FIAT DEALERS GARAGES

* Q1 net profit 22.89 bln rupees vs 23 bln rupee estimates

* Forecast sales for FY2013 to grow 5 percent

* Pricing down 3.7 pct from previous quarter

* Rival TCS seen reporting 25 pct rise in net profit

By Harichandan Arakali and Aradhana Aravindan

BANGALORE/MUMBAI, July 12 (Reuters) - Indian IT heavyweight Infosys Ltd made a deeper-than-expected cut to its sales forecast on Thursday as global economic uncertainty took a toll on tech spending, sending its shares down 10 percent and slamming hopes for a second-half recovery.

The prevailing dim global economic climate, competition for a bigger share of the outsourcing business and sharp currency fluctuations have slowed the pace of growth for Indian outsourcing companies and in recent quarters Infosys has been underperforming key rivals.

The company, India's No.2 software services exporter, had long been considered the industry bellwether for its practice of making and usually exceeding revenue forecasts.

It said it sees revenue in dollar terms rising 5 percent to $7.34 billion in the fiscal year to March 2013, down from its April estimate of 8-10 percent growth. The company also said pricing fell sharply. Most analysts were expecting Infosys to trim its sales growth outlook to 6-8 percent.

"Infosys' guidance is bad and it will have implications for the sector as well. It clearly reflects a slowdown in Europe and in the United States and (problems with) the company's internal policies," said Paras Adenwala, a fund manager at Capital Portfolio Advisors.

Shares of Infosys, which was valued at about $25.5 billion before the market opened, fell as much as 10.2 percent to 2,219 rupees, their lowest in nearly three months, dragging the broader market index down 1.1 percent and the sector index to 5.5 percent. The 10.2 percent fall wiped out about $2.5 billion from the company's market value.

"We were expecting the guidance to be cut by 200 basis points, but it's much worse than that. Demand outlook for Infosys has worsened considerably," said Ankur Rudra, an analyst at Ambit Capital in Mumbai. "We think this is highly company-specific; expect relatively stronger results from its peers," he said.

Infosys also reported Thursday its net profit rose 33 percent to 22.89 billion rupees ($413 million) in the quarter ended June from 17.2 billion rupees a year earlier, in line with analysts' expectations.

Infosys, whose customers include Bank of America, BT Group and GlaxoSmithKline Plc, said revenue rose 28.5 percent to 96.16 billion rupees as it added 51 new clients in the quarter. It added 1,157 employees during the quarter, taking its total headcount to 151,151.

LATEST DISAPPOINTMENT

After it gave disappointing guidance during its April results announcement, Infosys came under fire from investors for what some said was an overly conservative approach that put it at a disadvantage to rivals, adding to pressure on CEO S.D. Shibulal, who took the reins last year.

Infosys also was sitting on a cash pile of $3.7 billion as of the end of June and some investors have grown restless over the company's unwillingness to make a big acquisition or return some of the cash to shareholders.

"If you look at the environment, it's still very uncertain," Shibulal told reporters on Thursday. "In the financial services industry, in which we have 34 percent dependency, there were multiple events. I think sitting here in April, we couldn't have foreseen any of the events. The pipeline continues to be OK, but the question is how fast we can close (orders)," he said.

Pricing in the quarter fell 3.7 percent from the previous quarter and the company is seeing "sporadic pricing renegotiations" and demands for discounts, Shibulal said.

Infosys and its domestic rivals, Tata Consultancy Services and Wipro, are part of the country's export-driven outsourcing sector that has benefited from an increase in demand for outsourcing to cut costs and boost efficiency.

India's $100 billion-a-year IT and back-office outsourcing sector earns about three-quarters of its revenues from customers in the United States and Europe and faces intense competition from global rivals including IBM and Accenture.

Casting further gloom over the sector, U.S. automaker General Motors, which outsources 90 percent of its IT work and does 10 percent in-house, plans to reverse that split to bring 90 percent in-house over three years, according to a July 9 story in U.S. industry publication InformationWeek. Infosys does not have significant exposure to GM.

Tata Consultancy is expected later on Thursday to post a nearly 25 percent rise in net profit for the June quarter to 29.7 billion rupees.

"With TCS also coming out today, let's see if this is a wider malaise affecting the entire industry or a deeper Infosys-specific problem," said P. Phani Sekhar, a fund manager at Angel Broking.

Under the sale, Vodafone New Zealand said it will acquire TelstraClear's fixed-line and Internet operations, which hold only 16 percent of New Zealand's broadband market but will now have the muscle to compete head-on with much larger Telecom.

The deal also cuts Telstra free from the revenue-poor asset and opens the door to a possible takeover of Telecom TEL.NZ down the line by its Australian counterpart, as the New Zealand company faces the daunting task of expanding in an already mature market.

It will give Vodafone, which competes with Telecom in New Zealand's mobile market where both hold a 40 to 50 percent share, a stronger foothold in fixed-line services with around 30 percent of the fixed-line broadband market. Telecom currently controls just over half of that market.

Vodafone will also be better able to compete with Telecom in buying access to ultra-fast broadband, which is expected to be rolled out in New Zealand by 2019.

Telstra shares rose to a 3 1/2-year high of A$3.89 after the announcement before turning lower to end down 0.3 percent. Telecom TEL.NZ shares rose 2.2 percent on Thursday, recovering from an initial dip. New Zealand's benchmark stock index .NZ50 was up 0.6 percent.

TURNAROUND CHALLENGE

Few in the market expect Vodafone's strengthened position will immediately shake Telecom's market dominance, given TelstraClear's weak position and declining revenue, which sagged 3.8 percent in the six months to December.

Vodafone, which expects regulatory approvals for the deal to be completed late this year, will also have to rein in capital expenditures, which have risen due to the costs of rebuilding TelstraClear's network infrastructure in Christchurch, one of its major hubs which was devastated by an earthquake in 2011.

But some industry experts believe Telecom may eventually struggle to compete with Vodafone's global scale and aggressive strategies, and would not rule out the possibility that cash-rich Telstra may swoop in on Telecom in the future if the New Zealand company's fortunes wane.

"Telecom would have a very, very difficult time moving forward with a strengthened Vodafone. That may further build the case for an integration of Telecom NZ and Telstra," Australia-based independent telecoms consultant Paul Budde said.

He added that combining Telstra and Telecom was sensible from a cost perspective, given the lack of room to expand in New Zealand's small yet mature market.

"It makes sense to integrate Telstra and Telecom because in the end it's about cost savings, which would be possible if the two were merged," Budde said.

Vodafone on Thursday said the TelstraClear sale included a restraint of trade clause, which would bar Telstra from re-entering the New Zealand market, although it did not say for how long.

The NZ$840 million price tag was more than double market expectations for roughly NZ$400 million, and analysts said Vodafone appeared willing to pay a premium for the benefits of TelstraClear's network assets and customer base.

Fraser McLeish, an equities analyst at RBS in Sydney, said the sale dovetailed with Telstra's strategy to generate A$2 billion to A$3 billion ($1.95-2.93 billion) of free cash over the next three years.

"This really adds to that cash that's available to return to shareholders or potentially for some acquisitions," he said, adding that Telstra had mentioned interest in picking up assets related to network applications and services.

($1 = A$0.9765, NZ$1.259)

(Editing by Paul Tait and Edmund Klamann)