Profit for the six months ended September likely rose to S$1.13 billion (US$650 million) from S$966.2 million a year ago, based on the average estimate of four analysts polled by Bloomberg News. The estimates ranged from S$1.02 billion to S$1.2 billion. The results are expected after 5pm tomorrow.
The likely gain reverses a profit decline a year ago--the company's first since it went public in 1993--as it cut rates on international calls ahead of competition this April. Lower rates were probably offset in the first half by greater demand for newer non-voice services, analysts said.
"Big growth areas are data and public networks," said Peter Milliken, an analyst at Lehman Brothers Asia in Hong Kong.
The services, which include phone lines for companies and homes used solely for data transmission instead of voice traffic, as well as Internet services, could make up for almost a fifth of sales, trailing international calls as the biggest revenue contributor.
Competition
Analysts also said competition hasn't been felt yet since the market opened in April, as newer players from Telstra Corp, Australia's biggest phone company, to WorldCom Inc, the No 2 US long distance company, are still preparing to push their services on the island.
StarHub Pte, which is partly owned by British Telecommunications Plc and Japan's NTT Corp, is the only major carrier to rival SingTel so far. StarHub has offered its mobile phone and international call services since April; its traditional, or fixed-phone, services are still limited to the central business district.
"Competition hasn't come through as fast as people expected," said R Anand, an analyst at Salomon Smith Barney in Singapore, who rates the stock a "neutral." "The full extent would be reflective in the third and fourth quarter."
Still, competition has its benefits. Singapore has pushed forward the opening of its phone market twice, from 2007 and again from 2002. Both changes would give the former monopoly S$2.36 billion in compensation from the Singapore government, which it will book as profit over seven years. For the first half, that works out to about S$169 million.
"One of the main reasons for the increased earnings is the compensation," said Tjandra Kartika, an analyst at GK Goh Research Pte Ltd in Singapore, who recommends an "outperform" for SingTel shares.
The Singapore government owns almost 80 percent of SingTel.
Overseas investments
The results will also reflect the performance of SingTel's overseas investments. Among its biggest ventures are an eighth of Belgacom SA, Belgium's biggest phone company, a fifth of Advanced Info Service Pcl, the No 1 mobile phone operator in Thailand, and a third of Globe Telecom Inc, Philippines' second-biggest cell phone company. SingTel has about US$3.5 billion in cash.
Overseas investments made up about 15 percent of sales. SingTel expects that to rise to a quarter in three years, offsetting growing competition back home.
In the first half, SingTel invested US$725 million in Bharti Group, India's biggest private fixed-line phone operator, and Bharti's ventures, making it the biggest investor in the country's phone market. It also plans on bidding for so-called 3G, or third-generation, cellular phone licenses in six Asian countries such as Hong Kong and Malaysia. The services will give cell phone users high-speed Internet access on their handsets.
"We have been positive on the stock because we anticipated the regional investments would continue, but the weakness that's going to occur locally would offset its gains regionally," said Lehman's Milliken, who recently downgraded the stock to an "underperform." "You're looking at a flat earnings story going forward."
SingTel's shares have fallen 21 percent this year, matching the 22 percent drop in the Singapore benchmark Straits Times Index.
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