More than 215,000 Telecom customers who lost cellphone services in a prolonged outage on the vaunted XT network will be reimbursed in a $5 million package by next month.

In Dunedin yesterday, Telecom CEO Paul Reynolds said the outages, which affected customers south of Taupo from last Wednesday to Friday were unacceptable and should never have happened.

Apologising repeatedly throughout the press conference, he said he hoped the company's "goodwill gesture" would be well received.

"It's about customers at heart. When something's gone wrong - and it has in this case - it's about being fair, upfront and get it fixed as quickly as possible and do the right thing."

Telecom had asked for feedback on what customers believed would be fair compensation before settling on the rebate package.

"We think and hope it's fair ... I do apologise to our customers. Telecom's very much on the front foot in going forward to put this right and to deliver through XT what the promise of the technology has."

The company would also be paying $250,000 towards community projects across the lower South Island, where the outage was most severe.

Dr Reynolds acknowledged that it was the network's second outage affecting customers south of Taupo since mid-December, which he said was "very unfortunate".

"Outages happen in all networks at some time. We hate them. I hate it with a passion. But what you have to do is act when it happens. Get to the root cause, make sure you've done all the things that you can reasonably do to give customers the service they expect, and that's what we are doing."

Affected customers do not need to contact Telecom because the company will reimburse them automatically.

Pre-pay customers will receive their credits by the end of this month, but post-paid and on-account customers will see theirs in their March billing cycle.

The company will consider individual applications for further compensation.

Alan Strong, director of Christchurch Electrical, a company left unable to send staff from one job to another for three days because of intermittent cellphone reception, was pleased about yesterday's announcement.

He said Telecom had been "brilliant" in handling the crisis.

It was "impossible to quantify" if the rebate he was expecting after yesterday's announcement (one month's worth of call plan charges, plus any extras) would outweigh any loss he faced.

"We know that it would have had an effect but it's not worth spending energy to try to work out what it was really. We're more worried about the fact that they get it sorted and offer some reliability going forward."

Labour Party communications and IT spokeswoman Clare Curran welcomed the compensation package but said she would remain in close contact with Telecom to seek assurances that its core services were reliable.

"Given Telecom is one of dozens of companies bidding to roll out the Government's national broadband network, New Zealanders deserve an assurance that its systems, maintenance and monitoring are up to scratch," she said. "It simply can't happen again."

Customers affected by degraded services on the afternoon of Wednesday, January 27:

* Pre-pay: $10 credit.

* On-account: One week's worth of call plan charges and any extras.

* Small-to-medium business and corporate customers: Two weeks' worth of call plan charges and extras.

Customers affected by outages for up to three days from Wednesday, January 27 to Friday, January 29:

* Pre-pay: $20 credit.

* On-account: Two weeks' worth of call plan charges and any extras such as data or text message packages.

* Small-to-medium business and corporate customers: One month's worth of call plan charges and extras.