TeamTalk shareholders overwhelmingly back a deal to sell a controlling stake in rural broadband unit Farmside to Vodafone New Zealand, effectively rejecting a takeover by Spark New Zealand.

Wellington-based TeamTalk asked shareholders to approve a deal where Vodafone would pay $10 million for a 70 per cent stake in Farmside, with an option to buy the remaining 30 percent holding for $3 million, valuing the unit at a premium to independent adviser Grant Samuel's view.

At a special meeting in Wellington, 99.6 per cent of votes cast by 303 shareholders were in favour of the deal, while seven investors holding 0.4 per cent were opposed.

More than 40 people attended the meeting, where TeamTalk chairman Roger Sowry and chief executive Andrew Miller put forward the case in favour of the deal, which would reduce the company's debt to a more manageable level faster than anticipated and enable an earlier return to dividend payments, and fielded a dozen or so questions from the floor.

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Approving the transaction meant Spark's 80 cents per share takeover bid, valuing TeamTalk at $22.7 million, was defeated, with the country's biggest telecommunications company having warned the offer would lapse if the resolution was passed.

Spark has since confirmed the offer has lapsed in a statement to the NZX.

Spark's offer was rejected by TeamTalk's board as being too low and opportunistic and the companies traded barbs over Grant Samuel's independent valuation of $1.52-to-$2.11 a share for the smaller firm.

Sowry acknowledged that the board made the wrong call to buy Farmside in 2012 for $31 million in cash and scrip and had "taken the hit on the balance sheet for the last two years".

However, he was more optimistic about the future partnership with Vodafone, saying "we can actually turn this company around" and that the transaction "supported the directors' view that the value of TeamTalk shares is at the higher end of that range".

Vodafone chief executive Russell Stanners told TeamTalk shareholders the acquisition would let his company "move further into the rural market" which Vodafone has been increasing its exposure to over the past five or six years.

When asked why Vodafone didn't simply mount a rival takeover bid to Spark's, Stanners said his company already has fibre assets in Wellington's CBD, and that buying the assets made "no sense" when a partnership could cut costs for both parties.

Miller said a partnership with Vodafone would help lower the cost of putting 15 percent of its Wellington fibre network underground when the city's overhead trolley bus wires are removed, and was also optimistic about TeamTalk's mobile radio business which had seen higher demand as a result of health and safety legislation and emergency responses needing greater and more immediate coverage than cellular, which spans 55 percent of New Zealand's geography.

When questioned about the longevity of TeamTalk's board, Sowry said the company's directors were reviewing their governance arrangements and will make an announcement in the next couple of months.

TeamTalk shares were unchanged at 80 cents, while Spark shares rose 1.1 percent to $3.54.