UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

21 February 2014

Telecom Corporation of New Zealand Limited (“Telecom”)

(Translation of registrant’s name into English)

New Zealand

(Jurisdiction of incorporation or organization)

Level 2

Telecom Place

167 Victoria Street West

Auckland 1010

New Zealand

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: x Form 20-F ¨ Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: ¨ Yes x No

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a

This report on Form 6-K contains the following:

Half year report

Media release

Investor presentation

KPI’s

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Telecom Corporation of New Zealand Limited

Date: 21 February 2014	By:	/s/ Silvana Roest

	Name:	Silvana Roest
	Title:	Company Secretary

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telecom nz
Telecom Corporation of New Zealand Limited
Half Year Report For the period ended 31 December 2013

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Our future success depends on winning by customers choosing us to connect them at the ‘speed of life’, in an exciting and dynamic world of rapid advances in technology.
We are increasingly becoming a fast, agile retailer, focused on winning customers. Future oriented. Competitive. Relevant to all New Zealanders. Willing to make bold moves. Changing at a pace and scale we believe is unparalleled in a large New Zealand business over the last decade.
We’re making a huge investment in New Zealand’s digital future, through our networks, products and services. There’s real momentum building – for our customers and for us.
CONTENTS
INTRODUCTION
Performance snapshot 2
Strategic priorities progress update 4
Changing our name 6
Chairman and CEO report 8
Performance review for the period 12
Financial statements 22
ARBN 050 611 277
FINANCIAL CALENDAR
Half year result announced
21 February 2014
Financial year end
30 June 2014
Full year results announced
22 August 2014
Annual shareholders meeting
7 November 2014
This report is dated 21 February 2014 and is signed on behalf of the Board of Telecom Corporation of New Zealand Limited by Mark Verbiest, Chairman, and Simon Moutter, Chief Executive.
Mark Verbiest Simon Moutter
Chairman Chief Executive

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PLAYING
TO WIN

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PERFORMANCE
SNAPSHOT
Mobile connections
1,923k
Broadband connections
661k
Retail and Gen-i access lines
980k

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OUR H1 FY14 FINANCIAL HIGHLIGHTS
Net earnings after tax NZ$
167M
Revenue* NZ$
1,847m
Dividend per share NZ$
8cps
Net Earnings* NZ$
147m
Earnings per share NZ$
9cps
* From continuing operations.
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OUR FOUR STRATEGIC PRIORITIES
REVOLUTIONISE
CUSTOMER EXPERIENCES
We aim To:
Deliver simple, effortless experiences that are demonstrably and consistently better than our competitors’ and that generate extraordinary customer advocacy
Deeply understand New Zealanders’ increasing drive to be connected and act quickly on these insights to create distinctive solutions for customers
Satisfy customer demand for greater simplicity and more digital self-service options
SIMPLIFY
THE BUSINESS
WE AIM TO:
Radically simplify current platforms, products, offers, channels and supporting processes to reduce cost and complexity and improve speed to market
Design and build new platforms, products, offers, channels and end-to-end process capabilities
Create a best practice, performance-driven, lean and agile organisation supported with the right skills, processes, risk appetite and incentives
IN THE FIRST HALF OF FY14 WE:
Significantly expanded and grew the popularity of our digital customer self-service options, including launching a new Telecom App with over 60,000 downloads
Revamped phone booths around New Zealand into a nationwide WiFi network, with over 900 hotspots and 300,000 registered users, giving people better connections when out and about and enhancing the value of mobility solutions for our business clients
Refocused Gen-i customer service models for government and large enterprise customers, driving key customer wins
Launched a new 4G mobile data network, available to all our customers at no extra charge – and underpinned by a brand-new core data network using state- of-the-art optical transport technology
IN THE FIRST HALF OF FY14 WE:
Broadened the scope, reach and impact of business improvement initiatives (Turnaround Programme)
Made more tough decisions on operating costs to ensure we provide our customers with value at competitive prices
Continued to simplify pricing and products and processes, dramatically reducing the number of our mobile and broadband plans
Continued to streamline a huge number of our internal processes, including Human Resources (HR) and remuneration
Divested training services business Auldhouse from the Gen-i portfolio as part of the shift in strategic focus
Progressed the re-engineering of our Information Technology (IT) stack, with the first phase, focused on pre-paid mobile, on track for delivery in the next few months
Achieved clarity in our Australia market strategy, selling AAPT and refocusing Gen-i Australia’s operations
4 | Telecom Half Year Report For the period ended 31 December 2013

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WIN
KEY MARKETS
WE AIM TO:
Maximise opportunities from the major shifts in industry structure resulting from Government fibre investment, industry mergers and acquisitions and continued evolution of IP applications and services
Deliver a granular and focused market strategy by creating a competitive multi-brand capability to win key future markets while optimising value of existing markets
Realign resources, sales and marketing approach to step-shift performance in key markets
Support the market strategy with leading data network capability, products and processes at the lowest cost per gigabyte
WIN THE FUTURE
WE AIM TO:
Earn new revenues and margins by investing in and winning key future markets in Cloud, network delivered services, digital services & mobile commerce
Build market leadership, brand preference and revenues through demonstrating the benefits of our technology and services to distinct customer segments
Ensure success through committed substantive resourcing and an open approach to build, buy and partner options that balance execution risk and cost with agility and speed
IN THE FIRST HALF OF FY14 WE:
Revitalised the mass-market Telecom brand with a new multi- coloured visual identity
Relaunched our network of Telecom Business Hubs for small and medium business customers
Reset our flanking value mobile brand, Skinny and trialled the Bigpipe value brand in broadband
Grew our mobile connections by 108,000 and extended our $10 a day flat rate overseas data roaming to now cover where over 96% of New Zealanders travel
Launched new generation Ultra Fibre services on the government-supported ultra-fast broadband (UFB) network, and faster VDSL broadband over the existing copper network for customers not connected to UFB
Won a multi-year contract under the Government’s Network for Learning initiative to build a fast, safe online educational platform for New Zealand schools to maximise the digital opportunities created by the UFB rollout
IN THE FIRST HALF OF FY14 WE:
Advanced the Digital Ventures growth portfolio, including making a decision to enter the internet TV market, offering New Zealanders exciting new choices about how they get their home entertainment
Continued, in partnership with Telstra and Vodafone, to progress a new trans-Tasman cable to improve New Zealand’s international connectivity
Committed $149 million to date to become the biggest player in newly available 700 MHz band radio spectrum, which will make possible the more efficient rollout of
4G mobile data services to less populated parts of New Zealand
Continued to invest in data hosting services for corporate and government customers, leveraging the FY13 acquisition of data centre and Cloud computing specialist Revera and developing more data centre capacity in Auckland, Christchurch, Dunedin and Wellington
Partnered with some of the world’s best known technology providers such as SAP and Samsung to bring a wide range of innovative new services into the New Zealand market
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CHANGING
OUR NAME
Telecom is changing like never before.
Our business has already moved well beyond the humble landline telephone. Our old traditional copper network business is now an entirely separate company, Chorus. Our future is focused on communication, entertainment and IT services delivered over our networks and the Cloud.
We’re already a vastly different company, operating in a very different environment, than we used to be. Within a short space of time, we’ll be unrecognisable from the Telecom of old.
Last year, we laid out a bold ambition for a new Telecom. We’ve backed this up with brave plays in the marketplace: 4G mobile, the OTN core data network, national WiFi, Cloud services through the Revera acquisition and new data centres, flat rate overseas data roaming, new 700 MHz spectrum, to name just a few. We’ve also taken many tough decisions to turn around our financial trajectory and ensure we can provide our customers with value at competitive prices.
We’re investing in our brands. Last year, we revitalised the mass-market Telecom brand with a new multicoloured visual identity. We relaunched our network of Business Hubs for small and medium business customers. We reset our flanking
value brand, Skinny. These moves are showing an immediate impact in increased sales and positive customer feedback.
When we embarked on this journey, we knew that at some point we would likely move beyond the Telecom name – to something that better reflects what our customers expect from us, now and into the future, as we help unleash New Zealand’s potential in a digital world.
Following the rapid success of the recent initiatives within our Retail business, we’ve decided to advance our branding strategies with another big, bold move. Later this year we intend to change our company name to Spark.
The intention is for Telecom Corporation of New Zealand Limited to become Spark New Zealand Limited. Our main mass market brand will become Spark and our Gen-i business will become Spark Digital Solutions.
We chose Spark for several reasons. It has life and energy and momentum. It builds on our 2009 rebranding, when we introduced the ‘spark’ logo, and last year’s colour and style refresh of the Retail brand. We believe it symbolises a confident, forward-looking organisation that’s all about enabling great experiences. It allows us to imbue different business units with specific meanings off the back of the Group identity.
We’ve opted for what the brand experts call a ‘branded core’. This means that our core business units will all be called Spark, but we retain the flexibility of flanking and specialist brands (such as Revera, Skinny, Bigpipe, ShowmeTV and possibly further ventures in the future) where it makes business sense to do so.
6 | Telecom Half Year Report For the period ended 31 December 2013

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BRANDING
FRAMEWORK
GROUP SPARK NEW ZEALAND LIMITED
SPARK
SPARK
DIGITAL SOLUTIONS
BUSINESS
UNITS
SPARK VENTURES
Skinny
Bigpipe
Future
Future
revera
Venture 1
Venture 2
NETWORK
SPARK NETWORK
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CHAIRMAN AND CEO’S REPORT
WINNING AMBITION
Mark Verbiest CHAIRMAN
Simon Moutter CEO
Dear Shareholders,
We have been relentlessly focused for nearly a year now on a clear long-term strategy, and we are gathering pace in our execution.
We’re committed to revolutionising the service experience for our customers, simplifying our business fast, winning over more New Zealanders and finding new ways to excel in the markets we see as our future.
This strategy supports a bold ambition: to be a growing New Zealand company, winning by customers choosing us to connect them at the ‘speed of life’.
Over the last year we have moved quickly and decisively, putting several critical foundations in place and making a number of bold market moves. Reported net profit for the half year was flat. Underlying lead indicators and revenue performance, especially in mobile, were encouraging. That said, the ongoing market decline in legacy fixed data and voice, together with the strategic choices made during FY13 to put market share outcomes ahead of short-term financial
performance, has continued to impact earnings in New Zealand.
We expect to see the positive lead indicators from the half year begin to flow more into our financial results from the second half onwards and into the 2015 financial year.
Other signs give us additional confidence. We have gained greater traction on our cost competitiveness, increasing the projected free cash flow benefits we believe will be generated by our Turnaround Programme, a centrally-driven series of business improvement initiatives. As the previous year’s price-downs in broadband and wholesale are overtaken, the effect is expected to help moderate the rate of decline in legacy fixed revenues in the second half of our financial year.
Our investments in revamping our mass market brands, Telecom and Skinny, has delivered greater cut-through and relevance in key markets. This has given us the conviction to move beyond the Telecom name and better reflect our digital services capability and future focus. Later this year, we intend to change our company name and core customer brands to Spark.
To reinforce this exciting new digital services future, we’ve also expanded the ways in which customers are provided services, particularly online. We’ve continued to make huge investments in New Zealand’s digital networks, launching 4G
8 | Telecom Half Year Report For the period ended 31 December 2013

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mobile underpinned by a brand-new core data transport network, building more data centre capability and committing to a leadership position in 700 MHz spectrum. We have sold the AAPT business in Australia to focus all our efforts on getting it right for New Zealand customers. There has also been investment in the digital services so essential to future growth. Notably, we have decided to enter the internet TV market, with a standalone and high-quality internet TV brand, ShowmeTV, to be launched later in the year. We are pleased with our progress to date. We are working hard to become a fast, agile retailer, focused on winning customers. Future oriented. Competitive. Relevant to all New Zealanders. Willing to make bold moves. There’s real momentum building – for customers and for us.
Key Financials
Net profit after tax was NZ$167 million. Total operating revenues from continuing operations declined 3.0% to NZ$1,847 million, largely attributable to a 9.2% decline in fixed line revenues. Encouragingly, strong mobile performance saw mobile revenue up 5.8%, partially offsetting the fixed revenue decline.
Operating costs for continuing operations fell 2.1% largely due to ongoing cost reduction initiatives, particularly labour costs. These initiatives were offset by cost growth associated with increased customer numbers and data volumes.
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) from continuing operations were down 5.8% while net earnings from continuing operations were down 12.5%.
Capital expenditure from continuing operations was up 18.2% to NZ$266 million, reflecting the significant investment in the first half of the year in our networks, products and services. Major capital expenditure items included; the ongoing re-engineering programme, the upgrade of the core data transport network, and mobile network investment particularly in 4G LTE.
The Directors have declared a half year dividend of 8 cents per share. Our intention is to pay a minimum dividend of 16.0 cents per share for the full year.
We have an aspiration to sustainably increase ordinary dividends over time as the projected improved cash flow performance materialises.
HY14 Key Operational Overview
Gen-i has continued to leverage its leadership position in data, mobility and Cloud services to help business and government clients unleash their full potential in a digital world. During the first half year we announced plans to build new Greenfield data centres in Auckland and Wellington and completed the build of our new Christchurch data centre, further strengthening our data hosting and Cloud capabilities following the acquisition of Revera last year.
New partnerships have been formed with the likes of SAP and Samsung to bring innovative new business services into the market. Major change programmes have been initiated to reduce costs and improve delivery performance.
Gen-i also won a multi-year contract with the Government’s Network for Learning initiative to build a fast and safe online educational platform for New Zealand schools to maximise the digital learning opportunities created by the ultra-fast broadband (UFB) rollout.
Our Telecom Retail unit made a number of bold moves during the six months that are making a difference, particularly in mobile. Mobile connections for the total Group were up over 108,000 for the period and mobile revenues for Retail were up 9%.
Last year we revitalised the mass-market Telecom brand with a new visual identity and relaunched our network of Business Hubs for small and medium business customers. These moves are showing an immediate impact in increased sales, foot traffic and positive customer feedback.
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CHAIRMAN AND CEO’S REPORT CONTINUED
We also significantly expanded and grew the popularity of digital customer self-service options, including the launching of a new Telecom App that has already attracted over 60,000 downloads, and a significant growth in customer take-up of My Telecom and e-billing options. We extended Ultra Fibre services on the Government-supported UFB networks and launched faster Ultra VDSL broadband over the copper network for customers not connected to UFB.
Telecom Connect has continued to build on our network leadership, launching 4G LTE mobile in November 2013, underpinned by a brand-new nationwide high-speed core data network using state-of-the-art optical transport technology. We also committed a further $149 million in four lots (2 x 20 MHz) to become the biggest player in newly available 700 MHz band radio spectrum. This will make possible faster and better 4G coverage for less populated parts of New Zealand. This asset has not yet been paid for as the auction process is still under way. The Commerce Commission is deciding on whether or not the purchase of the 4th lot can proceed, which will be followed by an auction round to determine the allocation of positions in the band.
An ongoing programme to re-engineer the business IT stack has also progressed well, with the first release of IT improvements on target for the second half of this financial year. This first release, focused on pre-paid mobile, will deliver significant system capability enhancements and improve customer experience, especially across digital channels. Telecom Digital Ventures, the innovation focused business unit, continued to develop and advance its portfolio of growth oriented initiatives.
Later this year, we will launch ShowmeTV, our new internet TV business. The migration of entertainment to the internet is creating significant disruption to current broadcast TV business models and real opportunities for new online businesses. The rapid growth of better broadband
via fibre and VDSL means watching TV via streaming over the internet is now a much more viable option for many New Zealanders. We believe the time is right to enter this market and provide New Zealanders with exciting new choices when it comes to watching video entertainment.
Our nationwide WiFi network, primarily using revamped phone booths, now has over 900 hotspots and 300,000 registered users, giving people better connections when out and about and enhancing the value of mobility solutions for our business clients.
Skinny, our value mobile brand, has achieved strong growth since a brand refresh during the first half. A similar flanking brand for the broadband market, Bigpipe, was successfully trialled in December 2013 and was soft-launched in February 2014.
Outlook
Our first half results demonstrate a pace and level of change we believe is unparalleled in a large New Zealand business over the last decade. We don’t intend to slow down. We will continue to address our cost base and strengthen our organisational performance. We will focus even harder on becoming more relevant to customers and to modern New Zealand, particularly as we transition to Spark.
We anticipate an improved financial performance in the second half of this financial year, with broadband revenues beginning to stabilise, mobile growth continuing and our Turnaround Programme delivering tangible free cash flow improvements. As a result we expect adjusted EBITDA from continuing operations for the full year to be in the range of NZ$925 million to $945 million, excluding the AAPT sale proceeds and rebranding costs.
With a lot of the essential network investment for the strategic repositioning of the business already made or committed, capital expenditure from continuing operations for the full year is expected
10 | Telecom Half Year Report For the period ended 31 December 2013

