Very strong business position in the New Zealand market, providing growing free operating cash flow to support its expansion into Australia. Commitment to reduce leverage and restore its financial risk profile. Expansion into the larger, higher growth Australian market, which has similar business conditions to its domestic market. Moderate financial profile following debt financing of its Australian expansion. About 75% of its Australian cost base consists of interconnect and USO charges, causing margin squeeze in an environment of falling calling prices. Major competitors in New Zealand are owned and funded by large, well-capitalized parents. The ratings on Telecom Corp. of New Zealand Ltd. (TCNZ) reflect its moderately aggressive financial profile and increased debt usage in the past two years, and
