The ratings on Telecom Corp. of New Zealand (TCNZ) reflect the company's very strong domestic market positions; the growing underlying demand for reliable telecommunications; TCNZ's strong free operating cash flow; and the company's commitment to a moderately conservative financial profile. These strengths are offset by the highly competitive markets; technology risks; and a rising domestic regulatory threat. TCNZ's first-half results to Dec. 31, 2006, confirmed that the company's profitability, cash flow, and credit-protection metrics largely held up, albeit with some modest year-on-year underlying erosion. Behind the numbers, the continued transition of the cash-flow mix continued. The results, and the company presentation, highlight the challenges ahead, as an increasing portion of TCNZ's cash flow mix is from the more competitive, and
