The TELCO group, which at S$47 Billion ($28.1 billion) has the largest market capitalisation in Singapore, warned in June that rate cuts, price pressures and weaker regional economies might hurt prospects this fiscal year.

The group, almost 80 percent-owned by Temasek Holdings, the government's investment arm, unveils its results for the six months ended September 30, 1999 on Friday.

SingTel's nascent data and Internet businesses wereunlikely to generate enough bottomline contributions to make up for its weaker core businesses, analysts said.

Barra Global Estimates had a consensus net profit forecast of S$1.93 Billion for the fiscal year ended March 31, 2000.

Analysts Reuters contacted, expected the interim earningsto be around S$1 billion.

"Its new growth drivers - dataand Internet - are still too small to weather the fall in tariffs and revenue per subscriber," Goldman Sach's analyst Michel Sznajer said.

HSBS Securities' analyst David Leow said these new driverscannot compensate weaker earnings from international direct dial (IDD) services, from which contributions to group sales would eventually fall to 30 percent.

Last fiscal year, IDD accounted for about 38 percent ofSingTel's total revenue of S$4.88 Billion.This year alone, SingTel had cut its international callrates four Times - once in January, April and twice in October.

While recent months saw strong growth in international callminutes and mobile, revenues were unlikely to match volumes because IDD tariffs were cut sharply in January.

Undermining SingTel's operating margins even further were keener competition and new products such as pre-paid calls for mobile and budget calls for international calls.

The biggest threat was StarHub - a consortium groupingBritish Telecom, Nippon Telegraph & Telephone andSingapore Technologies Telemedia and Singapore Power.

StarHub's entry next year would erode SingTel's marketshare in both IDD and mobile, analysts said.

StarHub had said previously that it was targetting tocapture 25 percent of Singapore's international call market in the first three years of operations.SingTel's fair share value was seen around S$2.80 ToS$3.20.By 0842 GMT, SingTel was up 14 cents at S$3.20 A share.

Providing strong support was cash-rich SingTel's plans toreturn cash to shareholders through share buybacks and its strategy to position itself as a pan-Asian TELCO company.

"I think any share buyback will be around S$2.80-3.00. Thisis also a good support because of its potential acquisitions or alliances to become a key Asian telecom group," one analyst said.

REUTER