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to be NZ$450 million to NZ$460 million, excluding spectrum, with the capex envelope tightening further in the FY15 to FY17 period.
There is a lot more hard work to come. We’ve got plenty to do to complete our strategic shift and stretch our leadership in data connectivity as well as regain the top spot in the mobile market. And all the while, customer needs will continue to evolve as digital life becomes a reality.
But we are convinced we are on the right pathway. We’re committed to this course and to playing a major role in New Zealand’s digital future.
Mark Verbiest
CHAIRMAN
Simon Moutter
CEO
21 February 2014
Directors
Directors who held office during the half year and until the date of the report were:
Mark Verbiest - Chairman since
December 2011
Simon Moutter - Chief Executive and
Executive Director since
August 2012
Paul Berriman - a Director since
December 2011
Murray Horn - a Director since
July 2007
Maury Leyland - a Director since
December 2011
Kevin Roberts - a Director since
August 2008
Charles Sitch - a Director since
December 2011
Justine Smyth - a Director since
December 2011
Auditor’s independence declaration
The independence declaration of our auditors is on page 41 and forms part of this report.
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PERFORMANCE REVIEW FOR THE PERIOD
Financial Overview
Operations held for sale
On 9 December 2013 Telecom announced that it had entered into a binding agreement to sell AAPT for A$450 million to TPG Telecom Limited, with the transaction anticipated to be completed in late February 2014. In accordance with NZ IFRS 5, Non-current assets held for sale and discontinued operations, AAPT has been classified as a discontinued operation held for sale. As such, Telecom’s income statement is presented from continuing operations, with the net earnings from AAPT disclosed separately as earnings from discontinued operations. The assets and liabilities of AAPT have been presented separately from Telecom’s other assets and liabilities in the statement of financial position.
Additionally, Telecom is in active discussions for the sale of its 60% shareholding in Telecom Cook Islands. A sale was considered highly probable at 31 December 2013 and accordingly, the assets and liabilities of Telecom Cook Islands are classified separately as held for sale on the statement of financial position. As Telecom Cook Islands is not classified as a major line of business or major geographical area, it has not been classified as a discontinued operation in the income statement for the six months ended
31 December 2013.
Statutory results


SIX MONTHS ENDED 31 DECEMBER 2013 2012 Change
$M $M %
Operating revenue and other gains - continuing operations 1,847 1,905 (3.0)
EBITDA - continuing operations 452 480 (5.8)
Depreciation and amortisation expense - continuing operations 227 228 (0.4)
Net finance expense - continuing operations 17 22 (22.7)
Earnings before tax - continuing operations 208 230 (9.6)
Taxation expense - continuing operations 61 62 (1.6)
Net earnings - continuing operations 147 168 (12.5)
Earnings from discontinued operations, net of tax 20 (5) NM1
Total net earnings 167 163 2.5
Diluted EPS (cents) 9 9 -

1 NM means Not Meaningful.
12 | Telecom Half Year Report For the period ended 31 December 2013

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Group income statement
A break down of the Group’s reported income statement for the six months ended 31 December 2013 and the prior comparative period is provided in the table below.


SIX MONTHS ENDED 31 DECEMBER 2013 2012 Change
$M $M %
Operating revenues and other gains - continuing operations
Fixed 969 1,067 (9.2)
Mobile 492 465 5.8
IT services 276 269 2.6
Other operating revenue 102 88 15.9
Other gains 8 16 (50.0)
1,847 1,905 (3.0)
Operating expenses - continuing operations
Labour 266 321 (17.1)
Intercarrier costs 342 362 (5.5)
Other operating expenses 787 742 6.1
1,395 1,425 (2.1)
EBITDA - continuing operations 452 480 (5.8)
Depreciation 129 130 (0.8)
Amortisation 98 98 -
Earnings before interest and tax - continuing operations 225 252 (10.7)
Net finance expense 17 22 (22.7)
Earnings before tax - continuing operations 208 230 (9.6)
Income tax expense 61 62 (1.6)
Net earnings from continuing operations 147 168 (12.5)
Earnings from discontinued operations, net of tax 20 (5) NM1
Net profit after tax 167 163 2.5

1 NM means Not Meaningful.
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PERFORMANCE REVIEW FOR THE PERIOD
Overview
Operating revenue and other gains for Telecom’s continuing operations reduced by $58 million, or 3.0%, to $1,847 million in H1 FY14 when compared with the prior period.
- Fixed revenue decreased by $98 million, or
9.2%, in H1 FY14 driven by a continuation of trends of declining access lines, lower calling revenue and the impact of Telecom’s earlier decision to hold share in broadband.
- Mobile revenue increased by $27 million, or 5.8%, in H1 FY14 with 108,000 new customers added during the period. The popularity of smartphones and our new open plans have contributed to the growth in mobile device sales.
- IT services revenue increased by $7 million, or 2.6%, in H1 FY14 following the acquisition of Revera in H2 FY13, partially offset by the divestments of the Davanti (H2 FY13) and Auldhouse (H1 FY14) businesses. Underlying IT services revenue was stable with growth in enterprise professional services and networked information and communications technology (ICT).
- Other gains of $8 million in H1 FY14 comprised $5 million insurance recoveries relating to the Canterbury earthquakes and $3 million of other gains on sale. In H1 FY13 other gains comprised $10 million insurance recoveries relating to the Canterbury earthquakes and a $6 million gain from winding up a foreign operation.
The decline in operating revenues from continuing operations was partially offset by reductions in operating expenses, which fell by $30 million, or 2.1%, to $1,395 million in H1 FY14. The key drivers of the lower costs were reduced
labour costs resulting from restructuring activity, a reduction in intercarrier costs due to reduced access lines, an improvement in the consumption of services from Chorus and a continued strong cost-reduction focus across other operating cost areas. The cost reductions were partly offset by an increase in mobile acquisition costs and broadband costs associated with our growing customer base and higher backhaul costs, timing of spend on advertising, upfront costs associated with the cost-reduction programmes and a provision against a lease receivable.
The H1 FY14 depreciation and amortisation charges from continuing operations were stable compared with H1 FY13. Increased depreciation due to the acquisition of Revera in H2 FY13 and the completion of a number of large capital programmes in H1 FY14, offset the net effect of reduced charges resulting from significant reductions in capital expenditure in the previous two years.
The net finance expense in H1 FY14 of $17 million was $5 million lower, or 22.7%, than in H1 FY13 primarily due to maturing debt being replaced by debt at lower interest rates.
The H1 FY14 tax expense of $61 million was stable compared with H1 FY13, with lower tax associated with a reduction in earnings from continuing operations being offset by an increase in non-deductible expenditure and the impact of prior period tax adjustments.
Net earnings from discontinued operations held for sale represents the net earnings from AAPT. In H1 FY14 this increased by $25 million in comparison to H1 FY13, driven by higher margin revenue growth, cost of sales improvements and reductions in labour and property costs.
14 | Telecom Half Year Report For the period ended 31 December 2013

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Adjusting items and results
For FY14 Telecom has altered its approach to reporting adjusting items in its financial results, removing non-recurring or unusual items greater than $25 million from adjusted earnings to ensure only material items are excluded.
During H1 FY14 and H1 FY13, there were no adjusting items and as such no separate disclosure is required for the half year reporting.
Segmental results
Telecom’s continuing operations business units comprise Retail, Gen-i, and Connect. The Connect business unit is a new business unit comprising what was previously reported as Wholesale & International and Technology and Shared Services. In addition to these operating segments, the results of which are reported to Telecom’s CEO, there is also a Corporate Centre.
Telecom has reclassified its comparative segment results to reflect the reorganisation of the business units described above. In addition, reclassifications have been made to take into account customer transfers from Retail to Gen-i, mobile cell site maintenance costs from Retail and Gen-i to Connect and minor transfers to reflect the decentralisation of certain corporate functions to the business units.
An analysis of Telecom’s adjusted results by business unit is set out below, with further details available in a separate Key Performance Indicator (KPI) file on the investor section of Telecom’s website.


SIX MONTHS ENDED 31 DECEMBER 2013 2012 Change
NZ$M NZ$M %
Operating revenue and other gains from continuing operations
Retail 901 904 (0.3)
Gen-i 643 663 (3.0)
Connect 294 339 (13.3)
Corporate 67 53 26.4
Eliminations (58) (54) (7.4)
Operating revenue and other gains from 1,847 1,905 (3.0)
continuing operations
EBITDA from continuing operations
Retail 328 348 (5.8)
Gen-i 193 202 (4.5)
Connect (64) (67) 4.5
Corporate (5) (3) (66.7)
EBITDA from continuing operations 452 480 (5.8)

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PERFORMANCE REVIEW FOR THE PERIOD
Key revenue trends
Operating revenue and other gains from continuing operations declined by 3.0% to $1,847 million in H1 FY14 when compared with H1 FY13. The explanation of the decline is as described in the Group commentary, with further detail of trends by business unit as follows:
Retail’s revenues decreased by $3 million, or 0.3%, to $901 million for H1 FY14 due to declines in fixed calling and broadband revenues offset by growth in mobile revenue. Fixed voice revenues declined $24 million driven by a continuation of trends of lower calling revenue. Broadband revenues decreased by $8 million when compared with H1 FY13 due to the impact of rebased broadband pricing. Offsetting the underlying decline were revenues associated with the growth of 28,000 broadband connections. Mobile revenues increased by $32 million due to the growth in the customer base and the popularity of our new open plans contributing to the growth in mobile device sales.
Gen-i revenues decreased by $20 million, or 3.0%, to $643 million for H1 FY14 due to decline in fixed voice and data products, offset by growth in networked ICT and enterprise professional services. Within this result the acquisition of Revera during H2 FY13 added revenue of $26 million this year, while the divestment of Auldhouse in H1 FY14 and Davanti during H2 FY13 resulted in a reduction of $11 million for the current period.
Connect’s revenue decreased by $45 million, or 13.3%, to $294 million in H1 FY14 due to declines in wholesale fixed access and calling revenues resulting from the rebasing of the wholesale pricing and continued downward trend in calling minutes.
Corporate revenue increased by $14 million in H1 FY14 primarily due to Southern Cross dividend income of $43 million being $24 million higher than in H1 FY13, offset by lower insurance recoveries from the Canterbury earthquakes.
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Key EBITDA trends
Adjusted EBITDA from continuing operations decreased by 5.8% to $452 million in H1 FY14. Key movements by business unit are as follows:
Retail EBITDA decreased by $20 million, or 5.8%, to $328 million for H1 FY14 as cost reductions and mobile margin improvements were more than offset by fixed revenue declines. Labour costs reduced by a further $5 million through operational efficiency programmes. These cost reductions were partially offset by increased mobile and broadband cost of sales due to customer growth in H1 FY14, higher mobile device sales and investment in the brand refresh.
Gen-i EBITDA decreased by $9 million, or 4.5%, to $193 million for H1 FY14 driven mainly by a decline in high-margin telecommunications products and partially offset by continued growth in IT services EBITDA. The divestments of Davanti and Auldhouse and the acquisition of Revera created a net $2 million EBITDA upside for H1 FY14 compared with H1 FY13.
Connect EBITDA improved by $3 million, or 4.5%, to a $64 million loss in H1 FY14. Reduced wholesale revenues were more than offset by a decrease in expenses, driven by a combination of lower labour costs and accommodation and an improvement in services consumed by Chorus.
Corporate EBITDA was relatively stable in H1 FY14 compared with H1 FY13 driven by higher revenues, principally due to increased Southern Cross dividends and lower labour costs due to reduced staff levels, substantially offset by centralised costs associated with the group-wide cost-out programme and a provision taken against a lease receivable.
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PERFORMANCE REVIEW FOR THE PERIOD
Capital expenditure
SIX MONTHS ENDED 31 DECEMBER 2013 $M 2012 $M Change %
Operating capital expenditure:
Southern Cross 10 11 (9.1)
Regulatory 1 2 (50.0)
Other 100 107 (6.5)
Total operating capital expenditure 111 120 (7.5)
Total relating to continuing operations 266 225 18.2
AAPT 27 21 28.6
Total capital expenditure 293 246 19.1
Major programmes:
OTN & Carrier Ethernet 22 14 57.1
Re-engineering 44 8 NM
Mobile network 89 29 206.9
Mobile spectrum - 54 NM
Total major programmes 155 105 47.6
Total capital expenditure for H1 FY14 of $293 million was $47 million, or 19.1%, more than in H1 FY13 and capital expenditure from continuing operations was $41 million, or 18.2%, higher than H1 FY13. This was primarily due to the momentum of key multi-year programmes, in particular Re-engineering, Optical Transport Network (OTN) and Carrier Ethernet and Mobile 4G Long Term Evolution (LTE).
Major programmes
The Re-engineering work programme continued with an investment of $44 million in H1 FY14, $36 million more than in H1 FY13. This three-year programme will deliver a sustainable step-change in the simplification of Telecom’s business operating model.
FY14 is the second year of investment for the OTN and Carrier Ethernet programme, with an increase of $8 million to $22 million in H1 FY14.
Mobile network investment in H1 FY14 of $89 million was $60 million more than in H1 FY13, driven by investment in 4G LTE readiness, license renewals and significant equipment purchases.
Capital expenditure for the 700 MHz spectrum recently purchased at auction will be recognised in H2 FY14. The $54 million invested in H1 FY13 was for the renewal of the 850 MHz cellular spectrum.
Operating capital expenditure
Capital expenditure on Southern Cross capacity was at a similar level in H1 FY14 to H1 FY13.
Other operating capital expenditure decreased from $107 million in H1 FY13 to $100 million in H1 FY14. The reduction in spend results from a combination of lower spend in Gen-i Australia, the Retail NGT programme coming to a close and Canterbury earthquake recovery costs in H1 FY13. These decreases were partially offset by additional spend for Revera and a number of significant IT license purchases and upgrades.
Discontinued operations
AAPT investment of $27 million in H1 FY14 was $6 million higher than it was in H1 FY13 due mainly to higher spend on customer-related capital expenditure.
18 | Telecom Half Year Report For the period ended 31 December 2013

