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WRAPUP 1-SingTel profit beats forecast on Asia mobile growth

(Recasts with analyst quotes, adds AIS results, share price)

SINGAPORE, May 14 (Reuters) - SingTel STEL.SI, Southeast Asia's largest phone company, beat market forecasts with a 9 percent rise in quarterly profit, thanks to rapid mobile user growth led by India, but warned of an uncertain outlook.

Singapore Telecommunications SGT.AX, which derives about three quarters of its sales outside Singapore, said it was eyeing a potential acquisition in South African operator MTN Group Ltd MTNJ.J through its 30-percent-owned Indian telecoms operator Bharti Airtel Ltd BRTI.BO.

“Full-year net profit was ahead of our estimate, with Bharti mainly responsible for the double-digit growth in associate earnings,” said CIMB-GK Research analyst Khoo Chen Hsung. “The full-year dividend payout was disappointing, but signals SingTel’s serious pursuit of MTN.”

Chief Executive Chua Sock Koong told reporters Bharti’s talks with MTN, which has a market capitalisation of about $39 billion, were “at an extremely preliminary, exploratory stage”.

Lim Chuan Poh, head of SingTel’s international operations, said it was too early to say if Bharti would make a formal bid for MTN, or if SingTel would provide financing for the deal.

Looking ahead, Singapore’s largest listed firm warned of a challenging environment and forecast relatively slower revenue growth for Singapore and Australia, compared with markets such as India, Pakistan and Thailand.

State-controlled SingTel also raised its dividend payout ratio to 45-60 percent of underlying net profit for next year, compared with this year’s 54 percent, which disappointed investors who had anticipated more with a special dividend.

SingTel shares were unchanged at S$3.75 by 0810 GMT, down from an early high of S$3.78, broadly in line with the flat Singapore market .FTSTI.

The company made underlying net profit before goodwill and exceptionals of S$968 million ($706.6 million) in the January-March quarter, compared with S$886 million a year ago.

This was above an average net profit forecast of S$856.6 million from 14 analysts polled by Reuters.

Operating revenue rose 11 percent to S$3.76 billion.

For a graphic on SingTel results, click on: here _SNGTL&w=600 SingTel's 21-percent-owned associate Advanced Info Service PCL ADVA.BK, Thailand's top mobile operator, also reported a better-than-expected 29 percent rise in quarterly earnings on Wednesday, helped by strong subscriber growth.

SLOWER GROWTH AHEAD

The key question is what SingTel will do with its cash, said Theo Maas, a Sydney-based analyst at Fortis Investment Partners.

The group’s free cashflow surged 28 percent to S$3.58 billion for the fiscal year ended March.

“SingTel is heavily undergeared at the moment: they’ve got cash coming out their ears. It seems to me they’re keeping their powder dry in terms of what’s happening on the Bharti side, with the talks with MTN,” he added.

Facing a domestic market of just 4.6 million people where virtually everyone has a mobile phone, SingTel has spent S$18 billion in recent years buying stakes in mobile operators in high-growth Asian countries such as India and in the bigger Australian market.

Australia’s Optus -- SingTel’s single-biggest revenue and profit generator -- posted a 1.4 percent rise in full-year earnings before interest, tax, depreciation and amortisation (EBITDA) to A$2.02 billion ($1.9 billion), excluding a A$13 million write-off for a cancelled government contract.

The unit -- Australia’s second-largest mobile operator with a third of the market -- faces cut-throat price competition, slowing subscriber growth and regulatory changes in a saturated Australian market.

SingTel also owns big stakes in six emerging market mobile operators, including Globe Telecom GLO.PS in the Philippines and Indonesia's Telkomsel TLKM.JK. Most have shown phenomenal growth in wireless subscribers in recent years.

Pre-tax earnings from the associates rose 18 percent to S$630 million in the quarter, driven mainly by Bharti and a 2 percent appreciation of the Indian rupee against the Singapore dollar.

SingTel also benefited from a one-off gain of S$153 million from the sale of Bharti’s minority stakes to investors in a unit.

“SingTel is poised for slower growth this (fiscal) year -- its Singapore operations face a higher year-over-year base, Telkomsel faces a price war in Indonesia, while foreign earnings face a drag from Singapore dollar strength,” Khoo at CIMB-GK added.

Lim shrugged off suggestions that Telkomsel’s contributions would shrink. Some analysts have downgraded Indonesia’s top mobile operator on expectations of market share losses and margin erosion.

“Telkomsel is going through a phase where new players are becoming price aggressive, but growth is still strong. Relative to the market, Telkomsel is still performing well,” he added. ($1=1.37 Singapore Dollar) ($1=1.061 Australian Dollar) (Additional reporting by Ben Wilson in SYDNEY; Editing by Jan Dahinten and Jean Yoon)

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