Another potential candidate is Chris Quin, chief executive of Telecom's information and communication technology branch Gen-i. He did not return calls yesterday.
An industry insider said any internal candidate such as Quin would be assessed and benchmarked against overseas executives with similar experience before their name was put to the board.
Quin has worked for Telecom since 1991 in sales roles, management positions and as head of Gen-i.
According to an industry source, candidates who make the cut in a CEO search were not necessarily those with the same skills or attributes as the present boss.
Telecom is a markedly different company from when Reynolds took the helm in 2007.
After winning the bulk of the Government's ultra-fast broadband contracts, Telecom's network arm Chorus was spun off late last year as a separate public company to roll out fibre lines across New Zealand.
Telecom is now a standalone retailer, free from the regulatory requirements imposed by the previous Labour Government.
It is also slimming down, and indicated during its half-year financial results announcement in February that it had cut nearly 400 jobs over the past year.
The person who is picked as chief executive might have great industry skills but not necessarily the personality to lead the company, and so could get coaching to bridge the gap, the industry source said.
"You choose someone with what is called 'headroom to grow", he said.
"The person you appoint to the job might not be fully ready to the extent they can immediately launch into a new phase, but they have the five years to grow into the job as the [company] itself grows.
"It's always a forward-looking exercise."
According to Telstra's website, McKenzie "is widely recognised for her industry leadership, her championing of regulatory reform, and is a respected commentator on telecommunications issues of national importance".
Last month, commentators speculated that Telecom's former chief operating officer, Kevin Kenrick, will make a return in the top spot.
Kenrick worked for Telecom for eight years in a variety of divisions including sales, marketing, and mobile.
He is also likely to be known to new Telecom chairman Mark Verbiest from his previous stretch with the company.
Known as "KK", he left House of Travel Holdings last year after a three-year stint as chief executive. He was national marketing director at Lion Nathan between 1996 and 1999.
Although it was believed Rob Fyfe would be a good replacement for Reynolds, the Air New Zealand boss poured cold water on that speculation last month.
CONTENDERS
Potential candidates for Telecom CEO:
* Kate McKenzie: Telstra executive
* Chris Quin: Gen-i chief executive
* Kevin Kenrick: Former Telecom chief operating officer
