(Updates with closing price in second paragraph.)

Aug. 31 (Bloomberg) -- Telecom Corp. of New Zealand fell by the most in more than three weeks in Wellington after the company said its chief executive officer will leave and amid concern a structural split may leave earnings more vulnerable.

Telecom fell 3.6 percent to NZ$2.54 in Wellington. The shares, which have climbed 17 percent this year, dropped as much as 7 percent earlier today. The company is trading ex- entitlement to its 7.5 cents a share fourth-quarter dividend and a 2 cents special dividend today.

Telecom will begin searching for a new chief executive officer to replace Paul Reynolds in 2012, according to a statement. The company will also complete a planned structural split by the end of November, which will lead to the creation two independently listed companies, Telecom and Chorus, it said. Chorus owns and operates network infrastructure, while Telecom is the retail business.

“There is some concern over the break-up of earnings between the two units,” Guy Hallwright, an analyst at Forsyth Barr in Auckland, said in a telephone interview. “Some people in the market were expecting more of the earnings to be attributed to Chorus, considered the less risky part of the business.”

On a pro-forma basis for full-year 2011, the Chorus network-infrastructure unit generated earnings before interest, tax, depreciation and amortization of NZ$606 million ($517 million), while Telecom generated NZ$885 million, the company said.

Fixed Network

As part of the demerger, holders will receive one share in the Chorus unit for every five existing Telecom shares held. Telecom will remain New Zealand’s largest telecommunications company after generating revenue of NZ$5.1 billion in the year through June, it said. Chorus will own 93 percent of the nation’s fixed-line network, recording revenues of NZ$1.1 billion over the same period.

Telecom agreed to split its retail and infrastructure units prior to partnering with the government in building a high-speed broadband network throughout the country.

Chorus will be a main partner to deliver fast internet in 24 regions including Auckland and Wellington, representing 70 percent of the nation’s coverage area.

--Editor: Iain Wilson

To contact the reporter on this story: Chris Bourke in Wellington at cbourke4@bloomberg.net Shani Raja in Sydney at sraja4@bloomberg.net.

To contact the editor responsible for this story: Iain Wilson iwilson2@bloomberg.net