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Group cash flow
SIX MONTHS ENDED 31 DECEMBER 2013 $M 2012 $M Change %
Cash flows from operating activities 202 424 (52.4)
Cash flows from investing activities (277) (174) (59.2)
Cash flows from financing activities 116 (121) 195.9
Foreign exchange movement (4) (3) (33.3)
Net movement in cash 37 126 (70.6)
Cash flows from operating activities
Net cash from operating activities decreased in H1 FY14 by $222 million to $202 million when compared with H1 FY13. Major drivers of this were lower operating revenues reducing cash received from customers and higher payments to suppliers mainly due to one additional month’s payment of $76 million falling into H1 FY14 that related to H2 FY13 and the payment of $25 million for Telecom’s share of the Telecommunications Development Levy relating to FY12. Additionally, tax payments increased by $45 million with the tax paid in H1 FY13 reduced by refunds that dated back to FY11. These were partially offset by increased dividend receipts of $38 million from Southern Cross.
Cash flows from investing activities
The net cash outflow on investing activities of $277 million in H1 FY14 was $103 million higher than the $174 million outflow in H1 FY13, largely due to a $98 million increase in capital expenditure payments in H1 FY14 due to Telecom’s investment in its major capital programmes: OTN and Carrier Ethernet, Re-engineering and its 4G LTE mobile network.
Cash flows from financing activities
Telecom’s cash flows from financing activities reflect borrowing activities and dividend payments to shareholders. The net cash inflow for financing activities in H1 FY14 was $116 million, compared with a cash outflow of $121 million in H1 FY13. H1 FY14 includes an increase in bank debt and short-term commercial paper partially offset by the payment of dividends. H1 FY13 included the payment of dividends and the share buyback, partially offset by the issue of new term debt.
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PERFORMANCE REVIEW FOR THE PERIOD
Long-term capital management and dividend policy
Long-term capital management
Telecom’s principal sources of liquidity are operating cash flows and external borrowing from established debt programmes and bank facilities. The Telecom Board continues to be committed to Telecom maintaining an ‘A band’ credit rating, and its capital management policies are designed to ensure this objective is met. To that end, Telecom intends to manage its debt levels to ensure that the ratio of net interest-bearing debt (inclusive of associated derivatives) to EBITDA does not materially exceed 1.0 times on a long-run basis, which for credit ratings agency purposes equates approximately to debt to EBITDA of 1.5 times. The difference between these two ratios is primarily due to the rating agencies adjusting for items such as cash in the business and the capitalisation of operating leases.
As at 31 December 2013 Telecom had been assigned a credit rating of A-/Stable by Standard & Poor’s and A3/Stable by Moody’s Investors Service.
FY14 ordinary dividends
Telecom’s intention in FY14 is to pay a minimum dividend of 16.0 cents per share. Accordingly, a dividend of 8.0 cents per share has been declared for H1 FY14. This dividend will be partially imputed at the rate of 2.3333 imputation credits per share (which equates to 75% imputation based on the current corporate tax rate). A supplementary dividend of 1.0588 cents per share will be paid to non-resident shareholders.
First half ordinary dividends
Ordinary shares 8.0 cents
American Depositary Shares1 32.82 US cents
‘Ex’ dividend dates
New Zealand Stock Exchange 19 Mar 2014
Australian Securities Exchange 17 Mar 2014
American Depositary Shares 18 Mar 2014
Record dates
New Zealand Stock Exchange 21 Mar 2014
and Australian Securities
Exchange
American Depositary Shares 20 Mar 2014
Payment dates
New Zealand, Australia 11 Apr 2014
American Depositary Shares 18 Apr 2014
1 Based on an exchange rate at 31 December 2013 of NZ$1.00 to US$0.8206 and a ratio of five ordinary shares per one American Depositary Share. The actual exchange rate used for conversion is determined in the week prior to payment when the Bank of New York performs the physical currency conversion.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan has been retained. For the H1 FY14 dividend, shares issued under the Dividend Reinvestment Plan will be issued at the prevailing market price applied to ordinary shares. The last date for shareholders to elect to participate in the Dividend Reinvestment Plan for the H1 FY14 dividend is 21 March 2014.
20 | Telecom Half Year Report For the period ended 31 December 2013

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FINANCIAL
STATEMENTS
Condensed consolidated interim financial statements 22
Notes to the condensed consolidated interim financial statements 28
Auditors’ review report 40
Auditor’s Independence Declaration 41

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FINANCIAL STATEMENTS
Condensed consolidated interim income statement
For the six months ended 31 December 2013
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) NOTES 2013 UNAUDITED NZ$ 2012 UNAUDITED NZ$ 2013 AUDITED NZ$
Operating revenues and other gains - continuing operations
Fixed 969 1,067 2,067
Mobile 492 465 921
IT services 276 269 530
Other operating revenue 3 102 88 189
Other gains 4 8 16 28
1,847 1,905 3,735
Operating expenses - continuing operations
Labour (266) (321) (577)
Intercarrier costs (342) (362) (704)
Other operating expenses 5 (787) (742) (1,458)
Other expenses 4 - - (84)
Asset impairments 4 - - (38)
Depreciation (129) (130) (260)
Amortisation (98) (98) (199)
(1,622) (1,653) (3,320)
Finance income 15 15 32
Finance expense (32) (37) (74)
Net earnings before income tax - continuing 208 230 373
operations
Income tax expense (61) (62) (103)
Net earnings from continuing operations 147 168 270
Net earnings from discontinued operation held for sale 8 20 (5) (32)
Net earnings for the period 167 163 238
Net earnings attributable to equity holders of the 166 162 236
Company
Net earnings attributable to non-controlling interest 1 1 2
167 163 238
Basic and diluted net earnings per share (in cents) 9 9 13
Basic and diluted earnings per share from continuing 8 9 14
operations (in cents)
Basic and diluted earnings per share from discontinued 1 - (1)
operations (in cents)
Weighted average number of ordinary shares 1,820 1,851 1,845
outstanding (in millions)
See accompanying notes to the financial statements.
22 | Telecom Half Year Report For the period ended 31 December 2013

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Condensed consolidated statement of comprehensive income
For the six months ended 31 December 2013
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$
Net earnings for the period 167 163 238
Other comprehensive income/(loss)1:
Items that will not be reclassified to profit or loss:
Revaluation of long-term investments2 51 (1) 22
Items that may be reclassified to profit or loss:
Translation of foreign operations (30) (7) (26)
Reclassified to income statement on disposal of foreign operation - (6) (6)
Cash flow hedges 4 2 6
Other comprehensive income/(loss) for the period 25 (12) (4)
Total comprehensive income for the period 192 151 234
Attributable to equity holders of the Company 191 150 232
Attributable to non-controlling interest 1 1 2
Total comprehensive income for the period 192 151 234
1 Components of other comprehensive income are shown net of tax.
2 Revaluation of long-term investments relates to changes in the share price of Telecom’s investment in Hutchison Telecommunications Australia Limited (Hutchison).
See accompanying notes to the financial statements.
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FINANCIAL STATEMENTS
Condensed consolidated statement of changes in equity
For the six months ended 31 December
SHARE CAPITAL RETAINED EARNINGS HEDGE RESERVE SHARE BASED DEFERRED COMPENSATION RESERVE REVALUATION RESERVE FOREIGN CURRENCY TRANSLATION RESERVE TOTAL EQUITY HOLDERS OF THE COMPANY NON-CONTROLLING INTEREST TOTAL EQUITY
UNAUDITED OF
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ NZ$
Balance at 1 July 2013 899 1,012 - 2 (391) (115) 1,407 6 1,413
Net earnings for the period - 166 - - - - 166 1 167
Other comprehensive income/ - - 4 - 51 (30) 25 - 25
(loss)
Total comprehensive income - 166 4 - 51 (30) 191 1 192
for the period
Contributions by and distributions to owners:
Ordinary dividends - (145) - - - - (145) - (145)
Supplementary dividends - (13) - - - - (13) - (13)
Tax credit on supplementary - 13 - - - - 13 - 13
dividends
Dividend reinvestment plan 10 - - - - - 10 - 10
Issuance of shares under share - - - 1 - - 1 - 1
schemes
Total transactions with owners 10 (145) - 1 - - (134) - (134)
Balance at 31 December 2013 909 1,033 4 3 (340) (145) 1,464 7 1,471
Balance at 1 July 2012 990 1,126 (6) 7 (413) (83) 1,621 5 1,626
Net earnings for the period - 162 - - - - 162 1 163
Other comprehensive income/ - - 2 - (1) (13) (12) - (12)
(loss)
Total comprehensive income - 162 2 - (1) (13) 150 1 151
for the period
Contributions by and distributions to owners:
Ordinary dividends - (204) - - - - (204) - (204)
Supplementary dividends - (20) - - - - (20) - (20)
Tax credit on supplementary - 20 - - - - 20 - 20
dividends
Dividend reinvestment plan 15 - - - - - 15 - 15
Issuance of shares under share 8 - - (6) - - 2 - 2
schemes
Shares repurchased (114) - - - - - (114) - (114)
Total transactions with owners (91) (204) - (6) - - (301) - (301)
Balance at 31 December 2012 899 1,084 (4) 1 (414) (96) 1,470 6 1,476
See accompanying notes to the financial statements.
24 | Telecom Half Year Report For the period ended 31 December 2013

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Condensed consolidated statement of changes in equity (continued)
For the year ended 30 June 2013
SHARE CAPITAL RETAINED EARNINGS HEDGE RESERVE SHARE BASED DEFERRED COMPENSATION RESERVE REVALUATION RESERVE FOREIGN CURRENCY TRANSLATION RESERVE TOTAL EQUITY HOLDERS OF THE COMPANY NON-CONTROLLING INTEREST TOTAL EQUITY
UNAUDITED OF
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ NZ$ NZ$
Balance at 1 July 2012 990 1,126 (6) 7 (413) (83) 1,621 5 1,626
Net earnings for the period - 236 -- - - 236 2 238
Other comprehensive income/ - - 6 - 22 (32) (4) - (4)
(loss)
Total comprehensive income/ - 236 6 - 22 (32) 232 2 234
(loss) for the period
Contributions by and distributions to owners:
Ordinary dividends - (350) - - - - (350) (1) (351)
Supplementary dividends - (34) - - - - (34) - (34)
Tax credit on supplementary - 34 -- - - 34 - 34
dividends
Shares repurchased for (8) - - - - - (8) - (8)
dividend reinvestment plan
Dividend reinvestment plan 23 - - - - - 23 - 23
Issuance of shares under share 8 - - (5) - - 3 - 3
schemes
Shares repurchased (114) - - - - - (114) - (114)
Total transactions with owners (91) (350) - (5) - - (446) (1) (447)
Balance at 30 June 2013 899 1,012 - 2 (391) (115) 1,407 6 1,413
See accompanying notes to the financial statements.
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FINANCIAL STATEMENTS
Condensed consolidated statement of financial position
As at 31 December 2013
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NOTES NZ$ NZ$ NZ$
ASSETS
Current assets:
Cash 124 311 118
Short-term derivative assets 6 2 5
Receivables and prepayments 549 714 658
Taxation recoverable 6 26 4
Inventories 70 64 53
Net assets of disposal group held for sale 8 293 - -
Total current assets 1,048 1,117 838
Non-current assets:
Long-term investments 130 56 77
Long-term receivables and prepayments 176 169 159
Long-term derivative assets 7 - 1
Intangible assets 1,034 985 1,071
Property, plant and equipment 11 1,087 1,438 1,347
Total non-current assets 2,434 2,648 2,655
Total assets 3,482 3,765 3,493
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accruals 560 823 819
Taxation payable 7 6 6
Short-term derivative liabilities 3 3 1
Short-term provisions 30 19 35
Debt due within one year 12 326 405 225
Total current liabilities 926 1,256 1,086
Non-current liabilities:
Deferred tax liability 131 162 146
Long-term derivative liabilities 21 22 22
Long-term payables and accruals 25 27 30
Long-term provisions 14 20 45
Long-term debt 12 894 802 751
Total non-current liabilities 1,085 1,033 994
Total liabilities 2,011 2,289 2,080
Equity:
Share capital 909 899 899
Reserves (478) (513) (504)
Retained earnings 1,033 1,084 1,012
Total equity attributable to equity holders of the Company 1,464 1,470 1,407
Non-controlling interest 7 6 6
Total equity 1,471 1,476 1,413
Total liabilities and equity 3,482 3,765 3,493
See accompanying notes to the financial statements.
26 | Telecom Half Year Report For the period ended 31 December 2013

