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* Potential targets in Bangladesh, Sri Lanka, Indonesia
* Bought Cambodia telco rival for $155 mln last month
* Has $2.8 bln cashpile, but cooling on Vietnam
* Will again spend big in Indonesia
By Yantoultra Ngui and Stuart Grudgings
KUALA LUMPUR, Jan 9 (Reuters) - Malaysia's Axiata Group Bhd , Asia's third-largest mobile services group outside Japan and China by subscribers, is eyeing deals in Bangladesh, Indonesia and Sri Lanka, but reckons getting into Myanmar will be "very tough", CEO Jamaludin Ibrahim said in an interview.
Axiata, valued at close to $19 billion and with a cash pile of $2.8 billion, is expanding in the fast-growing Asian telecoms sector as Jamaludin nips at the heels of Southeast Asian market leader Singapore Telecommunications Ltd and India's Bharti Airtel Ltd.
Its expansion comes at a time of surging demand for smartphones as Asian consumers' spending power grows and relatively untapped economies such as Myanmar and Laos open up for business. Consumers in the seven major Southeast Asian countries spent nearly $14 billion on mobile phones in the year to September, according to market research firm GfK Asia. Smartphone sales surged 78 percent.
Axiata, which already has more than 200 million subscribers, agreed last month to pay around $155 million for Cambodia's Latelz Co Ltd, creating the country's No.2 mobile firm with 5 million subscribers.
"That's a good reflection of what we intend to do," Jamaludin told Reuters at Axiata's headquarters in Kuala Lumpur late on Tuesday. "It can be a small company, it can be a relatively large company. Generally what we would like to do is consolidation."
Bangladesh, Sri Lanka, and Indonesia - where Axiata spent more than half its record 5.4 billion ringgit ($1.8 billion) capital expenditure last year - were the most likely candidates for similar deals, Jamaludin said.
"That's the inorganic expansion. Of course, there are opportunities for new countries but in reality there's very few left," said the 53-year-old, who started his career as a lecturer in quantitative methods at California State University. He joined Axiata in 2008 from Malaysian telco Maxis Bhd .
Axiata - whose biggest shareholder is Malaysia's investment arm Khazanah Nasional Bhd - hopes to enter Myanmar, whose political opening has brought into play a new market of around 60 million people with the world's second-lowest cellphone penetration after North Korea.
But the lure of tapping one of Asia's last frontier markets has attracted a host of potential bidders, including Digicel and Norway's Telenor, for the two telecoms licenses Myanmar plans to offer to foreign operators. Five or six of the bidders were "really aggressive," Jamaludin said.
"It's going to be a tough one, a very tough one."
In contrast, Jamaludin said Axiata had little interest in entering Vietnam, which he said was an "anti-climax" after widespread excitement over its potential a few years ago. "They have a high level of penetration, so the attractiveness has gone down dramatically," he said.
Listed in 2008, Axiata shares last week hit a life high of 6.87 ringgit, and rose 28 percent last year, almost treble the increase in the broader Bursa Malaysia index. SingTel shares rose less than 8 percent.
Born from the 2008 demerger of TM International and Telekom Malaysia Bhd, Axiata already has controlling interests in operations in Indonesia through XL Axiata, Sri Lanka's Dialog Axiata and Bangladesh's Robi Axiata, as well as its Cambodian business. It has minority interests in Singapore's M1, India's Idea Cellular, Pakistan's Multinet and Thailand's Samart i-Mobile.
Jamaludin said there was increasing competition between cellphone firms in Indonesia, where robust growth is propelling millions of people into a bulging new middle class. Axiata doubled its spending on Indonesia last year and would invest another "big sum" this year, he said.
"Everybody can see it's a big opportunity and this is the time to go for it. Smaller players have also decided to up the ante, whereas in a lot of the other countries the smaller players are getting more quiet," he said.
Jamaludin said Axiata had no plans to copy SingTel, which has embarked on a drive to acquire high-tech firms to transform itself into a multimedia and information technology leader. The company bought Israeli mobile advertising solutions firm Amobee Inc last year for $321 million.
"We decided we do (it) more cautiously," Jamaludin said. "We want to do something which is more incremental and adding value to existing business, leveraging on our customer base, leveraging on our network, our brand and so forth rather than building a new one."
Axiata trades at almost 19 times its projected earnings, well above SingTel's 13.9 times and the average Asia Pacific sector multiple of 12.6 times. Of 29 analysts tracking Axiata, 19 rate it a 'buy' or 'strong buy', with a single 'underperform' rating.
Cash flow from operations was at 2.67 billion ringgit at end-September, more than three times net income of 710 million ringgit.
$ = 3 Malaysian ringgit Additional reporting by Al-Zaquan Amer Hamzah in Kuala Lumpur and Patturaja Murugaboopathy in Bangalore; Editing by Ian Geoghegan