Telecom’s American depositary shares fell 9% today as US investors sold on news of the company’s Moody’s downgrade.

Yesterday, the ratings agency downgraded Telecom from A2/P-1 to A3/P-2.

Moody's vice president and senior analyst Ian Lewis said Telecom faced the combined effects of increased competition, tighter regulatory requirements and weak economic conditions.

Mr Lewis said Moody’s expected Telecom's capital transformation programme, started in April 2008, as well as a continuation of high dividends, would lead to negative free cash flow and rising debt over at least the next one to two years.

Telecom’s American depository receipt (NZT) was hit hard all day, with its shares trading on heavier than usual volume of 340,931 to finish down 9% to $US6.27 on the NYSE today.

The company's NZX listd shares (TEL) have been flat since the downgrade, flagged well in advance by CFO Russ Houlden. Trading was within a 1 cent range late yesterday and early this morning.