Telecom New Zealand reported a 30 per cent drop in underlying profits in the fourth quarter as the country’s largest company by market value suffered from reduced margins in the face of stiff competition from Australia’s Telstra and the UK’s Vodafone.

However, the company’s warning that profits in the current financial year could drop as much as 30 per cent triggered a sharp sell-off in the shares, which closed 21 cents or 7 per cent lower at NZ$2.69.