Telecom New Zealand could be split into two listed companies giving shareholders exposure to the fortunes of both Telecom's retail business and its fibre business, chief executive Paul Reynolds has suggested this morning at an investor briefing in Sydney.

Reynolds introduced a de-merger as a new alternative to achieve the structural separation Telecom believes is inevitably required if it is to participate in the government's $1.35 billion ultra-fast broadband project.

Speculation on how Telecom would split itself has centred so far on the partial or total sale of Telecom's Chorus unit, either in a trade sale or by being nationalised - an option ruled out this week by Prime Minister John Key and Telecommunications Minister Steven Joyce.

A fourth option for Telecom is non-participation in the UFB project and to go it alone and compete with the new operator, Reynolds said, although such a business would be weighed down by what he described as having gone from one of the least regulated to the "the most heavily regulated" telecommunications market in the world.

Reynolds said a partial sale of Chorus was "unlikely to deliver sufficient value", given the current political and regulatory climate, which has radically weakened Telecom's market position and future outlook as telecommunications infrastructure moves from Telecom's copper-dominated network to very high-speed fibre.

A full sale of Chorus was a possibility, "but we think it might cost a bit more," Reynolds said. "It requires a significant lift in the value of the demerged business."

The advantages of a de-merger option might be to attract a better regulatory outcome for both businesses while allowing shareholders a bet on which of the two was the better long term proposition.

"Which of these businesses will be more successful?" said Reynolds.

"Who knows? Shareholders would remain invested in both and de-risked from some of the uncertainty in the future."

Telecom shares were trading 0.5 per cent higher this morning at $1.91, having found support in the last day as the country's largest listed stock and contributor to the NZX50 Index plumbed historic lows in the uncertainty created by the conversion of regulatory issues and the UFB project.