Analysts expected a flat second-quarter result of NZ$211-$213 million, compared with NZ$210.8 million for the same period last year.That would translate to half-year earnings to September 30 of $NZ401-$403 million, up around one per cent on the same period last year.

Earnings per share would be around 2-4 per cent stronger than the previous Q2's, 11.6 cents, because of Telecom's now completed share buy back programme, analysts said.That had reduced the number of shares on issue to around 1.75 billion, from 1.81 billion.Earnings before interest and tax (EBIT) was also expected to be ahead, reflecting continued growth in enhanced services, balanced by increased interest costs attached to the buyback.National and international call revenues were forecast to be depressed, reflecting another round ofprice cuts in August."The revenue growth is going to be very low but cost growth is going to be slightly lower, forgetting interest," said Guy Hallwright, Head of Research at Credit Suisse First Boston.

"The actual operating result will be up a little bit on last year's result but not by much -- you're not going to see a huge change," he told Reuters.Paul Richardson, from Warburg Dillon Read, agreed that a startling increase in profits was not expected.

"The company has already signalled to the investor community that the economy has been in recession and growing profits in that kind of environment is very very tough," he told said.

He expected the second-quarter result to be a continuation of the first quarter, possibly with slightly less robust growth in enhanced services but he was looking for signals that the third and fourth quarters were going to be better.

"The market is effectively pricing a swing back up in profitability at some point through next year so that's what we're looking for at themoment is some signs of being able to pick that."

Aided by its role as the bellwether stock in a rising New Zealand share market, Telecom's share price had risen 18 per cent from a low of NZ$7.20 in September to a peak of NZ$8.50 last Thursday. It was trading at NZ$8.40 on Thursday.

Richardson noted the comments by Telecom chief executive Roderick Deane last week that outbound international calls in October were 50 per cent up on the same month a year earlier, while Internet use was climbing 15 per cent a month.

"That's what people will probably be looking at, signs of those sorts of areas tending to be strong as well as control of costs which is something they're really focusing on in this period as well."

Analysts said regulation remained a threat to Telecom, as rivals and politicians targeted Telecom's domination of local phone networks.But while claims of monopoly rents made headlines, Hallwright saw little changing.

"There's always a risk of regulation," he said, but he did not see commitmentfor change from either of the major political parties, National and Labour. "Noise and smoke rather than action."