Following on from Moody's recent downgrading of its ratings outlook for Telecom, Fitch has also downgraded its credit rating of the company to 'Rating Watch Negative'.

As with Moody's, the downgrade is a reaction to the announcement of Telecom's pending structural separation as a result of its deal to fulfil its share of the government's UFB contracts.

After the demerger, Telecom will no longer own local access fixed networks.

The announcement from Fitch said from a bond holder perspective it is key that "the agreement with Crown Fibre Holdings ... on the UFB will result in the disposal of significant assets into a separately listed entity."

Once details emerge of the capital structure and financial policies of the remaining Telecom entity, Fitch may reassess the rating. Possible outcomes include an affirmation of the 'A-' ratings or a downgrade of the ratings. Any rating downgrade would be between on to two notches."

Fitch's statement to the press said the 'Rating Watch Negative' reflects "the loss of the distinctive advantage of owning both fixed-line and mobile platforms."