The ratings on Telecom Corp. of New Zealand Ltd. (TCNZ) primarily reflect our opinion of the group's strong market position as the incumbent provider of full-line telecommunications services in New Zealand. Also underpinning the ratings is TCNZ's strong underlying cash-flow generation and commitment to maintaining a conservative financial profile. These strengths are partly offset by the operational, technological, financial, and competitive challenges posed by the group's transformation program; the regulatory-enforced operational separation of its network and services businesses; longer term uncertainties surrounding fixed-line network ownership and returns; and the challenging macroeconomic environment. In our view, operational separation will continue to heighten competitive pressures for TCNZ in the next few years. Although this will likely precipitate some deterioration in market shares
