Singapore telecom firm M1's biggest shareholders evaluating stake sales

* Key shareholders hold stakes worth over S$1.2 bln

* Singapore's telecom sector set to see increased competition (Recasts with statement from M1 shareholders; adds industry details)

SINGAPORE, March 17 (Reuters) - Singapore telecom firm M1 Ltd's three biggest shareholders, who own about 60 percent in the company, are evaluating selling their stakes, in the first recent sign of M&A activity in the local sector which is set to see increased competition.

Singapore Press Holdings Ltd (SPH), Keppel Telecommunications & Transportation Ltd and Axiata Group Berhad are undertaking a strategic review of their respective shareholdings in M1, the firms said in separate statements. The three companies did not give a reason for the move.

M1, which has a total market value of about S$2.05 billion ($1.5 billion), referred media queries to the shareholders.

The shareholders added that there was no certainty that the review would lead to a transaction.

The investors' stakes in Singapore's smallest telecom firm are worth more than S$1.2 billion. Singapore currently has three telecom operators - Singapore Telecommunications Ltd, StarHub Ltd and M1. Australia's TPG Telecom last year won the bid to enter the city-state's market.

M1's shareholders have jointly appointed Morgan Stanley Asia (Singapore) Pte as their financial adviser to assist with the strategic review.

Malaysian telecom firm Axiata Group is the biggest shareholder in M1 with a stake of just over 28 percent, Keppel Telecommunications holds around 19 percent and SPH has an about 13 percent stake, according to stock exchange data.

M1 shares rose 8 percent before trading was halted ahead of the announcements. Its shares lost nearly half their value from a 2015 peak before Friday's jump. ($1 = 1.4003 Singapore dollars) (Reporting by Anshuman Daga and Aradhana Aravindan; Editing by Muralikumar Anantharaman)