The 'A-/A-2' ratings on Telecom Corp. of New Zealand (TCNZ) reflect our opinion of the group's modest financial risk profile, significant market position as the largest provider of telecommunications products and services in New Zealand, and strong free cash flow generation. Offsetting these strengths are the intensifying competitive environment in both fixed and mobile telecommunications services in New Zealand, and the execution risks associated with delivering new products, technologies, and cost-reduction initiatives. On Nov. 30, 2011, TCNZ completed the demerger of its fixed-line access network and related infrastructure, Chorus Ltd. In our view, the high-quality access network revenues and integrated business model were key credit strengths of TCNZ, with the access network accounting for about one-third of the group's pre-demerger
