Telecom's share price dropped to an all-time low yesterday after chief executive Paul Reynolds said the company could split off its network division. Shares closed down 11c at $1.85.

On Monday, Reynolds said Telecom was committed to being a part of the Government's $1.5 billion plan to roll out ultra-fast broadband internet.

Shareholders have been nervous since Reynolds confirmed the company was investigating structural separation as it is unclear which part of the business they will be a part of.

IDC telecommunications research manager Rosalie Nelson said structural separation would be a massive project for Telecom. It would be like "untangling spaghetti".

"These networks grow up like spaghetti, you have to know where to cut off. It's a big investment," Nelson said.

Temple Investment principal Paul Winton said if Telecom went through with structural separation New Zealand and consumers would be better off and the company would not be competing against the Government broadband plan.

But he added this left the retail side of the company wide open to international competitors, as such services could be offered to New Zealanders from companies overseas.

Under the rules of the Government initiative, one company cannot offer both retail and network services. Therefore, the network/infrastructure arm of Telecom, Chorus, would have to split from the company in order to be part of the scheme.

Winton said the core value of Telecom was its infrastructure and network.

"Telecom is a couple of years late to the party. The question is now whether Telecom will have a seat when the music stops."

The Government announced in April 2008 it would invest $1.5 billion into rolling out ultra-fast broadband to 75 per cent of New Zealanders over a 10-year time frame.

Winton said it was too early to predict what Telecom would look like if it did separate, and questions would be raised about where investors would sit.

Telecom claims Chorus is worth billions but the real value of the separate business units, the retail arm, the wholesale arm and Chorus, is not known, he says.

"The value in Chorus will be the ability to migrate customers from copper to fibre and prevent duplication. If Telecom, or Chorus, is in that tent, then they won't end up competing against companies such as Vector. New Zealand does not need two fibre networks," he said.

"This [announcement] is very positive for New Zealand but the question is how positive is it for shareholders. But the sooner it's done the better."

Winton said if Telecom split it would help make the Government's goals a reality and push New Zealand ahead of the world on fibre-to-the-home infrastructure, which in turn would have huge economic, health and educational benefits.

Fitch Ratings yesterday maintained Telecom's credit rating but said if the company went ahead with structural separation the rating could be cut. Fitch's present rating is A minus with a negative outlook.