KEY POINTS:
Telecom has revealed in-depth details of the future risks the company faces and published a copy of new chief executive Paul Reynolds' employment contract as part of its New York Stock Exchange disclosure requirements.
Telecom's filing with the exchange shows the company could suffer "substantial adverse effects" on its operational and financial performance under regulatory changes proposed by the Government.
Telecom has American depository shares listed on the New York exchange which allow local investors to buy shares in Telecom in US dollars.
The NYSE listing rules require companies to file detailed annual reports - the US version of Telecom's latest report runs to almost four times the length of what New Zealand investors saw this month.
Included is a copy of the employment contract signed by Reynolds in late June when he agreed to take over from Theresa Gattung as Telecom chief executive.
In addition to a base salary of $1.75 million, plus a $1.75 million annual performance incentive, Reynolds is eligible for a long-term incentive of up to $1.75 million in performance share rights.
Telecom will also pay for 10 business-class flights between New Zealand and Britain for Reynolds and his family, pay relocation costs and chip in $100,000 a year towards accommodation for the first two years.
He is expected to be joined in New Zealand by his wife and youngest son, leaving his twin daughters in Britain to begin tertiary studies.
Reynolds is required to give six months' notice when resigning his position, however that falls to three months if the Telecom board is unhappy with his performance and terminates his contract.
Detailed in 11 pages of "risk factors" is the possibility that regulatory changes being introduced by the Government would cut into the future revenues.
Telecom is concerned that offering competitors full access to its local copper loop - local loop unbundling - would affect performance beyond the middle of next year.
It said draft pricing for access to its network released by the Commerce Commission - prices were set at $16.49 a customer a month for urban areas and $32.20 for rural areas - were at the lower end of expectations.
"Should final pricing and non-price terms remain in line with the draft determination, this could have a significant and adverse effect on Telecom's fixed line business, its competitive position and the profitability of its business, particularly beyond the 2008 financial year," the report said.
Telecom said its mobile market share - estimated at just under 50 per cent - could also be hit as the company moves to replace its existing CDMA mobile network.
Telecom said it could also lose customers who regularly travel to Australia when Telecom's roaming partner Telstra switches off its CDMA network in January, up to 10 months before the availability of Telecom's replacement network in late 2008.
Telecom said it might be forced to write down the value of its older mobile network which it guaranteed to run in tandem with the new network for at least five years.
FULL DISCLOSURE
* Documents filed with the New York Stock Exchange detail Telecom's concerns as it enters a new business and regulatory environment.
* Telecom provided US investors with detailed financial and business reports as part of strict US disclosure requirements, a condition of its New York listing.
* Filings include the employment contract signed by incoming chief executive Paul Reynolds.
