Singapore Telecommunications Ltd. (Z74.SG) Tuesday said its fiscal third-quarter net profit fell 16% due to adverse foreign exchange rates and deteriorating market conditions.

At the same time, the company said it is on the lookout for acquisitions, helped by its strong balance sheet.

SingTel, in a filing with the Singapore Exchange, said net profit for the three months ended Dec. 31 was S$798.9 million, compared with S$952.2 million a year earlier. But the figure was better than the S$774 million tipped by a Dow Jones poll of eight analysts.

"The global economic slowdown has started to impact the group," said Chief Executive Chua Sock Koong in a statement.

Chua said at a press briefing that the company would make further cost cuts through measures like pay reduction if conditions worsen, but reiterated that jobs cuts would be a last resort.

SingTel said the strength of the Singapore dollar against the Australian dollar and major regional currencies weighed on its results. The Australian dollar's depreciation will negatively impact the company's consolidated revenue and operational earnings before interest, tax, depreciation and amortization for the fiscal year to March 31, it added.

SingTel, Southeast Asia's largest telecommunications firm by revenue, holds significant stakes in six foreign mobile operators: India's Bharti Airtel Ltd. (532453.BY), Indonesia's PT Telkomsel, Thailand's Advanced Info Service PCL (ADVANC.TH), Pakistan's Warid Telecom, the Philippines' Globe Telecom Inc. (GLO.PH) and Pacific Bangladesh Telecom. The company operates in Singapore and in Australia through its unit, Optus.

Pretax earnings from the regional mobile associates, a key driver for SingTel's bottomline growth in recent years, fell 27.4% to S$462 million from S$636 million a year earlier due to the stronger Singapore dollar, weaker performance from Telkomsel, Globe and Warid, and foreign-exchange related charges.

Net profit from Optus was flat in Australian dollar terms, but in Singapore dollar terms, net profit from the unit fell 22.7% to S$142 million.

SingTel's overall operating revenue for the quarter fell 3.2% to S$3.70 billion, compared with S$3.83 billion a year earlier. The Dow Jones poll expected S$3.34 billion in revenue for the quarter.

CIMB said in a report that SingTel's aggressive subscriber acquisition efforts in previous quarters are "bearing fruits," after noting stronger-than-expected performance from Singapore and Australia.

SingTel reiterated its forecast that operating revenue for its Singapore business, excluding the impact from the recently acquired Singapore Computer Systems Ltd., will grow at mid single-digit level for the financial year and EBITDA margin is expected at about 40%. Operating revenue for Optus will grow at a single-digit level for the year.

"SingTel maintained its guidance, which we view positively as it signals no further deterioration in outlook," CIMB said.

Still Looking For Acquisitions

Analysts have said that SingTel management is under pressure to make an acquisition to boost earnings growth as the economic slowdown takes its toll and with its mobile associates facing increased competition in their markets.

SingTel said overall pretax earnings contributions from the mobile associates for the fiscal year will be lower than that of the previous year. Pretax earnings from the companies in the three quarters to Dec. 31 fell 22.7%.

SingTel executives reiterated during the press briefing that that the company remains on the lookout.

"If there are good opportunities, we will be prepared to look at them, but clearly we are not in a big rush to make acquisitions given the global uncertainties," Chua said after noting that SingTel's strong balance sheet puts it in a good position for buying opportunities.

People familiar with the situation have said that SingTel has been in discussions about acquiring a stake in Vietnam's MobiFone.

Executives also said the company would consider assisting its associates in acquiring competitors and increasing its stake in current associates.

Australia Market Consolidation Welcome

CEO Chua told reporters that a decision Monday by Vodafone Group PLC (VOD) and Hutchison Whampoa Ltd. (0013.HK) to merge their Australian mobile telecommunications businesses in an equal joint venture means more competition for Optus "but is not something to worry about."

"During the transition to the merged entity we would expect that there be some level of uncertainty...and Optus will certainly capitalize on this," she said.

The merger would create an entity that will capture 25% to 27% of the mobile market, providing the scale to claw more market share from the largest mobile operator, Telstra Corp., and Optus.

Optus Chief Executive Paul O'Sullivan said during a separate conference call that while Optus remains committed to its third-generation network joint venture with Vodafone, it will need to evaluate how the JV will work after the proposed merger between Vodafone and Hutchison.

Despite fears of an economic slowdown hurting revenues, O'Sullivan said the Australian consumer market "remains quite buoyant," although there has been a slight softening in corporate voice traffic revenue.

O'Sullivan said the likelihood of the Australian government proceeding with its national broadband network has been enhanced by the global economic crisis as it steps up infrastructure spending to stimulate the economy.

Optus had entered a bid in November to build a high-speed, open-access national broadband network. -By Se Young Lee, Dow Jones Newswires; 65 6415 4155; vincent.lee@dowjones.com

(Costas Paris in Singapore and Bill Lindsay in Sydney contributed to this report.)