Telecom's half-year profits have slipped by almost a third because of the effects of regulatory changes and intense competition.
The telecommunications company made $165 million in the final six months of 2010 - 32% less than in the same period a year earlier.
Revenue fell more than 3% to $2.5 billion, but cost-cutting shaved 5% from the company's expenses.
Changes to the telecommunications service obligation and rural broadband levy also affected profits.
The Government ended an annual compensation payment to Telecom for supplying free local calling to uneconomic customers. A levy on all phone firms was imposed instead.
Telecom chief executive Paul Reynolds says the patchy economy is reflected in its results.
The company is maintaining its full-year earnings forecast and expects earnings of $330 - $370 million in the year to June.