The telecommunications company said yesterday that it will exchange a 24.5 per cent stake in privately-held NCIC for a 4 per cent interest in a publicly-listed sister firm, Far EasTone Telecommunications.

The move is seen by analysts as a possible prelude to SingTel's complete exit from the highly mature and competitive Taiwanese phone market.

It could, however, serve as a foothold that will allow SingTel to further expand into Taiwan's bigger and more lucrative mobile phone services sector.

Back-of-the-envelope calculations suggest that SingTel may lose about $270 million on the investment, made seven years ago amid much fanfare.

Then hailed as a major coup, the investment in NCIC was seen as a key victory in SingTel's overseas expansion.

The $637 million investment, however, later proved to be a drag rather than a growth driver like SingTel's other foreign investments. NCIC has been in the red since it started operations in 2001.

Based on Far EasTone's closing share price on Tuesday of NT$38, SingTel's future stake in the mobile operator, which is issuing new shares, is worth about NT$6.09 billion (S$279 million).

SingTel also expects to receive NT$1.8 billion from an upcoming NCIC capital reduction exercise that will take place before the transaction is completed by the end of the year.

Taken together, these imply that SingTel will get back about $365 million from the investment.

SingTel said the actual financial impact can only be assessed when the deal is completed.

Key factors determining the final figure include the closing market price of Far EasTone and the exchange rate of the Taiwan dollar against the Singapore dollar.

Analysts added that SingTel may have made provisions for expected impairments to NCIC's value earlier.

'The transaction will allow shareholders, SingTel, Far EasTone and New Century to leverage on fixed-mobile convergence play,' said SingTel spokesman Chia Boon Chong.

Deutsche Bank analyst William Bratton said the disposal is a welcome development, as NCIC was one of SingTel's more obvious non-performing, non-core assets.

'In contrast, Far EasTone looks a more viable business, is profitable and offers a forecast 7.1 per cent dividend yield next year.'