Australian contract loss bad for SingTel-JP Morgan

SINGAPORE, April 3 (Reuters) - An Australian government decision to cancel a broadband contract involving Singapore Telecommunications is a setback for the group as the deal would have strengthened it against rival Telstra, JPMorgan said in a client note.

Australia on Wednesday cancelled a A$958 million ($871 million) funding agreement with OPEL, a joint venture between SingTel's (STEL.SI: Quote, Profile, Research, Stock Buzz) Optus Australian mobile phone arm and Futuris Corp Ltd's (FCL.AX: Quote, Profile, Research, Stock Buzz) Elders business, as some conditions including prescribed coverage requirements had not been met.

"The termination of the OPEL contract is a positive for Telstra and a negative for SingTel as the network build in regional areas would have created greater competition in markets where Telstra enjoys a competitive advantage due to a lack of competition," JPMorgan analysts said in the research report.

JPMorgan is keeping its "neutral" rating for SingTel shares.

Telstra (TLS.AX: Quote, Profile, Research, Stock Buzz), Australia's largest telephone company, has been fighting for market share with key competitor Optus in the broadband and mobile phone markets.

Optus Chief Executive Paul O'Sullivan said in a statement on Wednesday that the government's decision was "based on flawed data", and "was bad news for rural and regional Australia and for competition in the telecommunications industry". (Reporting by Daryl Loo; Editing by Jan Dahinten)