Mobitel in Cambodia, countries where Axiata already has a presence and where the Malaysian firm sees room for consolidation, another source familiar with the deal said.

Celltel has a 15 percent market share and ranks third among four operators in Sri Lanka, while Mobitel has a 67 percent market share, making it the leader in Cambodia.

Millicom's Asian business saw revenues rise 7 percent to $68 million in the first quarter, while earnings before interest, depreciation, taxation and amortization fell 3 percent to $25 million due to competition.

A QUESTION OF FUNDING

Axiata's 70 percent-owned Dialog Telekom is the number one operator in Sri Lanka, and its 100 percent-owned Telekom Malaysia International Co Ltd is the smallest operator in Cambodia.

A year ago it bought a 15 percent stake in Idea Cellular (IDEA.BO), India's fifth-largest mobile operator, for about $1.5 billion.