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Condensed consolidated statement of cash flows
For the six months ended 31 December 2013
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NOTES NZ$ NZ$ NZ$
Cash flows from operating activities
Cash received from customers 1,964 2,098 4,164
Interest income 13 13 28
Dividend income 57 19 42
Payments to suppliers and employees (1,727) (1,644) (3,202)
Income tax paid (77) (32) (79)
Interest expense (28) (30) (68)
Net cash flows from operating activities 7 202 424 885
Cash flows from investing activities
Sale of property, plant and equipment 1 9 8
Insurance proceeds 8 20 25
Insurance proceeds paid to Chorus - (10) (10)
Sale/(purchase) of business 3 (5) (91)
Sale/(purchase) of long-term investments (3) 1 2
Purchase of property, plant and equipment and intangibles (283) (185) (389)
Capitalised interest paid (3) (4) (7)
Net cash flows from investing activities (277) (174) (462)
Cash flows from financing activities
Proceeds from long-term debt 390 350 650
Repayment of long-term debt (253) (150) (712)
Proceeds from short-term debt 565 276 509
Repayment of short-term debt (466) (282) (489)
Dividends paid (135) (190) (327)
Payments on finance leases (2) (4) (6)
Receipts on finance leases 15 13 29
Share repurchase - buyback - (134) (134)
Share repurchase - dividend reinvestment plan - (8)
Proceeds from derivatives 2 - -
Net cash flows from financing activities 116 (121) (488)
Net cash flow 41 129 (65)
Opening cash position 118 185 185
Foreign exchange movement (4) (3) (2)
Closing cash position 155 311 118
Comprising:
Cash held by discontinued operations 8 31- -
Cash held by continuing operations 124 311 118
Closing cash position 155 311 118
See accompanying notes to the financial statements.
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FINANCIAL STATEMENTS
Notes to the condensed consolidated interim financial statements
Note 1 Financial statements
The condensed consolidated interim financial statements of Telecom Corporation of New Zealand Limited (the Company) together with its subsidiaries and associates (Telecom), as at and for the six months ended 31 December 2013, have been prepared in accordance with the New Zealand equivalent to International Accounting Standard No. 34: ‘Interim Financial Reporting’, and Generally Accepted Accounting Practice in New Zealand (NZ GAAP).
Telecom Corporation of New Zealand Limited is a profit-oriented company registered in New Zealand under the Companies Act 1993 and is an issuer for the purposes of the Financial Reporting Act 1993. These condensed consolidated interim financial statements have been prepared using the same accounting policies and methods of computation as, and should be read in conjunction with, the financial statements and related notes included in Telecom’s annual report for the year ended 30 June 2013. The preparation of interim financial statements also requires management to make judgements, estimates and assumptions. Telecom has been consistent in applying the judgements, estimates and assumptions adopted in the annual report for the year ended 30 June 2013. Critical accounting policies are the same as those set out in the annual report for the year ended 30 June 2013. On 9 December 2013 Telecom announced that it had entered into a binding agreement to sell AAPT for A$450 million to TPG Telecom Limited, with the transaction anticipated to be completed in late February 2014. In accordance with NZ IFRS 5 Non-current assets held for sale and discontinued operations, AAPT has been classified as a discontinued operation held for sale. As such, Telecom’s income statement discloses the net earnings from AAPT as earnings from discontinued operations. The net assets and liabilities of AAPT have been presented separately in current assets in the statement of financial position.
Additionally, Telecom is in active discussions for the sale of its 60% shareholding in Telecom Cook Islands Limited. The sale is considered highly probable at 31 December 2013. Accordingly, the assets and liabilities of Telecom Cook Islands are classified separately as held for sale on the statement of financial position.
At 31 December 2013 Telecom has negative working capital excluding the net assets of the disposal group held for sale. Telecom has sufficient borrowing facilities in order to meet current obligations as they fall due.
Telecom has reclassified the comparative segment results to reflect changes in the business unit structures and changes in accountabilities for managing revenues and costs. These revenues and costs are now directly recognised in the relevant business unit. There is no change to the overall Group reported result as a result of these changes. Certain other comparative information has also been reclassified to conform to the current period’s presentation.
The presentation currency of these condensed consolidated financial statements is New Zealand dollars, which is also the Company’s functional currency. References in these financial statements to ‘$’ or ‘NZ$’ are to New Zealand dollars.
References to ‘A$’ are to Australian dollars. All financial information has been rounded to the nearest million, unless otherwise stated. These condensed consolidated interim financial statements were approved by the Board of Directors on 21 February 2014 and are unaudited. However, the results for the year ending and as at
30 June 2013, excluding the segmental reclassifications referred to above, have been extracted from the Group’s audited financial statements in the annual report for the year ended
30 June 2013. The annual report is available on Telecom’s website: http://investor.telecom.co.nz.
28 | Telecom Half Year Report For the period ended 31 December 2013

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Note 2 Segmental reporting
Telecom’s segments comprise Retail, Gen-i, Connect, and AAPT.
Segmental information for the six months ended 31 December 2013
UNAUDITED RETAIL GEN-i CONNECT AAPT* TOTAL
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$ NZ$ NZ$
Fixed 516 229 224 217 1,186
Mobile 372 115 5 2 494
IT services 1 273 1 - 275
Other operating revenue 12 3 40 2 57
Other gains - 3 - - 3
Internal revenue - 20 24 14 58
Total operating revenue and other gains 901 643 294 235 2,073
Segment result 328 193 (64) 55 512
* AAPT is a discontinued operation held for sale
Segmental information for the six months ended 31 December 2012
UNAUDITED RETAIL GEN-i CONNECT AAPT* TOTAL
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$ NZ$ NZ$
Fixed 547 255 265 235 1,302
Mobile 340 120 5 3 468
IT services 1 266 1 - 268
Other operating revenue 15 4 47 3 69
Other gains - - - 1 1
Internal revenue 1 18 21 21 61
Total operating revenue and other gains 904 663 339 263 2,169
Segment result 348 202 (67) 36 519
* AAPT is a discontinued operation held for sale
Segmental information for the year ended 30 June 2013
AUDITED RETAIL GEN-i CONNECT AAPT* TOTAL
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$ NZ$ NZ$
Fixed 1,077 494 496 468 2,535
Mobile 674 236 11 5 926
IT services 2 523 2 - 527
Other operating revenue 27 8 90 4 129
Other gains - 2 5 1 8
Internal revenue 1 44 47 37 129
Total operating revenue and other gains 1,781 1,307 651 515 4,254
Segment result 700 402 (114) 74 1,062
* AAPT is a discontinued operation held for sale
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FINANCIAL STATEMENTS
The segment results disclosed are based on those reported to Telecom’s CEO and are how Telecom analyses its business results. Segment results are measured based on net earnings before depreciation, amortisation, other gains and expenses not allocated to segments, finance income and expenses, associates’ profit/losses and income taxation expense. None of these other items are assessed on a segment basis by Telecom’s CEO.
Internal revenue also includes revenue for the continuing Group earned from discontinued operations and revenue for discontinued operations earned from the continuing Group.
Reconciliation from segment result to earnings before income tax
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NOTES NZ$ NZ$ NZ$
Segment result 512 519 1,062
AAPT (discontinued operation held for sale) (55) (36) (74)
Net result of Corporate revenue and expenses (5) (3) (13)
Impairment and restructuring expenses not allocated to segments 4 - - (101)
Depreciation (129) (130) (260)
Amortisation (98) (98) (199)
Finance income 15 15 32
Finance expense (32) (37) (74)
Net earnings before income tax - continuing operations 208 230 373
Note 3 Other operating revenue
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$
Dividend income 43 19 56
Sale of equipment 3 4 8
Miscellaneous other 56 65 125
102 88 189
Dividend income includes dividends received from Pacific Carriage Holdings Limited and Southern Cross Cables Holdings Limited, related parties by way of Telecom’s 50% shareholding in these companies.
30 | Telecom Half Year Report For the period ended 31 December 2013

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Note 4 Other gains & other expenses
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$
Other gains
Gain on sale 3 - 2
Settlement on insurances 5 10 15
Various resolutions and settlements with supplier - - 5
Gain on winding up of foreign operation - 6 6
8 16 28
Other expenses
Natural disaster costs - - 9
Restructuring costs - - 75
- - 84
Asset impairments
Related to restructuring - - 26
Other - - 12
- - 38
Other gains in the six months ended 31 December 2013 of $8 million included $3 million gain on the sale of Auldhouse and $5 million (net) received from insurers in relation to the February 2011 Canterbury earthquake claim.
Other gains in the six months ended 31 December 2012 of $16 million included a $6 million gain on winding up of a foreign operation and $10 million (net) received from insurers in relation to the February 2011 Canterbury earthquake claim. Other gains in the year ended 30 June 2013 of $28 million included a $2 million gain on the sale of the Davanti Consulting business, $15 million received from insurers in relation to the February 2011 Canterbury earthquake claim, a $5 million gain relating to various resolutions and settlements
reached with a supplier and $6 million gain on winding up of a foreign operation.
Other expenses in the year ended 30 June 2013 of $84 million included $9 million incremental costs in relation to the February 2011 Canterbury earthquake and $75 million of restructuring costs associated with the implementation of Telecom’s new strategy.
Asset impairments in the year ended 30 June 2013 of $38 million included $26 million of impairments of assets directly associated with the implementation of Telecom’s new strategic direction and $12 million of other asset impairments relating to assets whose future economic benefit was assessed as being lower than the assets’ carrying values.
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FINANCIAL STATEMENTS
Note 5 Other operating expenses
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$
Direct costs 44 42 69
Mobile acquisitions, upgrades and dealer commissions 193 175 338
Procurement and IT services 161 156 319
Broadband and internet 133 121 248
Computer costs 38 39 74
Advertising promotions and communications 44 39 71
Accommodation and co-location 43 51 108
Bad debts 16 6 14
Field service costs 17 25 39
Other expenses 98 88 178
787 742 1,458
Note 6 Dividends and equity
Dividends paid
During the period Telecom paid a dividend relating to the six months ended 30 June 2013 of $145 million representing 8 cents per share. The dividend was partially imputed (at a ratio of 21/72), which equates to 75% imputation based on the corporate income tax rate. In addition, a supplementary dividend of approximately $13 million was paid to shareholders who are not resident in New Zealand. In accordance with the Income Tax Act 2007, Telecom receives a tax credit from Inland Revenue equivalent to the amount of supplementary dividend paid.
Declaration of dividend
On 21 February 2014 the Board of Directors approved the payment of a dividend for the half
year of $146 million, representing 8 cents per share. This dividend will be partially imputed (at a ratio of 21/72), which equates to 75% imputation based on the current corporate income tax rate. In addition, a supplementary dividend of approximately $13 million (1.0588 cents per share) will be payable to shareholders who are not resident in New Zealand. In accordance with the Income Tax Act 2007, Telecom will receive a tax credit from Inland Revenue equivalent to the amount of supplementary dividends paid.
Shares issued in lieu of dividends
In respect of the six months ended 31 December 2013, 4,334,617 shares with a total value of $10 million were issued in lieu of a cash dividend (six months ended 31 December 2012: 6,493,423 shares with a total value of $15 million; year ended
30 June 2013: 9,793,591 shares with a total value of $23 million).
32 | Telecom Half Year Report For the period ended 31 December 2013

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Note 7 Reconciliation of net earnings to net cash flow from operating activities
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$
Net earnings for the period 167 163 238
Adjustments to reconcile net earnings to net cash flow from operating activities:
Depreciation and amortisation 263 269 539
Bad and doubtful accounts 17 8 21
Deferred income tax (16) (6) (26)
Net insurance proceeds (8) - -
Gain on winding up of foreign operations - - (6)
Net insurance proceeds (included in investing cash flows) - (10) (15)
Asset impairments - - 38
Other 6 (13) -
Changes in assets and liabilities net of effects of non-cash and investing and financing activities:
Decrease/(increase) in accounts receivable and related items (18) (1) 58
Increase in inventories (20) (15) (4)
Decrease in current taxation receivable - 36 49
Decrease in accounts payable and related items (189) (7) (7)
Net cash flow from operating activities 202 424 885
The reconciliation above is shown inclusive of the cash flows from discontinued operations.
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FINANCIAL STATEMENTS
Note 8 Discontinued operations held for sale
The Group income statement and comparatives have been re-presented to show the AAPT results to
31 December 2013 as a discontinued operation held for sale, separately from Telecom’s continuing operations. The discontinued operation held for sale results for the periods presented in the income statement are as follows:
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$
Results of discontinued operation held for sale
Revenues 235 263 515
Expenses (215) (268) (547)
Net earnings for the period 20(5)(32)
The results of the continuing and discontinued operations set out above and in the condensed consolidated income statement are shown at a gross amount to include transactions between AAPT and the continuing operations of the Telecom Group, as this is reflective of the anticipated presentation of operating results going forward.
The cash flows of the discontinued operation held for sale are as follows:
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED UNAUDITED
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$
Net cash flows from operating activities 28 28 73
Net cash flows from investing activities (27) (26)(49)
Net cash flows from financing activities - -(35)
Net cash flows from discontinued operation held for sale 1 2(11)
34 | Telecom Half Year Report For the period ended 31 December 2013

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The carrying value of assets and liabilities of discontinued operations held for sale are:
AS AT 31 DECEMBER 2013
(DOLLARS IN MILLIONS) NZ$
AAPT statement of net assets held for sale
ASSETS
Current assets held for sale:
Cash 30
Receivables and prepayments 80
Inventories 3
Total current assets held for sale 113
Non-current assets held for sale:
Intangible assets 26
Property, plant and equipment 254
Non-current assets held for sale 280
Total assets held for sale 393
LIABILITIES AND EQUITY
Current liabilities held for sale:
Accounts payable and accruals 89
Non-current liabilities held for sale:
Long-term derivative liabilities 26
Total liabilities held for sale 115
Net AAPT assets held for sale 278
Telecom Cook Islands net assets held for sale* 15
Net assets of discontinued operations held for sale 293
* Includes $1 million of cash.
investor.telecom.co.nz | 35

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FINANCIAL STATEMENTS
Note 9 Contingencies
Effect of outstanding claims
Telecom has ongoing claims, investigations and inquiries, none of which it currently believes are expected to have significant effect on the financial position or profitability of Telecom. Telecom cannot reasonably estimate the adverse effect (if any) on Telecom if any of these outstanding claims or inquiries is ultimately resolved against Telecom’s interests. There can be no assurance that such litigation or inquiries will not have a significant effect on Telecom’s business, financial position, results of operations or profitability.
Commitments
At 31 December 2013 capital expenditure amounting to $82 million (31 December 2012: $101 million) had been committed under contractual arrangements, with substantially all payments due within one year. The capital expenditure commitments principally relate to telecommunications network equipment. Additionally, Telecom successfully bid $66 million for three lots of 2x5 MHz of 700 MHz spectrum in October 2013 and a further $83 million in January 2014 for a fourth lot of spectrum. The acquisition of this final lot is subject to Commerce Commission approval. Following the Commission’s decision on this acquisition there will be an assignment auction round to determine the location of all successful bidders’ spectrum blocks within the 700 MHz band. As a condition of purchasing 2x20 MHz of this spectrum, Telecom will be required to deploy 700 MHz services on at least 300 of its rural cell sites and deploy a minimum of 10 new cell sites in each of the first five years of the spectrum licence.
Note 10 Significant events after balance date
As described in Note 6 Telecom has declared a dividend in respect of the six months ended
31 December 2013.
Note 11 Property plant and equipment
Telecom has $112 million of additions to property, plant and equipment for the six months ended
31 December 2013 ($83 million for the six months ended 31 December 2012 and $170 million for the year ended 30 June 2013).
36 | Telecom Half Year Report For the period ended 31 December 2013

