The chief operating officer of the consumer division, Kevin Kenrick admitted the launch of the Yahoo!Xtra Bubble service had had a 'miserable start'.
Telecom is making an unprecedented $7 million apology to customers for problems with its new email service.
The company yesterday made an about-turn and admitted it had let the online community down after earlier refusing to compensatecustomers for email problems.
Telecom, which announced a net profit of $955
million in the year to June 30, said it would give a total of $1 million to four customer-selected charities as a peacemaker.
Affected Xtra customers will also receive a week's free internet access. Telecom estimates the deal will cost it $5 million to $6 million.
The chief operating officer of the consumer division, Kevin Kenrick, acknowledged "the inconvenience and frustration" of customers and admitted the launch of the Yahoo!Xtra Bubble service had had a "miserable start".
The service was touted as providing at no extra cost "an exciting range of new services that will change the way you use the internet".
Instead, thousands of customers were shut out from their email, with many complaining of continuing difficulties, since the upgrade more than a week ago.
Mr Kenrick said: "We are aware of how important reliable email access is, and apologise to each customer whose service was affected."
Consumers' Institute chief executive Sue Chetwin said the offer was the "very least Telecom could do".
"It's a very big apology but it's also a very big mistake."
Chris Dunn, a Kohimarama industrial real estate agent, was among several readers to contact the Herald complaining about disruptions to his Xtra email service.
Mr Dunn said he found out from the Telecom helpdesk that most of his legitimate email had been marked as spam for the past two weeks and he was "having a total nightmare" trying to sort through hundreds of messages.
He was afraid he had missed out on business as many of his clients were from overseas and used email to communicate with him.
He said he could be looking at around $80,000 in lost revenue.
The Herald has received scores of complaints from Telecom customers angered by waits of an hour or more when calling helpdesks.
Alan Walker, general manager of Video Distributors in Auckland City, said his company's smart-phone system, which used to receive email, had collapsed since the upgrade.
His efforts to get the issue resolved had met "an absolutely appalling response" from Telecom.
"I eventually got through to a helpdesk a few hours later but they referred me on to their technical department. I then got an answer to refer to a website to sort out the problem myself."
Mr Kenrick said a fault with the registration process to the new email service had created the problems.
Telecom had tried to augment its contact centre staff but with more than 500,000 email customers and more than 800,000 different email addresses to deal with, he conceded that people might still have to wait.
He could not give an assurance that the problems had been completely resolved.
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