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Singapore Telecommunications said Wednesday it would return S$3.3bn ($2.2bn) to shareholders in the form of dividends as Asia’s largest telecoms group reported a 7.9 per cent rise in full-year underlying profit to S$3.56bn.

The company said that fourth-quarter net profit fell 41 per cent to S$989m. However, that was better than market forecasts after earnings of S$1.68bn a year ago were boosted by one-time gains when creditors took over SingTel’s troubled submarine cable unit, C2C. Underlying profit in the January-March period fell 3.7 per cent to S$971m due to a deferred tax charge.

Chua Sock Koong, who became chief executive on April 1, said she expected double-digit growth in underlying net profit over the next five years. The company said strong demand in emerging markets, such as India and Indonesia, would counter slow growth in Singapore and Australia.

SingTel this week reported that affiliates Bharti in India and Telkomsel in Indonesia had the strongest subscriber growth rates among overseas operations. which make up 75 per cent of total sales and 66 per cent of pre-tax earnings.

Net profits at Optus, SingTel's largest subsidiary and Australia's number two mobile operator, rose 11 per cent in the fourth quarter to A$155m from a year ago, suggesting that its performance had stabilised in spite of stiff competition.

The pay-out of S$3.3bn was less than the S$4bn that SingTel returned to shareholders last year in its biggest dividend payment.

In the absence of big investments for foreign acquisitions, SingTel has adopted an aggressive dividend policy to improve investor sentiment.

"We are balancing our objective for an efficient balance sheet with financial flexibility to make further investments", Ms Chua said. The dividend payments also benefit Temasek Holdings, the Singapore state investment company that is SingTel's largest shareholder, as it seeks to raise funds for its overseas expansion.

But SingTel could increase capital spending over the next few years as it seeks to invest in mobile operators in the Middle East and central Asia.

Analysts remain concerned about the future performance of Optus in spite of its recent improvement.

In addition, SingTel's investment in Thailand's Advanced Info System has suffered from recent political turmoil triggered by Temasek's takeover of the group last year.

Ms Chua warned that earnings from its Singapore operations, the main source of SingTel's strong cashflow, could suffer over the next year due to accounting changes, pressure on its fixed-line businessand new investments.

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