Manila - The chief of the Philippines' Armed Forces warned Monday that Muslim rebels might resort to terrorism amid an intensified military offensive against them in the southern region of Mindanao.

The military launched the offensive against two factions of the Moro Islamic Liberation Front (MILF) after the rebels attacked several towns in Mindanao last month, killing nearly 200 people and displacing more than 500,000 residents.

General Alexander Yano said the MILF rebels have splintered into smaller groups amid the military's offensive and might shift their strategy to terrorist attacks.

"We have broken them up into smaller formations," he said, "but it is not to say that we have totally or completely decimated their capability to strike because they can resort to other forms of fighting and terrorism and guerrilla actions."

Yano said the military has formed special units in response to the splintering of the MILF.

Major Armand Rico, a regional military spokesman, said an improvised bomb prematurely exploded before dawn Monday at the entrance of a public market in Isulan town in Sultan Kudarat province, 960 kilometres south of Manila.

No one was injured in the explosion on the island of Mindanao and police were investigating if the MILF was involved, Rico said.

The major added that security forces foiled a bombing in nearby Tacurong City, also in Sultan Kudarat province, after a homemade bomb was recovered near a bakery. The bomb was successfully defused.

Fighting between the MILF and the military flared up last month after the Supreme Court stopped the signing of a territorial deal between the guerrillas and the government that would have expanded an existing Muslim autonomous region in Mindanao.

Yano said punitive actions were continuing against three MILF commanders who led the attacks despite the observance of the Muslim holy month of Ramadan.

The Philippine government has already scrapped the agreement on ancestral domain in the wake of the MILF attacks and strong opposition by Catholic officials.

President Gloria Macapagal Arroyo has also dissolved the government peace panel negotiating with the MILF, saying the move would give the talks a fresh start. (dpa)