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Written by: Staff

SINGAPORE, May 4 (Reuters) Singapore Telecoms, Southeast Asia's largest phone firm, on Thursday posted a surprise 14 percent rise in quarterly profit, thanks to strong Asian mobile growth, and said it would return S$4 billion ($2.6 billion) to investors.

State-controlled Singapore Telecommunications Ltd., Singapore's largest listed firm, made underlying net profit before goodwill and exceptionals of S$1 billion ($636 million) for the fiscal fourth quarter, up from S$881 million a year ago, beating even the most optimistic forecasts.

Attributable net profit in the quarter was S$1.68 billion, compared with S$1.04 billion a year before.

The group said it planned a S$2.3 billion capital reduction and would pay S$1.7 billion in dividends to its shareholders.

''A capital reduction will help us achieve an optimal capital structure while maintaining financial flexibility,'' SingTel Chief Executive Lee Hsien Yang said in a statement.

Investors will have one SingTel share cancelled for every 20 owned and will receive S$2.74 in cash for every cancelled share.

But the company signalled that profit would be flat in its 2006/07 fiscal year and said it needed to raise its stakes in existing mobile phone investments in Asia as well as make new acquisitions to drive growth.

''The group expects consolidated operating revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) to be stable,'' it said.

A SMALL HOME MARKET Facing a small home market of just 4.4 million people, where over nine out of 10 individuals own a handset, SingTel has spent S$17 billion in recent years buying operators in high-growth Asian nations with fewer cellphone users, and in the bigger Australian market.

It now derives about 75 percent of revenues and two-thirds of pretax earnings from operations outside Singapore. SingTel owns 21.5 percent of Thailand's Advanced Info Service Plc., 30.8 percent of India's Bharti Group, 44.6 percent of Globe Telecom Inc. in the Philippines, 35 percent of Indonesia's PT Telkomsel, and 45 percent of Pacific Bangladesh Telecom Ltd.

SingTel, 56.3 percent-owned by state firm Temasek Holdings, warned in November it might not hit its target of double-digit growth in underlying profit in the March 2006 fiscal year. It said it hoped to achieve that goal in the medium term. Its Australian unit Optus, the country's second-largest mobile operator, faces intense price competition, slowing subscriber growth and regulatory changes in a saturated domestic market, where more than eight in 10 people own a mobile phone.

Last year, the Australian Competition&Consumer Commission (ACCC) cut fees that telecoms companies charge each other when their customers make calls to people on rival networks, and when a fixed-line call from one goes to the mobile network of another.

Rivals Telstra Corp, Hutchison Telecommunications (Australia) Ltd. and Vodafone Group Plc have also been wooing new users with aggressive price deals, including capped mobile plans, where users can make a pre-defined volume of calls and/or text messaging for a set maximum monthly fee.

SingTel said in February Optus was exploring ways to cut operating costs, such as staff cuts, outsourcing selected customer services, and automating processes.

SingTel shares gained 1.5 percent in the January-March quarter, compared with a 4.8 percent decline for Telstra.


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