Singapore Telecommunications (STEL.SI), Southeast Asia’s largest telecoms firm, reported lower-than-expected quarterly profit, partly due to the cost of acquisitions by its Indian ally.

The company, 55% owned by Singapore state investor Temasek Holdings (TEM.UL), said earnings were hit by costs from Bharti Airtel’s (BRTI.BO) acquisition of the African telecom assets of Kuwaiti group Zain (ZAIN.KW) in June and investments in multimedia services in Singapore.

Singtel owns 32% of Bharti.

With a domestic market of just 5 million people and mobile phone penetration of over 100 percent, SingTel has bought stakes in mobile operators in high-growth Asian countries such as India and Indonesia to boost its earnings.

At home, analysts say the introduction of a next generation high-speed nationwide internet broadband network could provide more challenges for the company, especially in the corporate market.

Smaller rivals including StarHub (STAR.SI) and MobileOne (MONE.SI) are trying to take a bigger share of the corporate market.

Singtel said operating revenue in both the Singapore and Australia divisions would grow in the mid-single digit level over the full 2010-11 fiscal year, but Bharti’s acquisition costs and fluctuations in the Australian and Singapore dollar could hit earnings.

Concerns about SingTel’s profit margins have weighed on the company’s shares, which have risen by only 6% since the start of the year, underperforming the 14% rise in the benchmark Singapore index <.FTSTI>.

SingTel, the biggest company on the Singapore Exchange with a market value of US$41 billion ($52.8 billion), earned $892 million in the fiscal second quarter ended September, down from $956 million a year ago. The net profit lagged estimates by four analysts who had predicted quarterly profit of $960.5 million on average.

Revenue climbed 8.1% to $4.43 billion.

Besides Bharti, Singtel controls 100% of Optus, the second largest telecom firm in Australia, and stakes in five other mobile operators including Indonesia’s Telekomunikasi Selular and Thailand’s Advanced Info Service (ADVA.BK).