SINGAPORE: Singapore Telecommunications, Southeast Asia's biggest telco, warned of lower earnings from Singapore and India in the coming year after beating expectations with a 6.6 per cent rise in quarterly profit.

SingTel, 55 per cent owned by state investor Temasek, said earnings from Singapore would be hit by start-up costs in broadband infrastructure and pay TV, and from India because of associate Bharti Airtel's costs for an African deal.

The bearish outlook dampened a solid performance during the last financial year, when revenue and profits both rose 13 per cent despite the financial crisis, pushing SingTel shares down 1.3 per cent in a broadly flat market.

Stuart O'Gorman, who helps manage $2.7 billion of technology investments at Henderson Global Investors, said he is bearish on telcos as margins were constantly under pressure and that earnings could only be increased by growing subscriber numbers.

"We are very negative on telecom companies. We think they are just dumb utilities," O'Gorman said.

In SingTel's core Singapore market, earnings before interest, tax, depreciation and amortisation (EBITDA) could fall by low-to-mid single digits in percentage terms due to the cost of expanding its cable TV business, SingTel said in its outlook for the financial year ending March 2011.

Singapore contributes about 25 per cent of SingTel's EBIDTA while Bharti accounts for about 18 per cent.

Singapore CEO Allen Lew said the rollout of Singapore's nationwide high speed broadband network will erode SingTel's advantage in infrastructure and allow the entry of new players.

Facing a saturated domestic market, the bulk of SingTel's earnings growth in recent years has come from its overseas mobile phone affiliates, in particular Indonesia's Telkomsel and 32-per cent owned Bharti.

SingTel recently supported Bharti in a $9 billion purchase of Zain's African assets to increase its presence in the emerging African market.

"In the near term, Bharti's earnings are expected to be diluted by acquisition financing costs for Zain and the investment in 3G spectrum," SingTel said.

Bharti's pre-tax profit contribution rose 9 per cent in the fourth quarter while Telkomsel's contribution climbed 26 per cent, lifted by a strong Indonesian rupiah . Net fourth quarter profit from its Australian unit Optus rose 14 per cent.

SingTel said on Thursday that it had no plans to list Optus.

SingTel earned an underlying net profit of S$1.02 billion ($739.7 million) in the fourth quarter, up from S$959 million a year ago. Five analysts surveyed by Reuters had forecast an underlying net profit of S$987 million, on average.

Bangladesh tie-up

For the 2010/11 financial year, SingTel is expected to post an underlying net profit of S$4.1 billion, up about 5 per cent from S$3.9 billion recorded in year to March 2010, according to ThomsonReuters I/B/E/S estimates.

The Singapore firm has to date invested S$18 billion to buy Australia's Optus as well as stakes in various other firms but the overseas acquisitions have come to a halt since 2007, and its later investments in Bangladesh and Pakistan have so far struggled to make a profit.

SingTel group CEO Chua Sock Khoon, who began as SingTel's treasurer and was closely involved in the company's overseas expansion drive, reiterated the firm was still on the lookout for possible acquisitions but would be financially disciplined.

SingTel said fair value losses of S$321 million, including from Warid Pakistan, had offset a S$327 million exceptional foreign exchange gain.

In Bangladesh, SingTel is looking at the possibility of tying together its and Bharti's units, now that Bharti is also present in the country.

"Tower sharing and site sharing and all that will be the first path," SingTel Group CFO Jeann Low said at a briefing.

SingTel has a 45 per cent stake in PBTL, Bangladesh's fifth largest mobile phone operator, which has a market share of just 4 per cent.

SingTel shares have lost 3.5 per cent since the start of the year, underperforming a 0.5 per cent decline in the Singapore Straits Times Index, based on Wednesday's closing price.