(Adds mayor's comments, number of injured rises)

By Manny Mogato

MANILA, May 18 (Reuters) - A bomb killed three people and wounded 35 when it tore through a canteen inside a crowded bus terminal in the southern Philippines on Friday, security officials said.

Paniares Adap, police chief in Cotabato City, said fragments of an improvised explosive device were recovered at the blast site, where a five-year-old boy was killed on the spot. Two others died on the way to hospital.

Thirty five people, including four children, were being treated for burns and shrapnel wounds.

"We're still trying to establish the motive for the blast, but we can't discount the possibility of a terrorist attack," Adap told reporters, adding most of the victims were eating when the crude bomb went off.

Adap said there had been threats of militant attacks in Cotabato City, the political and economic hub of the Philippines' Muslim south, since last month when two people were killed when the bomb they were carrying exploded prematurely in a residential area.

Muslim militants have been fighting for decades for independence from the Philippines' largely Catholic central government.

But Muslimen Sema, Cotabato City mayor and a former Muslim rebel leader, said the bus company had been receiving threats from a group of bandits demanding "protection money".

"This could be a simple case of extortion," Sema said.

Manila has truces with two of the largest Muslim rebel groups but has vowed to destroy Abu Sayyaf, the country's deadliest militant group which has links to regional terrorist organisation Jemaah Islamiah.

Last week, eight people were killed when a bomb ripped through a billiard hall in Tacurong City in nearby Sultan Kudarat province in an attack blamed on Abu Sayyaf.

AlertNet news is provided by