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Telecom Shareholder Nominates New Board Candidates

August 11, 2008

Telecom New Zealand Shareholder Nominates Two New Board Candidates

Elliott International, L.P., together with funds under common management (“Elliott”), a 30-year-old private investment firm and shareholder in Telecom Corporation of New Zealand Ltd. (TEL.NZ), today nominated two local, independent, candidates to the Board of Directors to provide new thinking and new ideas regarding the future strategic direction of the company.

The Board candidates, who will stand for election at the Annual General Meeting on October 2, are Mark Tume, from Wellington, an experienced director with a banking and funds management background, and Mark Cross, from Auckland, who has a global financial markets background specialising in utilities. The candidates have agreed to stand on the basis that, if elected, they will be independent and will represent the interests of Telecom and all of its shareholders. Elliott believes that the candidates’ understanding of investor needs will create a cooperative and energetic environment between the Board and its shareholders.

“For almost a year we have been trying to talk to Telecom about some of our ideas and concerns regarding the affairs of the company. Telecom’s share price has been in decline over the past few years and once again, following disappointing year end results, its share price is around a fifteen year low. In our view, Telecom’s performance languishes behind that of other key telecommunications players in the international market, and we believe this is partly due to an unclear and outdated strategy. Shareholders and customers remain dissatisfied with Telecom’s progress,” said James Smith, a portfolio manager at the fund.

Elliott believes that the appointment of Mark Cross and Mark Tume will provide a fresh perspective to the current challenges Telecom faces. Both Mark Cross and Mark Tume have considerable strengths in the finance and investment industry, strong commercial and strategic acumen and unique skills that will provide extra depth and new ideas for Telecom. Their expertise in financial strategy will be of particular value to the Board.

According to Elliott, Telecom needs to take immediate and serious action to improve its situation and to consider and debate new ideas that will benefit customers and shareholders.

One idea that Telecom has been asked to consider by Elliott over the past year is ‘structural separation’ -- the next logical step in the operational separation process that Telecom began earlier this year. This idea involves a simple structural split of Telecom’s retail business (‘NewCo’) from the remaining wholesale and network business of Telecom (‘NetCo’). This structural separation idea was first proposed by Elliott in November 2007 when Elliott and other interested groups publicly commented on Telecom’s operational separation plan. The proposal is still available on Ministry for Economic Development’s website at http://www.med.govt.nz/templates/ContentTopicSummary32573.aspx

Since that submission, Telecom’s management and the Board have been provided with extensive research and analysis on the structural separation proposal, including reports from global consultancies on key feasibility issues - regulatory and legislative implications, cost, and technical issues. The research also outlines the significant benefits the proposal could bring for Telecom, its shareholders and customers.

ENDS


About Elliott

Founded in 1977, Elliott is one of the oldest private investment firms in the United States under continuous management with an outstanding track record. The firm has a history of working with management teams, regulatory bodies and shareholder groups to deal with complex issues and achieve mutually beneficial results. Elliott has been involved in both regulatory processes and corporate restructurings related to telecommunications companies around the world.

Biography of Mark Tume

A professional director with significant experience in the infrastructure sector, Mark Tume currently holds a number of directorships with listed and unlisted companies, including Infratil, Transpower New Zealand Limited, New Zealand Refining Company, and Ngai Tahu Holdings Corporation. He is also a member of the board of the Guardians of The New Zealand Superannuation Fund. As a member of Transpower’s board since 2002, Mr. Tume has a strong understanding of the issues associated with Transpower’s evolution from self-regulation to the current regulatory environment.

Mr. Tume has had a 20-year career working in the New Zealand banking and funds management industries, and is a former president of the NZ Financial Markets Association. He was previously Head of Funds Management at the Bank of New Zealand and has held a number of senior roles within the finance industry specialising in investment, asset and liability management, capital markets and risk. He holds a Bachelor of Business Studies and a Diploma of Banking (Treasury Studies) from Massey University.

Biography of Mark Cross

Mark Cross has 20 years’ experience in the financial sector both in New Zealand and overseas, for the last twelve years in London and Sydney. Most recently he was Managing Director and co-head of the European natural resources mergers and acquisitions team for Deutsche Bank, co-leading a large team of bankers in the regulated utilities and energy sector. In this role, he led a number of significant transactions, working closely with both unlisted and public companies on M&A transactions and across debt and equity capital markets. He has a comprehensive understanding of utility regulation and investor perspectives on utility valuation.

Prior to Deutsche Bank, Mr Cross held previous roles with Lloyds Bank (Australia) and Southpac (NZ). His investment banking background has given him extensive commercial experience and insight as an advisor to boards and senior management teams on strategic and financial issues.

Mr Cross holds a Bachelor of Business Studies in Accounting and Finance from Massey University, and is a qualified chartered accountant. After an extensive career both in New Zealand and abroad, Mark now lives in Auckland with his family.

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