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Note 12 Current and long-term debt
SIX MONTHS ENDED YEAR ENDED
31 DECEMBER 30 JUNE
2013 2012 2013
UNAUDITED UNAUDITED AUDITED
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$
Short-term debt 227 90 122
EMTN 81 79 79
TeleBonds 223 539 226
Bank funding 440 250 300
Domestic notes 250 250 250
Unamortised discount (1) (1) (1)
Total debt 1,220 1,207 976
Debt due within one year 326 405 225
Debt due greater than one year 894 802 751
Total debt 1,220 1,207 976
See note 22 of Telecom’s annual report for the year ended 30 June 2013 for further details on the Group’s other debt facilities, the material terms of which are unchanged at 31 December 2013.
Note 13 Investment in associate companies
Telecom’s investment in associate companies consists of:
COUNTRY OWNERSHIP PRINCIPAL ACTIVITY
Pacific Carriage Holdings Limited Bermuda 50% A holding company
Southern Cross Cables Holdings Limited Bermuda 50% A holding company
During the period Telecom invested $2 million for a 16% stake in Vigil Wireless Sensor Technologies Limited, a medical monitoring company. There is provision in the agreement on reaching certain milestones to increase this investment by a further $3 million increasing the Telecom shareholding to 40%.
investor.telecom.co.nz | 37

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FINANCIAL STATEMENTS
Note 14 Financial instruments
Telecom has carried out a fair assessment of its financial assets and liabilities for 31 December 2013 in accordance with NZ IFRS 13 Fair Value Measurement.
Fair value of financial instruments
Financial instruments are either carried at amortised cost, less any provision for impairment, or fair value. The only significant variances between instruments held at amortised cost and their fair value relates to long-term debt.
The table below categorises Telecom’s financial assets and liabilities, including discontinuing operations that are measured at fair value by the significance of the inputs used in making the measurements, as prescribed in NZ IFRS 7 Financial Instruments Disclosures:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie, as prices) or indirectly (ie, derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL2
(DOLLARS IN MILLIONS) NZ$ NZ$ NZ$ NZ$
Financial assets
Cash 155 - - 155
Short-term derivative assets - 6 - 6
Long-term derivative assets - 7 - 7
Long-term investments1 125 - 4 129
280 13 4 297
Financial liabilities
Short-term derivative liabilities - (3) - (3)
Long-term derivative liabilities - (21) - (21)
- (24) - (24)
1 Excludes associates and Government stock.
2 The fair value of the above financial instruments equals their carrying value in the statement of financial position.
38 | Telecom Half Year Report For the period ended 31 December 2013

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Transfers
There have been no transfers between categories during the period. Reconciliation of Level 3 fair value measurements of financial assets:
2013
(DOLLARS IN MILLIONS) NZ$
Long-term investment in TMT & VIGIL
Balance at 1 July 2013 2
Investment in Vigil 2
Balance at 31 December 2013 4
Sensitivity
Due to the size of the TMT Ventures (TMT) and Vigil investments, any sensitivity around the valuation inputs is considered to be immaterial.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Long-term investments
At 31 December 2013 Telecom had quoted and unquoted investments. The quoted investments have standard terms and conditions and are traded in active markets. Telecom measures its investment in Hutchison and in TMT at fair value and, due to the strategic nature of the investments held, Telecom has elected to carry these investments at fair value through other comprehensive income. Telecom has chosen to measure the fair value of Hutchison under NZ IFRS 9 Financial Instruments using the observable market share price. TMT’s fair value is based on the latest available fund manager’s report. Vigil’s fair value is based on the initial investment cost.
Cross-currency interest rate swaps, interest rate swaps and forward exchange contracts
Fair values are estimated on the basis of the quoted market prices of these instruments. If a listed market price is unavailable, then fair value is estimated by using a valuation model involving discounted future cash flows of the derivative, using the applicable forward price curve (for the relevant interest rate, foreign exchange rate or commodity price) and discount rate. The fair value is adjusted for the credit component within the instruments.
Cash
The carrying amounts of these balances are approximately equivalent to their fair value because of the short term to maturity.
investor.telecom.co.nz | 39

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FINANCIAL STATEMENTS
Auditors’ review report
KPMG
To the shareholders of Telecom Corporation of New Zealand Limited
We have completed a review of the interim financial statements on pages 22 to 39 in accordance with the Review Engagement Standard RS-1 issued by the External Reporting Board. The financial statements provide information about the past financial performance of Telecom Corporation of New Zealand Limited and its subsidiaries (“the Group”) and its financial position as at 31 December 2013.
Directors’ responsibilities
The Directors of Telecom Corporation of New Zealand Limited are responsible for the preparation of interim financial statements which give a true and fair view of the financial position of the Group as at 31 December 2013 and the results of its operations and cash flows for the six month period ended on that date.
Reviewers’ responsibilities
It is our responsibility to express an independent opinion on the interim financial statements presented by the Directors and report our opinion to you.
Basis of opinion
A review is limited primarily to enquiries of company personnel and analytical review procedures applied to the financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.
Our firm has also provided other services to the company in relation to other assurance related services and taxation. Subject to certain restrictions, partners and employees of our firm may also deal with the company on normal terms within the ordinary course of trading activities of the business of the company. These matters have not impaired our independence as auditors of the company. The firm has no other relationship with, or interest in, the company.
Review opinion
Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements on pages 22 to 39 do not give a true and fair view of the financial position of the Group as at
31 December 2013 and the results of its operations and cash flows for the six month period ended on that date in accordance with NZ IAS 34 Interim Financial Reporting.
Our review was completed on 21 February 2014 and our opinion is expressed as at that date.
KPMG
Auckland
40 | Telecom Half Year Report For the period ended 31 December 2013

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Lead Auditor’s Independence Declaration under
Section 307c of the Corporations Act 2001 to the directors of Telecom Corporation of New Zealand Limited
KPMG
I declare that to the best of my knowledge and belief, in relation to the review for the six months ended
31 December 2013 there have been:
(i) No contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and (ii) No contraventions of any applicable code of professional conduct in relation to the review.
KPMG
KPMG
Malcolm Downes
Partner Auckland
21 February 2014
investor.telecom.co.nz | 41

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APPENDIX
Forward-looking statements and disclaimer
This interim report may include forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of Telecom. Such forward-looking statements are based on the beliefs of management, as well as on assumptions made by management and information currently available at the time such statements were made.
These forward-looking statements may be identified by words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘plan’, ‘may’, ‘could’ and similar expressions. Any statements in this report that are not historical facts are forward-looking statements. These forward-looking statements are not guarantees or predictions of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond Telecom’s control, and which may cause actual results to differ materially from those projected in the forward-looking statements contained in this interim report. Factors that could cause actual results or performance to differ materially from those expressed or implied in the forward-looking statements are discussed herein and also include Telecom’s anticipated growth strategies, Telecom’s future results of operations and financial condition, economic conditions and the regulatory environment in New Zealand and Australia, competition in the markets in which Telecom operates, risks related to the sharing arrangements with Chorus, other factors or trends affecting the telecommunications industry generally and Telecom’s financial condition in particular and risks detailed in Telecom’s filings with the US Securities and Exchange Commission. Except as required by law or the listing rules of the stock exchanges on which Telecom is listed, Telecom undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
The securities referred to in this report have not been, and will not be, registered under the United States Securities Act of 1933 or under the securities laws of any state or other jurisdiction of the United States. This announcement does not constitute an offer of securities in the United States or to any person to whom it would not be lawful outside Australia and New Zealand. Any securities described herein may not be offered or sold in the United States absent registration under the Securities Act or pursuant to an applicable exemption from registration or to any person to whom it would not be lawful outside Australia and New Zealand.
42 | Telecom Half Year Report For the period ended 31 December 2013

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Non-GAAP financial measures
Telecom results are reported under IFRS. This interim report includes non-GAAP financial measures that are not prepared in accordance with IFRS. The non-GAAP financial measures used in this presentation include:
1. EBITDA. Telecom calculates EBITDA by adding back (or deducting) depreciation, amortisation, finance expense/(income), share of associates’ (profits)/losses and taxation expense to net earnings/(loss) from continuing operations.
2. Adjusted EBITDA. Adjusted EBITDA excludes significant one-off gains, expenses and impairments.
3. Capital expenditure. Capital expenditure is the additions to property, plant and equipment and intangible assets, excluding goodwill and other non-cash additions that may be required by IFRS such as decommissioning costs.
4. Average Revenue per User (ARPU). Telecom calculates ARPU as revenue for the period (for mobile this is only voice and data) divided by an average number of customers.
5. Adjusted net earnings. Adjusted net earnings are net earnings for the year adjusted by the same items to determine adjusted EBITDA, together with any adjustments to depreciation, amortisation and financing costs, whilst also allowing for any tax impact of those items.
Telecom believes that these non-GAAP financial measures provide useful information to readers to assist in the understanding of the financial performance, financial position or returns of Telecom but that they should not be viewed in isolation, nor considered as a substitute for measures reported in accordance with IFRS. Non-GAAP financial measures as reported by Telecom may not be comparable to similarly titled amounts reported by other companies.
investor.telecom.co.nz | 43

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Shareholder inquiries/contact details
Telecom is a company incorporated with limited liability under the New Zealand Companies Act 1993 and domiciled in New Zealand (Companies Office registration number 328287 and ARBN number 050 611 277).
Registered office
Level 2
Telecom Place
167 Victoria Street West
Auckland 1010
Principal administrative office in Australia
Level 23
680 George Street
Sydney NSW 2000
Ph +61 2 9009 9009
Company secretary
Silvana Roest
New Zealand registry
Computershare Investor Services Limited
Private Bag 92119
Auckland 1142
Ph +64 9 488 8777
Fax +64 9 488 8787
New Zealand Toll Free 0800 737 100
Email: enquiry@computershare.co.nz Website: www.computershare.co.nz
Australian registry
Computershare Investor Services Pty Limited
GPO Box 3329, Melbourne
VIC 3001, Australia
Ph +61 3 9415 4083
Australia Freephone: 1 800 501 366 Fax +61 3 9473 2500
Email: enquiry@computershare.co.nz Website: www.computershare.co.nz
United States registry
Details for Depositary Receipts, Transfer Agent, and Registrar
BNY Mellon Depositary Receipts
P.O. Box 43006
Providence, RI 02940-3006
United States
Toll Free phone number for United States domestic calls:
+1 888 BNY ADRS (+1 888 269 2377)
Number for international calls:
+1 201 680 6825
Email: shrrelations@bnymellon.com Website: www.bnymellon.com/shareowner
Shareholder inquiries
Shareholder inquiries about Telecom’s operating and financial performance should be emailed to investor-info@telecom.co.nz or addressed to: GM Corporate Finance
Telecom New Zealand Limited
Private Bag 92028
Auckland 1142
New Zealand
Contact phone numbers
Australia 1800 123 350
Canada 1800 280 0398
Hong Kong 800 962 867
New Zealand 0800 737 500
Singapore 800 641 1013
United Kingdom 0800 960 283
United States 1800 208 2130
For more information http://investor.telecom.co.nz investor.telecom.co.nz ARBN 050 611 277
44 | Telecom Half Year Report For the period ended 31 December 2013

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MEDIA RELEASE

21 February, 2014

TELECOM FY14 HALF YEAR RESULTS

GATHERING MOMENTUM ON EXECUTION OF STRATEGY

CHANGING NAME AND LAUNCHING NEW INTERNET TV BUSINESS

Telecom announced today a flat net profit after tax of NZ$167 million for the half year ending 31 December 2013.

Chairman Mark Verbiest said Telecom has been focused for nearly a year now on a clear long-term strategy and is gathering momentum in its execution.

“Over the last year we have moved quickly and decisively, putting several critical foundations in place and making a number of bold market moves.

“We have gained greater traction on our cost competitiveness, increasing the projected free cash flow benefits we believe will be generated by our Turnaround Programme, a centrally-driven series of business improvement initiatives.

“Our investments in revamping our mass market brands, Telecom and Skinny, have delivered greater cut-through in key markets. This has given us the conviction to move beyond the Telecom name, and better reflect our digital services capability and future focus. Later this year, we intend to change our company name and core customer brands to Spark.”

Earnings for the Group were flat, while underlying lead indicators and revenue performance, especially in mobile, were encouraging. However as expected the ongoing market decline in legacy fixed data and voice, together with the strategic choices made during FY13 to put market share outcomes ahead of short-term financial performance, has continued to impact earnings in New Zealand.

“We expect to see the positive lead indicators from the half year begin to flow more into our financial results from the second half onwards and into the 2015 financial year,” said Mr Verbiest.

Total operating revenues from continuing operations declined 3.0% to NZ$1,847 million, largely attributable to a 9.2% decline in fixed line revenues. Strong mobile performance saw mobile revenue up 5.8%, partially offsetting the fixed revenue decline. Operating costs for continuing operations fell 2.1% largely due to ongoing cost reduction initiatives, particularly labour costs. These initiatives were offset by cost growth associated with increased customer numbers and data volumes.

Telecom Corporation of New Zealand Limited ARBN 050 611 277

Telecom Place, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand

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Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) from continuing operations were down 5.8% while net earnings from continuing operations were down 12.5%.

Capital expenditure for continuing operations was up 18.2% to NZ$266 million, reflecting the significant investment in the first half of the year in networks, products and services. Major capital expenditure items included; an ongoing re-engineering programme, upgrade of the core data transport network, and mobile network investment particularly in 4G LTE.

As the previous year’s price-downs in broadband and wholesale are overtaken, the effect is expected to help moderate the rate of decline in legacy fixed revenues in the second half of the financial year.

The Directors have declared a half-year dividend of 8 cents per share, and an intention to pay a minimum of 16 cents per share for the full year. Directors also outlined an aspiration to sustainably increase ordinary dividends over time as the projected improved cash flow performance materialises.

