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+44 (0)20 7232 3090 Traded on

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Telecom Corporation of New Zealand Limited 04 July 2008

Company News Alert

Significant depreciation in common stock price

Common BUY Telecom Corporation of New Zealand Limited’s (TCNZ), common stock has significantly depreciated
Direct
since access
our last update,toprimarily
the fullduereport freeglobal
to declining of charge at
markets. However, going forward we expect
Stock Australian operations to drive top-line growth. Furthermore, we expect broadband penetration to
http://www.iirgroup.com/researchoracle/viewreport/show/20192
increase, leading to an increase in subscriber base. In light of these factors and our positive outlook
Ticker: TEL.NZ
for the company, we believe the common stock provides an attractive investment opportunity at
Target price: NZ$4.38 current levels. As a result, we upgrade our rating from a HOLD to a BUY.
Current price: NZ$3.28
Price change We will reassess the common stock rating for TCNZ in our next update report.
since last report: (20.39%)

ADR BUY We do not anticipate a change in our BUY rating for the ADR as we anticipate a positive currency
impact over the next 6-24 months. We expect to revise our investment horizon from 6-24 to 6-12
Ticker: NZT months in our next update report, as we now expect a significant currency impact in the medium term.
Target price: US$17.80
Current price: US$12.44
Price change We will reassess the ADR rating for TCNZ in the coming weeks.
since last report: (22.10%)

Supervisor: Jinesh Joshi

Analyst: Smita Uchil
Editor: Shem Pennant
Global Research Director:
Satish Betadpur, CFA
Next news due:
4Q 08 results, 07 August 2008
Investment horizon - short term actionable trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-24 months.
If this report is provided to you by your broker under the Global Settlement, you may now also access (free of
charge) the short term trading outlook that we publish from time to time for this issuer, looking at the
coming 5-30 days for readers with a shorter trading horizon. These are available on-line only at
www.researchoracle.com.

In our 2Q 08 update report, dated 20 February 2008, the fundamental valuation of TCNZ’s common
stock resulted in a target price of NZ$4.38, representing a potential 6% upside. Since then, the
common stock has depreciated significantly, closing at NZ$3.28 on 03 July 2008.

We believe the recent depreciation in the common stock price is attributable to declining global
markets. The decline in the global markets is mainly attributable to the increase in commodity prices,
especially oil. New Zealand’s Free Float Total Return Index and New Zealand’s All Ordinaries index
have declined 14.27% and 16.92% respectively since our previous update report. Nevertheless, as
detailed in our 3Q 08 update report, TCNZ’s revenues increased, driven by impressive performance
from Australian operations, partially offset by a decline in revenues from New Zealand operations.
Going forward, we expect competition to intensify due to an expected increase in regulatory pressure.
As a result, we expect margins to face downward pressure for the next two years in line with
Management’s guidance. Furthermore, we expect broadband penetration to increase, leading to an
increase in subscriber-base. As a result, we expect moderate growth in revenues. As the current price
supports a BUY rating, we are upgrading our rating for the common stock.

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