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Nicholas Grove is a Morningstar journalist.

Telstra (TLS) on Thursday confirmed it will sell TelstraClear, its wholly owned New Zealand subsidiary, to Vodafone New Zealand for $660 million.

It will also return approximately $380 million in cash to Australia via a pre-completion dividend, which is already consolidated in group results, Australia's biggest telco said.

Vodafone New Zealand will acquire TelstraClear's voice and data-based services, network infrastructure and New Zealand customer base, Telstra said in a statement.

Telstra chief executive David Thodey said the transaction has "a strong strategic rationale and is good for Telstra's shareholders".

"The deal is a natural one, bringing together TelstraClear's fixed telecommunications and data products and corporate client base with Vodafone New Zealand's mobile offering and retail customer base," Thodey said.

"The transaction is consistent with Telstra's overall strategy and capital management framework that we outlined in April."

Telstra has also agreed with Vodafone New Zealand to ensure service continuity in New Zealand for its trans-Tasman customers.

The sale is contingent on New Zealand regulatory approval, including that from the New Zealand Commerce Commission, Overseas Investment Office and the Ministry of Business, Innovation and Employment.

Telstra said it expects this approval to take a number of months.

The sale proceeds, when received, will be incremental to previous guidance for three-year excess free cash flow of $2-3 billion, Telstra said, subject to the National Broadband Network (NBN) rollout schedule and market conditions.

Telstra said it will also record an accounting charge of approximately $130 million in fiscal 2012, and an additional charge of approximately $130 million in fiscal 2013, largely due to unrealised foreign currency losses.

Morningstar head of equities research Peter Warnes described the sale of TelstraClear as "a positive" for Telstra.

"In fiscal 2011, an EBIT (earnings before interest and tax) loss of $28 million was incurred. It (TelstraClear) has not been profitable in the past seven years," he said.