Chief Executive Simon Moutter said that other moves being made in the market are also giving the company additional confidence.

“We’ve continued to make huge investments in New Zealand’s digital networks, launching 4G mobile underpinned by a brand-new core data transport network, building more data centre capability and committing to a leadership position in 700MHz spectrum. We have sold the AAPT business in Australia to focus all our efforts on getting it right for New Zealand customers.”

“There has also been investment in the digital services so essential to future growth. Notably, we have decided to enter the internet TV market, with a standalone and high-quality internet TV brand, ShowmeTV, to be launched later in the year.”

“We are pleased with our progress to date. We are working hard to become a fast, agile retailer, focused on winning customers. Future oriented. Competitive. Relevant to all New Zealanders. Willing to make bold moves. There’s real momentum building, for our customers and for us.”

H1 FY14 operational overview

Gen-i has continued to leverage its leadership position in data, mobility and Cloud services to help business and government clients unleash their full potential in a digital world. During the first half, plans were announced to build new greenfield data centres in Auckland and Wellington and a new data centre was opened in Christchurch, further strengthening data hosting capabilities following the acquisition of Revera last year.

Gen-i also won a multi-year contract with the Government’s Network for Learning initiative to build a fast and modern online educational platform for New Zealand schools to maximise the digital learning opportunities created by the ultra-fast broadband (UFB) rollout.

Telecom Corporation of New Zealand Limited ARBN 050 611 277

Telecom Place, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand

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Last year the mass-market Telecom retail brand was revitalised with a new look and the network of Business Hubs for small and medium business customers was relaunched. These moves have shown an immediate impact in increased sales, foot traffic and positive customer feedback. Digital customer self-service options were also significantly expanded, including the launching of a new Telecom App that has already attracted over 60,000 downloads, and a significant growth in customer take-up of My Telecom and e-billing options.

Telecom has also committed $149 million to four lots (2 x 20MHz) of newly available 700 MHz band radio spectrum to become the biggest player. This will make possible faster and better 4G mobile coverage for less populated parts of New Zealand. This asset has not yet been paid for as the auction process is still under way. The Commerce Commission is deciding on whether or not the purchase of the 4th lot can proceed, which will be followed by an auction round to determine the allocation of positions in the band.

An ongoing programme to re-engineer the IT stack for the business has also progressed well, with the first release of IT improvements on target for the second half of this financial year. This first release, focused on pre-paid mobile, will deliver significant system capability enhancements and improve customer experience, especially across digital channels.

Telecom Digital Ventures, the innovation focused business unit, has continued to develop its portfolio of growth oriented initiatives. This includes a nationwide WiFi network, primarily using revamped phone booths, which now has over 900 hotspots and 300,000 registered users, giving people better connections when out and about and enhancing the value of mobility solutions for business clients.

Mr Moutter said, “Later this year, we will launch ShowmeTV, our new internet TV business. The migration of entertainment to the internet is creating significant disruption to current broadcast TV business models and real opportunities for new online businesses. The rapid growth of better broadband via fibre and VDSL means watching TV via streaming over the internet is now a much more viable option for New Zealanders. We believe the time is right to enter this market and provide New Zealanders with exciting new choices when it comes to watching video entertainment.”

Outlook

Mr Moutter said the first half results demonstrate a pace and level of change he believes is unparalleled in a large New Zealand business over the last decade.

“We don’t intend to slow down. We will continue to address our cost base and strengthen our organisational performance. We will focus even harder on becoming more relevant to customers and to modern New Zealand, particularly as we continue our intended transition to Spark.

Telecom Corporation of New Zealand Limited ARBN 050 611 277

Telecom Place, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand

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“We anticipate an improved performance in the second half of this financial year, with broadband revenues beginning to stabilise, mobile growth continuing and our Turnaround Programme delivering tangible free cash flow improvements.”

As a result, adjusted EBITDA from continuing operations for the full year is expected to be in the range of NZ$925 million to $945 million, excluding the sale of AAPT and rebranding costs.

With a lot of the essential network investment for the strategic repositioning of the business already made or committed, capital expenditure from continuing operations for the full year is expected to be NZ$450 to NZ$460m, excluding spectrum, with the capex envelope tightening further in the FY15 to FY17 period.

Mr Moutter concluded, “There is a lot more hard work to come. We’ve got plenty to do to complete our strategic shift and stretch our leadership in data connectivity as well as regain the top spot in the mobile market. And all the while, customer needs will continue to evolve as digital life becomes a reality. But we are convinced we are on the right pathway. We’re committed to this course and to playing a major role in New Zealand’s digital future.”

- ENDS –

For media queries, please contact:

Richard Llewellyn

Head of Corporate Communications

+64 (0) 27 523 2362

For investor relations queries, please contact:

Mark Laing

General Manager Corporate Finance

+64 (0) 27 227 5890

Telecom Corporation of New Zealand Limited ARBN 050 611 277

Telecom Place, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand

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telecomnz
Telecom H1 FY14 Financial Results
Mark Verbiest Chairman
Simon Moutter Chief Executive
Chris Quin Retail CEO
Tim Miles Gen-i CEO
Jolie Hodson CFO
H1 FY14 Financial Results

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telecomnz
AGENDA
H1 Snapshot
Delivering on our Strategy
Key BU Snapshots
Key Financial Results
Looking Ahead
2

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telecomnz
H1 SNAPSHOT
Executing quickly and decisively against a clear strategy
- Momentum building with number of significant moves made during the six month period and with more to come this year
- Growing confidence our strategy will deliver intended long-term benefits
Group operating earnings maintained
- Improved performance by AAPT pivotal to excellent sale price
- NZ earnings down as expected, reflecting ongoing legacy decline and impact of strategic choices made in FY13 to put market share outcomes ahead of near-term financial results
Improving outlook for H2 and FY15
- Lead indicators encouraging, particularly in mobile
- Turnaround Programme of over 200 business improvement initiatives lifting confidence in projected free cash flow improvement ($200-300m of benefits)
-Successful sales and marketing tactics expected to moderate the rate of decline of legacy fixed revenues
- Capital expenditure envelope being tightened for FY15-16
H1 FY14 Financial Results
3

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telecomnz
H1 SNAPSHOT CONTINUED
Continued rapid strategic repositioning of the Group
- Sale of AAPT to focus on New Zealand customers
- Huge investment in New Zealand’s digital future - all data network now a reality, underpinning superior anytime anywhere connectivity for customers, backed by 700MHz spectrum investment
- Re-engineering programme on track to deliver enhanced customer service capability and efficiencies, with first release in April
- Selected investment in growth initiatives, including pending launch of new internet TV business to enter the online entertainment market
- Success of brand makeovers to date has advanced the intention to change company name and core trading brands to Spark
- Continued major strategic shift of Gen-i business portfolio towards data, mobility, managed ICT, Cloud infrastructure and platform as a service
Dividend policy to be reviewed at full year
- Aspiration to sustainably increase ordinary dividends over time as improved cash flow performance materialises
H1 FY14 Financial Results
4

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telecomnz
AGENDA
H1 Snapshot
Delivering on our Strategy
Key BU Snapshots
Key Financial Results
Looking Ahead
5

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telecomnz
DELIVERING ON OUR STRATEGY
Ambition A growing New Zealand business, winning by customers choosing us to connect them at the “speed of life”
Goals #1 in mobility #1 in data #1 in effortless service and cost
Strategic priorities Revolutionise customer experiences Simplify the business Win key markets Win the future
Foundations People, Brands, All Data Network, Turnaround Programme
H1 FY14 Financial Results 6

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REVOLUTIONISING CUSTOMER EXPERIENCES: KEY WINS
Rapid expansion and take-up of digital customer self-service options across Group
Telecom Smartphone App launched Sep 2013, over 60k downloads by end Dec 2013
‘My Telecom’ usage grown from 130k to 254k
E-Bill uptake from 100k to 287k in 6 months
Bigpipe broadband trialled and soft-launched with online only service model
National WiFi network growing quickly
Over 900 hotspots, over 300k registered, over 115k active users
Partnership strategy expanding
A powerful competitive differentiator
Invested in world-class data network
3G, 4G, WiFi, ADSL, VDSL and Fibre backed up by 5Tbps OTN
OTN deployed across 66 sites nationally
Underpins 24/7 anytime anywhere connectivity
Optimised Gen-i service models for key customers
Transitioned 1,350 ME clients to a Dealer managed model within Gen-i
Reoriented sales and client delivery functions more tightly around our customers
Renewed our focus on Wellington clients, in particular Central Government
Business Hubs relaunched New SME experience for business customers
H1 FY14 Financial Results 7

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telecomnz
REVOLUTIONISING CUSTOMER EXPERIENCES: DIGITAL SERVICES
100,000
Tech in a Sec comments
60,000
Smartphone App users
7M Digital Self Service Transactions Monthly
800,000
Unique Visits Online Monthly
H1 FY14 Financial Results 8

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telecomnz
SIMPLIFYING THE BUSINESS: KEY WINS
Turnaround Programme broadened in scope and impact
Increase in projected benefits
Building performance management capability
IT stack re-engineering 1st major release on target for Q3
Focus on pre-paid in 1st drop
On time and on budget
From ‘Green screen’ to modern ‘CRM’
Simplification of broadband and mobile plans helping drive sales
78% of broadband customers on latest plans
From 126 to 38 post-paid plans within 6-9 months
Re-eng will deliver pre-paid reduction from 3 to 1 core plans
Ongoing simplification of organisational processes
HR and remuneration processes overhauled
Staff level continuing to decline
Gen-i continuing its strategic shift
IT Services strategy refocused around network and infrastructure core
Divestment of Auldhouse following earlier divestment of Davanti
Simplified Voice & Data pricing
Sale of AAPT in line with strategic focus on NZ customers
Sold for A$ 450m
Settlement due late Feb
H1 FY14 Financial Results 9

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telecomnz
SIMPLIFYING THE BUSINESS: TURNAROUND PROGRAMME
IDEAS QUANTIFIED
PLANNED INITIATIVE
DELIVERY
FULL P&L & BALANCE SHEET RECONCILIATION
Enhanced cross-sell
Improved customer retention practices
Pricing optimisation
Procurement improvements
Network sourcing and management enhancements
Call centre efficiencies
Operational process efficiencies
Additional labour reductions
Procurement improvements
Re-eng enabled systems simplification
Tight discretionary capex management
Enhanced performance management
Removal of process pain points
Building business improvement capabilities
REVENUE INCREASES
COST SAVINGS
CAPEX REDUCTIONS
ORG HEALTH IMPROVEMENTS
Turnaround initiatives implemented in FY14 and through FY15 to deliver $200-$300m of annualised sustainable cash benefits (previously $100-$200m)
H1 FY14 Financial Results 10

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SIMPLIFYING THE BUSINESS: RE-ENGINEERING
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telecomnz
H1 FY14 Financial Results 11

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telecomnz
SIMPLIFYING THE BUSINESS: GETTING MORE COST COMPETITIVE
FTE
9000
8000
7000
6000
5000
4000
FTE
7,903 7,530 6,622 6,469 5,769
30-Jun-12
FY 13 H1 reduction
31-Dec-12
FY 13 H2 reduction
Revera acquisition
30-Jun-13
FY 14 H1 reduction
31-Dec-13
AAPT divestment
31-Dec-13
Continuing ops
H1 FY14 Financial Results 12

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telecomnz
WIN KEY MARKETS: KEY WINS
Retail brand refresh in H1 driving confidence in brand
6 percentage point increase in brand preference with Auckland u35
Increased foot traffic in stores by 14% in Auckland
Skinny and Bigpipe value brands in mobile and broadband
Skinny brand refreshed in October, driving good pre-paid growth
Bigpipe launched and billing in Feb 2014
Encouraging growth signals showing in mobile market
Overall mobile connections up 108k
New value-adds coming
Ultra Broadband (VDSL, Fibre) numbers growing well
Ultra Broadband (VDSL and Fibre) going well, with 20k connections as at 31 Dec 2013
Enabling the education sector as Network for Learning technology partner
Launched in August 2013
239 schools signed up by 28 Jan 2014
700+ schools targeted by end 2014
Telecom SME business market growing
Revenue and margin growth achieved
Mobile market share increased
H1 FY14 Financial Results 13

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telecomnz
WIN KEY MARKETS: MOBILE AND BROADBAND
MOBILE CONNECTIONS (6 month active)
000’s 2000 1950 1850 1800 1750 1700 1650 1600
1,723 44 48 1,815 72 36 1,923
31-Dec-12 Prepaid net adds Postpaid net adds 30-Jun-13 Prepaid net adds Postpaid net adds 31-Dec-13
RETAIL BROADBAND REVENUES
NZ$M 175 150 125 100 75
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
NZ Revenue % of customers on refreshed plans
100% 75% 50% 25% 0%
Mobile
Sustained mobile connection growth, with 108,000 net additions in the half
Total mobile base has grown 12% in last 12 months
Pre-paid ARPU up 6% YOY, reflecting popularity of monthly prepaid packs
Post-paid ARPU down 4.5% YOY, reflecting change in mix towards more profitable open term plans
Devices providing additional source of revenue and margin
Flanking brand strategy (Skinny) proving effective
Broadband
12,000 net broadband additions (Retail & Gen-i) in the half
Average data usage up 89% in last year to 34GB per month
Close to holding connection share
Intense competition and growth in naked broadband category
Close to half of Telecom broadband customers on higher grade plans, with Fibre and VDSL providing good up sell opportunity
Progressively filling product gaps
H1 FY14 Financial Results 14

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telecomnz
WIN KEY MARKETS: BRAND STRATEGY NOW CLEAR
GROUP
BUSINESS UNITS
NETWORK
SPARK NEW ZEALAND LIMITED
SPARK
SPARK DIGITAL SOLUTIONS
SPARK VENTURES
Skinny MOBILE
Bigpipe
showmetv
Future Venture 1
Future Venture 2
revera
SPARK NETWORK
H1 FY14 Financial Results 15

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telecomnz
WIN THE FUTURE: KEY WINS
Digital Ventures making good progress on portfolio
Announcement of internet TV
National WiFi going very well
Bigpipe trialled and soft-launched
Other moves being made in m-commerce, smart living, smart data, and health
Vigil investment just a part of a growing Group wide opportunity we see in health sector
Spectrum Auction and 4G launch demonstrates commitment to future of mobile
$149m investment in 4 lots (2x 20MHz) of 700 MHz spectrum
4th lot subject to Commerce Commission approval
Price favourable v global benchmarks
4G LTE launched in main centres
Investment in TGA trans- Tasman cable
Planning for project progressing well
Partners working through respective approval processes over coming months
Further refocusing of Gen-i
towards Cloud, converged ICT, Data Centres and Mobility
Leveraging Revera capability with Government
Leading local Data Centre portfolio - AKL, WLG, CHC backbone with regional facilities including Dunedin
Mobility Practice established
Partner collaborations - SAP, Cisco, Samsung
Health sector a key sector priority, with rural and education also being developed
H1 FY14 Financial Results 16

