Army Brig Gen Alan Arrojado said no one among the hundreds of military personnel was killed in the fierce two-hour gunbattle with more than 100 militants in a mountainous hinterland near Indanan town in Sulu province.
Government forces fired artillery rounds to prevent other Muslim rebels from reinforcing the Abu Sayyaf gunmen.
When the fighting eased by nightfall, five bodies of militants were sighted by troops. Intelligence reports indicated 10 other Abu Sayyaf fighters also died, Arrojado said.
The military launched the assault after the militants beheaded a kidnapped village leader last week and threatened to kill two coast guard personnel who were abducted with him in May if a ransom was not paid.
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A number of other hostages, including two Malaysians, are believed to be held by the militants in the jungles of Indanan. There were no immediate reports on the fate of the hostages following the clash.
A Dutch bird watcher kidnapped more than two years ago is believed to be held by another Abu Sayyaf faction in Sulu's Patikul town.
It is one of at least four small armed groups outside of a peace deal the government signed last year with the largest Muslim rebel group, the 11,000-strong Moro Islamic Liberation Front, in an attempt to settle a decades-long separatist insurrection by minority Muslims in the south of the largely Roman Catholic country.