* Q2 underlying net profit S$886 mln; forecast S$896 mln
* Australia op revenue to fall by mid-single digits in FY2013
* Strong Singapore dollar also impacted earnings (Adds details, analysts' comments)
By Eveline Danubrata and Kevin Lim
SINGAPORE, Nov 14 (Reuters) - Singapore Telecommunications Ltd forecast its first drop in annual revenue in 14 years after it posted a weaker-than-expected quarterly profit, hit by tough competition in its key Australian market.
SingTel, Southeast Asia's largest telecommunications firm by market value, relies on Australian unit Optus for two-thirds of its revenue, but competition with the likes of Telstra has grown increasingly fierce amid slowing growth in that country's mobile market.
SingTel said on Wednesday that it now expects a "mid-single digit" percentage decline in Australian operating revenue for the financial year ending March 2013, a reversal from its earlier forecast for a low-single-digit increase.
"With the revised revenue outlook for Australia, the consolidated revenue of the group is expected to decline by a low-single digit level," SingTel said in a statement. SingTel last reported a fall in annual revenue in 1998/99, Thomson Reuters data shows.
SingTel, however, expects earnings before interest, tax, depreciation and amortisation (EBITDA) at the group level to be stable, in line with earlier guidance.
For its July-September quarter, SingTel, which also owns large stakes in several mobile operators including India's Bharti Airtel and Indonesia's Telkomsel, had an underlying net profit of S$886 million ($725 million). That was up only slightly from S$885 million a year earlier and undershot the S$896 million average estimate of six analysts polled by Reuters.
"The main issue is with Australia. It's really in the pricing, on bundles offered on fixed line products that is impacting top-line revenue," said Michael Wu, an equities analyst with Morningstar in Sydney.
"We were expecting EBITDA to decline ... but they did match their declining revenue with declining costs, so EBITDA is stable. That's encouraging," he added.
Nomura Securities said revenue and operational trends at Optus were weak, noting Telstra had gained market share in Australia's mobile market after discounting the gains in subscriber numbers following Optus's purchase of Vivid Wireless earlier this year.
Optus, Australia's No.2 telecom after Telstra, saw revenue drop 4 percent to A$2.24 billion ($2.34 billion) during the quarter from a year earlier, due to price competition in mobile phones and a mandated reduction in mobile termination rates.
SingTel shares have risen about 2 percent this year, underperforming a 13 percent gain in the broader Straits Times Index. The stock was down 0.6 percent at 0452 GMT, in line with the decline in the broader index.
SingTel fared better in its home market, where revenue rose 4 percent from a year earlier to S$1.67 billion during the quarter, helped by a strong performance from IT and engineering arm NCS. In mobile phones, SingTel's share of the local market rose by 0.2 percentage point from the previous quarter to 46.6 percent.
Even so, SingTel's postpaid average revenue per mobile phone user fell about 6 percent to S$80 during the quarter as roaming income declined amid the growing popularity of cheaper Internet data and voice services such as WhatsApp and Viber.
SingTel's results were also hurt by the strength of the Singapore dollar, which depressed contributions from India, Indonesia and Thailand.
The Singapore dollar has gained 6 percent against the U.S. dollar so far this year, the second-best performing Asian currency after the Philippine peso among 10 currencies tracked by Reuters.
Telkomsel, for instance, had a pretax profit increase of 26 percent in local currency terms, but this translated into a smaller rise of 16 percent when converted in Singapore dollars.
Excluding currency movements, SingTel's underlying net profit, which excludes one-off items, would have risen 2.9 percent year-on-year.
Overall, pretax earnings from SingTel's regional mobile associates grew 17 percent to S$549 million, with strong performances from Telkomsel and Thailand's Advanced Info Service PCL helping to offset weaker results from Bharti.
SingTel's consolidated revenue does not include contributions from Telkomsel, in which it has an effective stake of about 35 percent, and other regional mobile operators because it owns less than 50 percent of these firms.
Bharti, which is around one-third owned by SingTel, last week reported its 11th consecutive quarter of profit declines, with margins under pressure from intense competition. ($1 = 1.2227 Singapore dollars) ($1 = 0.9584 Australian dollars) (Additional reporting by Naomi Tajitsu in WELLINGTON; Editing by Chris Gallagher)