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telecomnz
WIN THE FUTURE: INTERNET TO MARKET ENTRY
Video is migrating to the internet
Episodic TV series binge viewing is the big trend globally, driving demand for freedom and choice
Telecom has decided to enter, with a world-leading OTT platform in build and content deals under negotiation
Mid year launch of ShowmeTV will provide more choice for NZ consumers of TV and movies
Consumer centric - watch what you want, when you want, where you want
More than 5,000 hours of content at launch, across all key genres, including local
Available to all New Zealanders not just Telecom customers
Initially accessible on web and tablet - will be coming to all screens soon
Showmetv Entertainment as it should be
H1 FY14 Financial Results 17

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telecomnz
AGENDA
H1 Snapshot
Delivering on our Strategy
Key BU Snapshots
Key Financial Results
Looking Ahead
18

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telecomnz
RETAIL BU SNAPSHOT
RETAIL REVENUES
Revenue $M 800 700 600 500 400 300 200 100 0
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
Fixed Mobile
RETAIL FIXED REVENUES
Revenue $M 300 250 200 150 100 50 0
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
Access Voice/Calling Broadband
Retail Revenue stabilised, for first time since 2008
EBITDA $328m, down 5.8%
Strong performance in mobile, revenues up 9% (service revenues up 4%)
Further improvements in SARC ratio
Rate of fixed revenue decline slowing to 5.7% YOY (previously >8%)
- Access churn remains very low at 3.8% on an annualised basis
- Price and volume reductions resulting in 17% decline in calling revenues
- 5% decline in broadband revenues reflecting impact of prior year plan refresh (78% on new plans)
Increased broadband costs of sales reflecting connection growth and backhaul cost increases on rapidly rising data volumes
8% reduction in labour costs, following prior year initiatives
Skinny EBITDA and TDV early investment costs included within Retail
H1 FY14 Financial Results 19

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telecomnz
RETAIL CUSTOMER FOCUS IS DRIVING RESULTS
Total mobile base has grown 200,000 connections in last 12 months (includes Skinny & Gen-i)
holding connection share in broadband at around 47%
Business market revenue returned to growth
94% of service transactions are now online
SARC/revenue ratio improved a further one % point
On track for a 2% improvement in support cost per revenue dollar
68% of customers rate us 5/5 for effortless service
6% point increase in brand preference with Auckland u35
H1 FY14 Financial Results
20

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telecomnz
RETAIL CUSTOMERS ARE SEEING MOMENTUM
ULTRA MOBILE PLANS
LOADS OF DATA CHANGES HOW MUCH YOU SHARE telecomnz
OPEN TERM MOBILE 4G
FREE 4G UPDGRADE FOR EVERYONE ONLY ON TELECOM ULTRA MOBILE telecomnz telecom.co.nz/ultramobile
LOCAL LIKE YOU
“THE HUB HAS MADE MY LIFE SO SIMPLE AND EASY.”
UNICA
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WIFI
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As at 5:20pm Monday 01 Jun 2013
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TBC’s | Legals
2013 Telecom NZ TOP
telecomnz
TELECOM
6%
BRAND PREFERENCE UP
WITH AUCKLAND
UNDER 35s
H1 FY14 Financial Results 21

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telecomnz
CUSTOMER INSIGHTS
2,500 200 1,500
TOUCH POINT SURVEYS EACH MONTH IN BUSINESS AND IN HOME ONE ON ONE INTERVIEWS MONTHLY BUSINESS INTERACTIONS
MONITORING 2.5M 120,000
590,000 IVR TRANSACTIONS STORE VISITS WEEKLY
CALLS EACH MONTH
100,000 60,000 800,000
TECH IN A SEC COMMENTS SMARTPHONE APP USERS UNIQUE VISITS ONLINE MONTHLY
Know me and like me
Value and win my business
Bring me new, cool stuff
Make it easy for me to deal with you
Be a company I love and am proud to be with
H1 FY14 Financial Results 22

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telecomnz
THE CONSUMER BRAND STORY
OUR HIGHER PURPOSE
UNLEASHING NEW ZEALAND’S POTENTIAL OUR BELIEF AND DIFFERENTIATION
We believe that New Zealand is the best place on the planet. We will ensure everyone can live, work and play in more incredible ways by being the leaders in the indispensable and amazing experiences data provides
WHAT WE LIVE BY
FOR HERE. FOR YOU. FOR TOMORROW.
OUR CUSTOMER-INSPIRED CHARACTER
COURAGEOUS. CARING. CURIOUS. COLOURFUL.
H1 FY14 Financial Results 23

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telecomnz
GEN-I BU SNAPSHOT
GEN-i REVENUES
Revenue $M 400 350 300 250 200 150 100 50 0
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
Fixed Mobile IT Services
GEN- iT SERVICES
Revenue $M 300 250 200 150 100 50 0
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
Revenue IT Services margin excluding procurement
EBITDA $193m, down 4.5%
Revenues down 3.0%, reflecting intense price pressure across all product categories, particularly in Enterprise Segment
Maintained #1 NZ market position in Mobile, Data and IT Services
Focus on Network and Platform-centric ICT
- Gen-i/Revera has the highest market share (49%) in the Hosted Infrastructure Services category in the NZ IT Services Market Tracker
- Acquisition of Revera providing synergy value in major accounts
- Divested Davanti & Auldhouse
- Partnering to access capability while reducing delivery risk
- Key wins with N4L and Auckland Council
Labour costs down 17.8% reflecting operating model changes in H1 FY13
IT Services contribution margins improving from product simplification, process standardisation and Procurement portal implementation
Data Centre development on track
H1 FY14 Financial Results 24

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telecomnz
GEN-I BU: THE STRATEGIC SHIFT
* gen-i PARTNERS
Network Services
Outsourcing
Vertical Applications
Security Services
Horizontal Applications
Application Development
Networks Infrastructure Platforms (IaaS, PaaS, DaaS) Managed Services Applications Business Consulting Business Process Outsourcing
INFRASTRUCTURE CENTIC
PEOPLE CENTRIC
Data Centre investments
Invested in Revera IaaS and C-stack
Launched ‘Hosted’ ReadyCloud products
Exited Software Solutions to partner
Exited Davanti & Auldhouse
H1 FY14 Financial Results 25

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telecomnz
GEN-I BU: REPOSITIONING ON TRACK
Reoriented Sales and Service around the customer
Future Voice & Data propositions gaining traction
Leadership position in mobility maintained
IT Services strategy refocused around network and infrastructure core
Infrastructure investments on track
Sale & Service organisational structure reset
Additional resource focused on government segment, leveraging Revera capability
Migrating clients to Broadsoft IP voice. On track to be #1 in IP voice in FY15
UFB connected in all regions by March 2014
On track to launch two new corporate data products in Q4
Slight growth in mobile market share, but intense price based competition
Mobility practice established, focused on M2M and mobile apps
Partner collaborations - SAP, Cisco, Samsung
IT contribution margin improving, due to better execution and better quality product mix
Strong pipeline for data centres and Revera
Christchurch data centre complete
Build on track for Auckland, Wellington and Dunedin
H1 FY14 Financial Results 26

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telecomnz
52 52
AGENDA
H1 Snapshot
Delivering on our Strategy
Key BU Snapshots
Key Financial Results
Looking Ahead
27

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telecomnz
KEY FINANCIAL RESULTS
Total Revenues - cont ops
Operating Costs - cont ops
EBITDA - cont ops
D&A - cont ops
Net financing costs - cont ops
Tax expense - cont ops
Net Earnings - cont ops
Net Earnings - disc ops
Net Earnings
Capex - cont ops
EPS (cps)
H1 FY14 $M 1,847 1,395 452 227 17 61 147 20 167 266 9
H1 FY13 $M 1,905 1,425 480 228 22 62 168 (5) 163 225 9
CHANGE (3.0) (2.1) (5.8) - (22.7) (1.6) (12.5) NM 2.5 18.2 -
H1 FY14 Financial Results 28

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telecomnz
REVENUES
REVENUE FROM CONTINUING OPERATIONS
H1FY13 v H1FY14
$M 2000 1950 1900 1850 1800 1750 1700
1905 27 98 7 24 18 1847
H1FY13 Revenue
Mobile
Fixed
IT services
Southern Cross dividend
Other
H1FY14 Revenue
- 3% top line decline
- Strong mobile performance
- 4% service revenue growth in Retail
- Price pressure in Gen-i
- Continued fixed line declines Retail access churn 4%
- 17% decline in calling revenues
- Broadband price downs in prior year
- Commercial wholesale deals
-$24m increase in Southern Cross dividends
-$5m lower insurance proceeds
H1 FY14 Financial Results 29

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telecomnz
COSTS
COSTS FROM CONTINUING OPERATIONS H1FY13 v H1FY14
$M 1500 1450 1400 1350 1300 1250 1200
1425 18 20 12 5 55 10 1395
H1FY13 Cost
Mobile COS
Intercarrier costs
Broadband costs
IT services
Labour costs
Other
H1FY14 Cost
- Mobile cost of sales reflects strong connection growth
- Intercarrier costs reflect access line reductions and more efficient consumption of Chorus inputs
- Broadband costs increase reflects base growth and increased backhaul costs
- Labour cost reductions YOY reflect flow through benefits of FY13 cost reduction activities
H1 FY14 Financial Results 30

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telecomnz
EBITDA FULL YEAR OUTLOOK
EBITDA from continuing operations
$M 550 500 450 400 350 300 250 200
480m 495m 452m 473 to 493m
H1 FY13 H2 FY13 H1 FY14 H2 FY14 forecast
H1 FY14 EBITDA impacted by:
- Continued fixed line declines
- Impact of FY13 broadband plan refresh
- Wholesale commercial arrangements
Expect improved performance in H2 FY14
- Sustained growth in mobile revenue/margin
- Stabilisation of Broadband revenues/margin
- Turnaround initiatives, delivering improved free cash flow
H1 FY14 Financial Results 31

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telecomnz
MEDIUM TERM VALUE DRIVERS
Fixed revenue decline moderating to circa 6% CAGR FY14 to FY17
Offset by growth in mobile, IT services & other revenues
Aiming to stabilise top line around FY16
Turnaround initiatives implemented in FY14 and through FY15 to deliver $200-$300m of annualised sustainable cash benefits (previously $100-$200m)
FIXED REVENUE TRENDS
Revenue $M
2,500 1,500 500
FY13 FY14 FY15 FY16 FY17
Analyst range Telecom estimate
Turnaround initiatives Percentage of benefits
Opex ~75%
Revenue ~10%
Capex ~15%
H1 FY14 Financial Results 32

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telecomnz
CAPITAL EXPENDITURE
Core Capex - continuing operations
$M
700 600 500 400 300 200 100
FY13 FY14 FY15 FY16
BAU / sustain / 3G
LTE
Spectrum
OTN/Carrier Ethernet
Data centres
Re-engineering
Other strategic
Chart reflects FY14 to FY16 core Capex envelope
FY14 excludes final allocation round for spectrum
FY14 peak Capex year in strategic turnaround programme
$149m spectrum purchase
- Price favourable vs global benchmarks
- 4th lot subject to commerce commission approval
- Final round (allocation) still to be completed
Targeting sustainable long term core Capex of below $400m per annum
H1 FY14 Financial Results 33

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telecomnz
DIVESTMENT OF NON-CORE ASSETS
AAPT
- Sold 100% stake for A$450m, NZ$490m
- Transaction expected to complete 28 February 2014
- EBITDA H1 FY14 NZ$55m, expect approx NZ$70m for 8 months
- D&A H1 FY14 NZ$35m Telecom Cook Islands
- Actively considering divestment of our 60% stake
- EBITDA H1 FY14 NZ$4m
H1 FY14 Financial Results 34

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telecomnz
CAPITAL MANAGEMENT
Repositioning business portfolio in line with strategic shift
Divestment of non-core assets
Reinvestment in 700 MHz spectrum, 4G expansion, re-engineering, digital ventures, new brand
Remain committed to conservative capital structure and single A credit rating
Ratio of net debt/EBITDA (including associated derivatives) not to materially exceed 1.0x on a long run basis, which for credit rating agency purposes equates approximately to 1.5x
Expect debt headroom of approx $250m post completion of AAPT sale and acquisition of spectrum
Appropriate given stage in business turnaround
Aspiration to deliver sustainable increases in ordinary dividends over time
8cps dividend declared for H1 FY14 (75% imputation)
Intention to pay a minimum dividend of 16cps in FY14, payout to be reviewed at full year
H1 FY14 Financial Results 35

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telecomnz
AGENDA
H1 Snapshot
Delivering on our Strategy
Key BU Snapshots
Key Financial Results
Looking Ahead
36

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telecomnz
OUR SCORECARD: AT THE FY13 FULL YEAR RESULTS, WE SAID WE WOULD TARGET IN FY14 ..…
A more competitive organisation: A new winning culture which is performance driven, more agile and competitive On track to crystallising an additional $100-$200m of annualised benefits from re-engineering, cost out and simplification programmes
On track Increased to $200-$300m
Success in the market: A 1-2% point increase in mobile market service revenue share – with mobile completely re-platformed, 4G LTE launched Greater brand cut-through and preference in key markets Stabilising broadband market connection share - VDSL and fibre products take-up accelerated Double digit revenue growth from Gen-i networked ICT – with expanded data, mobility and Cloud capability
On track Beginning Achieved Achieved
Success for the future: At least four new highly differentiated offers to consumer & SME customers Clear strategic path forward for Australia Digital Ventures having launched a portfolio of new products and services
On track Achieved Achieved
37
H1 FY14 Financial Results

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telecomnz
FINANCIAL OUTLOOK
Adjusted EBITDA:
– Expect full year adjusted EBITDA from continuing operations of $925m to $945m
– Guidance excludes AAPT sale proceeds and rebranding costs
Capex:
– Expect FY14 Capex from continuing operations of $450m to $460m, excluding spectrum
Dividend:
– Intention to pay a minimum dividend of 16cps in FY14
– Payout to be reviewed at year end
38
H1 FY14 Financial Results

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telecomnz
A solid half-year, with a sound strategy being executed at increasing pace.
Telecom is busy reinventing itself for its customers and for the digital future.
39

