Analysts are forecasting a profit of NZ$190-194 million, compared to NZ$18.8 million for the same June period last year.

Growth in revenues from increasing cellular phone use and enhanced services had offset the impact of continuing price cuts in the very competitive toll market, analysts said.

``A marginal increase only'' was the forecast from Credit Suisse First Boston, Guy Hallwright

That should not come as a surprise, as Telecom chief executive Roderick Deane had been speaking for the past two quarters about the flat state of the economy and the effect on his company, Hallwright said.

Although the latest reduction in toll prices came after the quarter ended, Hallwright said earlier falls would impact.

``There's a lot of pressure on international pricing and there's probably a flow-on into national pricing.''

Telecom's share price has dived in the past few weeks.

After peaking atNZ$8.80 during July 31, a slide followed that took it to NZ$7.79 at the close on Friday.

Analysts said rising interest rates during the quarter, the flat economy and government discussion of how to increase telecommunications competition have all had an impact -- along with more recent political reactions.

For some overseas institutions, Telecom is the only New Zealand stock they hold and the increased likelihood of an early election saw them increase the risk quotient.

But the shares may have bottomed, said Paul Richardson, from Warburg Dillon Read.

``You're probably reaching support levels at the moment and people from offshore will look at it and say NZ$7.80 looks pretty attractive. ''

``By and large Telecom New Zealand is a well managed company in its sector globally and if it looks cheap relative to the rest of its sector people will buy it, especially with its yield higher than US treasuries,'' he said.