Telecom shares went into free-fall yesterday as investors abandoned the company once considered a blue-chip investment and the largest listed company in New Zealand.
The shares closed at 5pm at $1.85, down 5.6%, or 11c on the day.
Craigs Investment Partners broker Chris Timms said there seemed to be a disconnection with what the company was worth and what people were feeling.
"It's a perfect storm for Telecom. It has its own uncertainty, uncertainty in Europe and now the military stand-off in Korea. It's all come together at the wrong time," he said.
The NZX-50 closed just above the bench mark 3000 points.
The rot started on Monday when Telecom chief executive Paul Reynolds announced the group was considering structural separation so it could take part in the Government's ultra-fast broadband (UFB) project.
Standard & Poor's affirmed the group's credit rating but put Telecom's long-term rating on negative from stable.
Fitch Ratings yesterday affirmed Telecom's credit rating but said if the group went ahead with structural separation a negative rating action could result.
Fitch already had a negative outlook in its A minus rating of Telecom.
Fitch said yesterday that Telecom's announcement confirmed what it was already assuming and Telecom would undertake a detailed analysis of structural separation before any decision was made.
If Telecom confirmed it had finished its analysis and had decided to move forward with separation then a negative rating action could result, Fitch said.
Telecom's chief financial officer, Russ Houlden, said the group remained committed to maintaining single A credit ratings with both Moody's and S&P.
S&P said its rating could be lowered in the next 12 to 18 months if Telecom agreed to structurally separate its copper access network from the rest of the group, the group's financial profile deteriorated, or there was a significant shift in earnings mix to lower-quality earnings sources, such as information technology services.
The prospect of structural separation came at a time when the group continued to face operating and competitive challenges in its core mobile network business, S&P said.