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telecomnz
DISCLAIMER
Forward-looking statements and disclaimer
This announcement may include forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of Telecom. Such forward-looking statements are based on the beliefs of management as well as on assumptions made by and information currently available at the time such statements were made.
These forward-looking statements may be identified by words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘plan’, ‘may’, ‘could’ and similar expressions. Any statements in this announcement that are not historical facts are forward-looking statements. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond Telecom’s control, and which may cause actual results to differ materially from those projected in the forward-looking statements contained in this announcement. Factors that could cause actual results or performance to differ materially from those expressed or implied in the forward-looking statements are discussed herein and also include Telecom’s anticipated growth strategies, Telecom’s future results of operations and financial condition, economic conditions and the regulatory environment in New Zealand and Australia; competition in the markets in which Telecom operates; risks related to the sharing arrangements with Chorus, other factors or trends affecting the telecommunications industry generally and Telecom’s financial condition in particular and risks detailed in Telecom’s filings with the U.S. Securities and Exchange Commission. Except as required by law or the listing rules of the stock exchanges on which Telecom is listed, Telecom undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
The securities referred to in this announcement have not been, and will not be, registered under the United States Securities Act of 1933 or under the securities laws of any state or other jurisdiction of the United States. This announcement does not constitute an offer of securities in the United States or to any person to whom it would not be lawful outside Australia and New Zealand. Any securities described herein may not be offered or sold in the United States absent registration under the Securities Act or pursuant to an applicable exemption from registration, or to any person to whom it would not be lawful outside Australia and New Zealand.
Non-GAAP financial measures
Telecom results are reported under IFRS. This announcement includes non-GAAP financial measures which are not prepared in accordance with IFRS. The non-GAAP financial measures used in this presentation include:
1. EBITDA. Telecom calculates EBITDA by adding back (or deducting) depreciation, amortisation, finance expense/(income), share of associates’ (profits)/losses and taxation expense to net earnings/(loss) from continuing operations.
2. Adjusted EBITDA. Adjusted EBITDA excludes significant one-off gains, expenses and impairments.
3. Capital expenditure. Capital expenditure is the additions to property, plant and equipment and intangible assets, excluding goodwill and other non-cash additions that may be required by IFRS such as decommissioning costs.
4. ARPU. Telecom calculates ARPU as revenue for the period (for mobile this is only voice and data) divided by an average number of customers.
5. Adjusted net earnings. Adjusted net earnings are net earnings for the year adjusted by the same items to determine adjusted EBITDA, together with any adjustments to depreciation, amortisation and financing costs, whilst also allowing for any tax impact of those items.
Telecom believes that these non-GAAP financial measures provide useful information to readers to assist in the understanding of the financial performance, financial position or returns of Telecom, but that they should not be viewed in isolation, nor considered as a substitute for measures reported in accordance with IFRS. Non-GAAP financial measures as reported by Telecom may not be comparable to similarly titled amounts reported by other companies.
40
H1 FY14 Financial Results

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Telecom Group
Group result
H1 FY12 NZ$m H2 FY12 NZ$m H1 FY13 NZ$m H2 FY13 NZ$m H1 FY14 NZ$m
Adjusted operating revenues and other gains
Fixed 1,148 1,112 1,067 1,000 969
Mobile 459 471 465 456 492
IT Services 267 276 269 261 276
Other operating revenue 110 98 88 102 102
Other gains 18 8 16 11 8
Internal Revenue - - - - -
Adjusted operating revenues and other gains 2,002 1,965 1,905 1,830 1,847
Adjusted operating expenses
Labour 347 321 321 256 266
Intercarrier costs 433 385 362 342 342
Other operating expenses 766 747 742 716 787
Other expenses 5 - - 9 -
Asset impairments - - - 12 -
Adjusted operating expenses 1,551 1,453 1,425 1,335 1,395
Adjusted EBITDA - continuing operations 451 512 480 495 452
Adjusted EBITDA - Chorus discontinued operations 321 - - - -
Adjusted EBITDA - AAPT discontinued operations 40 48 36 38 55
Adjusted EBITDA - total 812 560 516 533 507
Depreciation and amortisation expense - continuing operations 237 248 228 231 227
Net finance expense - continuing operations 59 21 22 20 17
Taxation expense - continuing operations 46 65 62 41 61
Net earnings after tax - continuing operations 109 178 168 203 147
Profit or loss - discontinued operations (7) 4 (5) (27) 20
Net earnings after tax including discontinued operations 102 182 163 176 167
Analysis & KPI’s
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
Fixed revenue
Access 436 427 419 410 399
Voice/Calling 373 348 327 285 272
Broadband 188 187 177 169 166
Data 132 128 126 122 117
Other 19 22 18 14 15
1,148 1,112 1,067 1,000 969
Mobile revenue
Mobile usage 345 351 360 363 366
Mobile other 114 120 105 93 126
459 471 465 456 492
FTE Permanent - continuing operations 6,686 6,710 6,387 5,512 5,342
FTE Contractors - continuing operations 432 428 402 390 427
FTE Total - continuing operations 7,118 7,138 6,789 5,902 5,769

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Telecom Group
Revenue and EBITDA by Unit
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
NZ$m NZ$m NZ$m NZ$m NZ$m
Operating revenue and other gains
Connect 448 331 339 312 294
Retail 938 936 904 877 901
Gen-i 703 682 663 644 643
Corporate 53 50 53 62 67
Eliminations (140) (34) (54) (65) (58)
2,002 1,965 1,905 1,830 1,847
EBITDA
Connect (61) (62) (67) (47) (64)
Retail 338 371 348 352 328
Gen-i 199 226 202 200 193
Corporate (25) (23) (3) (10) (5)
Continuing operations 451 512 480 495 452
Discontinued operations - AAPT 40 48 36 38 55
Discontinued operations - Chorus 321 - - - -
Total group adjusted EBITDA 812 560 516 533 507

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Telecom
Financial breakdown by business unit - Retail
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
NZ$m NZ$m NZ$m NZ$m NZ$m
Adjusted operating revenues and other gains
Fixed 596 577 547 530 516
Mobile 331 342 340 334 372
IT services 1 1 1 1 1
Other operating revenue 10 13 15 12 12
Other gains - 3 - - -
Internal Revenue - - 1 - -
938 936 904 877 901
Adjusted operating expenses
Labour 67 68 61 53 56
Intercarrier costs 202 176 157 156 158
Other operating expenses 212 309 321 297 343
Internal expenses 119 15 17 19 16
600 568 556 525 573
Adjusted EBITDA 338 368 348 352 328
Analysis & KPI’s - Retail
Local Service
Access Lines (000) 1,023 976 949 933 913
Broadband connections (000) 598 599 612 630 640
Fixed
Access 264 255 245 248 247
Voice/Calling 163 153 143 130 119
Broadband 158 157 149 142 141
Managed Data 1 1 1 1 -
Other 10 11 9 9 9
596 577 547 530 516
FTE Permanent 1,787 1,736 1,615 1,435 1,432
FTE Contractors 124 125 138 131 136
FTE Total 1,911 1,861 1,753 1,566 1,568

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Telecom
Financial breakdown by business unit - Connect
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
NZ$m NZ$m NZ$m NZ$m NZ$m
Adjusted operating revenues and other gains
Fixed 275 271 265 231 224
Mobile 33565
IT services - 1 1 1 1
Other operating revenue 60 42 47 43 40
Other gains 6 5 - 5 -
Internal Revenue 104 9 21 26 24
448 331 339 312 294
Adjusted operating expenses
Labour 82 73 81 60 70
Intercarrier costs 184 165 161 142 142
Other operating expenses 141 150 158 142 141
Asset impairments - - - 11 -
Internal expenses 102 5 6 4 5
509 393 406 359 358
Adjusted EBITDA (61) (62) (67) (47) (64)
Analysis & KPI’s - Connect
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
Local Service
Access Lines (000) 417 440 442 421 414
Fixed
Access 111 114 118 110 101
Voice/Calling 116 108 101 79 82
Broadband 2 1 1 1 -
Managed Data 39 39 37 36 36
Other 7 9 8 5 5
275 271 265 231 224
Analysis of international transits:
International transit revenue - $m 85 74 71 55 64
International intercarrier costs - $m 67 57 55 43 54
FTE Permanent 2,094 2,146 2,064 1,825 1,856
FTE Contractors 134 140 138 152 119
FTE Total 2,228 2,286 2,202 1,977 1,975

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Telecom
Financial breakdown by business unit - Gen-i
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
NZ$m NZ$m NZ$m NZ$m NZ$m
Adjusted operating revenues and other gains
Fixed 277 264 255 239 229
Mobile 125 126 120 116 115
IT Services 266 274 266 257 273
Other operating revenue 7 8 4 4 3
Other gains 4 - - 2 3
Internal Revenue 24 10 18 26 20
703 682 663 644 643
Adjusted operating expenses
Labour 159 141 146 120 120
Intercarrier costs 47 44 44 44 42
Other operating expenses 235 266 252 259 268
Asset impairments - - - 1 -
Internal expenses 63 5 19 20 20
504 456 461 444 450
Adjusted EBITDA 199 226 202 200 193
Adjusted EBITDA - Telecommunications solutions 180 199 179 171 164
Adjusted EBITDA - IT services 19 27 23 29 29
Total 199 226 202 200 193
Analysis & KPI’s - Gen-i
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
Local Service
Access Lines (000) 74 73 68 67 67
Broadband connections (000) 19 20 19 19 21
Fixed
Access 61 58 56 52 51
Voice/Calling 94 87 83 76 71
Broadband 28 29 27 26 25
Managed Data 92 88 88 85 81
Other 2 2 1 - 1
277 264 255 239 229
FTE Permanent 2,370 2,379 2,280 1,977 1,869
FTE Contractors 150 134 114 89 163
FTE Total 2,520 2,513 2,394 2,066 2,032

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Telecom
Financial breakdown by business unit - AAPT (Discontinued operation)
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14 H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
NZ$m NZ$m NZ$m NZ$m NZ$m A$m A$m A$m A$m A$m
Adjusted operating revenues and other gains
Fixed 341 261 235 233 217 266 202 185 188 189
Mobile 5 5 3 2 2 4 4 3 2 1
Other operating revenue 2 4 3 1 2 2 3 2 1 2
Other gains - - 1 - - - - 1 - -
Revenue from continued operations 22 24 21 16 14 17 18 15 14 13
370 294 263 252 235 289 227 206 205 205
Adjusted operating expenses
Labour 64 65 63 59 52 51 50 49 49 46
Intercarrier costs 208 134 118 114 95 162 104 92 93 83
Other operating expenses 38 30 34 29 23 29 24 27 23 21
Expenses to continued operations 20 17 12 12 10 16 13 10 10 8
330 246 227 214 180 258 191 179 175 158
Adjusted EBITDA 40 48 36 38 55 31 36 27 30 47
Analysis & KPI’s - AAPT
Fixed
Access - - - - -
Voice/Calling 70 60 50 51 48
Broadband 56 38 35 33 36
Managed Data 55 52 57 64 66
Other 85 52 43 40 39
266 202 185 188 189
FTE Permanent 768 751 733 703 690
FTE Contractors 14 14 8 17 10
FTE Total 782 765 741 720 700

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Telecom
Financial breakdown by business unit - Corporate
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
NZ$m NZ$m NZ$m NZ$m NZ$m
Adjusted operating revenues and other gains
IT services - - 1 2 1
Other operating revenue 33 35 22 43 47
Other gains 8 - 16 4 5
Internal Revenue 12 15 14 13 14
53 50 53 62 67
Adjusted operating expenses
Labour 39 39 33 23 20
Other operating expenses 23 22 11 18 35
Other expenses 5 - - 9 -
Internal expenses 11 12 12 22 17
78 73 56 72 72
Adjusted EBITDA (25) (23) (3) (10) (5)
Analysis & KPI’s - Corporate
Southern Cross Dividends - $m 26 32 19 37 43
FTE Permanent 435 449 428 275 185
FTE Contractors 24 29 12 18 9
FTE Total 459 478 440 293 194

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Telecom
Analysis & KPI’s - Mobile
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
Mobile (Retail & Gen-i)
Mobile revenue:
Voice revenue - $m 198 193 193 192 188
Data revenue - $m 144 154 163 166 173
Other mobile revenue1 114 121 105 92 126
456 468 460 450 487
New Zealand average revenue per user (ARPU) 6 month active
ARPU - $ per month 28.45 28.54 33.75 33.55 32.78
Postpaid - $ per month 53.25 53.51 56.43 54.84 53.89
Prepaid - $ per month 10.29 9.41 11.32 11.92 12.01
Voice - $ per month 16.48 15.85 18.30 18.03 17.06
Data - $ per month 11.97 12.69 15.44 15.52 15.71
Number of mobile customers at period end (000) (New Zealand - Group) 6 month active
Postpaid 857 893 863 908 948
Prepaid 1,157 1,123 847 895 967
Internal postpaid 17 15 13 12 8
Total mobile customers2 2,031 2,031 1,723 1,815 1,923
1 Other mobile revenue includes handset sales and mobile interconnect
2 Mobile connections exclude MVNO connections.

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Telecom Group
Costs summary
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
NZ$m NZ$m NZ$m NZ$m NZ$m
Operating expenses
Labour 347 321 321 256 266
347 321 321 256 266
Intercarrier costs
Baseband and access charges 264 262 245 236 231
Other intercarrier costs 169 123 117 106 111
433 385 362 342 342
Other operating expenses
Direct network costs 50 41 42 27 44
Mobile cost of Sales 153 183 175 163 193
IT Services cost of sales 153 164 156 163 161
Broadband cost of sales 122 119 121 127 133
Field services 28 23 25 14 17
Computer costs 46 34 39 35 38
Accommodation Costs 71 53 51 57 43
Advertising Promotions and Communication 36 27 39 32 44
Bad debts 6 2 6 8 16
Other expenses 101 101 88 90 98
766 747 742 716 787

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Telecom Group
Capex Summary
H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1 FY14
NZ$m NZ$m NZ$m NZ$m NZ$m
Major Programmes:
Optical transport network - - 14 19 22
Re-engineering - - 8 17 44
Mobile network 46 48 29 55 89
Mobile spectrum - - 54 - -
46 48 105 91 155
Revenue retention and sustain:
Southern Cross 1 3 11 - 10
Regulatory 8 7 2 2 1
Revenue retention and sustain other 116 123 107 103 100
125 132 120 105 111
Discontinued Operations:
Chorus 136 - - -
AAPT 18 22 21 23 27
154 22 21 23 27
Total Group 325 203 246 219 293
Capital expenditure is presented on an accruals basis.

TELECOM CORP OF NEW ZEALAND LTD 6-K