Telecom New Zealand is sticking with its loss-making Australian arm, AAPT, despite writing the business down by $NZ1.3 billion ($1.16 billion) in the year to June and forecasting further red ink for at least another two years.

The AAPT write-down caused Telecom NZ to report a loss for the year of $NZ435 million on revenue of $NZ5.75 billion. The underlying profit, which excludes the impact of abnormal items, was in line with market expectations at $NZ820 million, down 4.3 per cent on 2005.