Telecom (NYSE: NZT - News) New Zealand has issued a second profits warning in just over two months after announcing it would spend NZ$574m (US$356m) on its next generation mobile network during the next two years.

The company warned that current year earnings guidance would be as much as 8 per cent lower than it had previously estimated. In August, the southern nation's biggest telecoms group reported a 30 per cent drop in its fourth quarter profits and warned of a similar size drop in its current financial year.

The former state-owned monopoly, which has been forced by the government to split into three units and open its network to rivals, said the higher spending would result in profit for the year ending June 30 in the range of NZ$460m-NZ$500m, compared with its previous forecast of NZ$500m-NZ$540m.

Telecom New Zealand has been the target of an activist campaign by Elliott Internal, a US hedge fund, that last month unsuccessfully attempted to have two extra independent non-executive directors elected to the group's board.

Elliott, which owns about 3 per cent of Telecom New Zealand, is concerned about the group's languishing share price and its capacity to fund its mobile strategy. Shares in the group closed down 5.4 per cent to a 16-year low of NZ$2.44 on Wednesday.

Elliott has also called for the separation of the group's retail arm from its network. The US hedge fund wrote to Telecom New Zealand's shareholders saying they had been deprived of value because the "current board and management have failed to overcome the challenges facing Telecom for the past several years".

It also warned that the group's profits were expected to fall over the next two years.

Telecom New Zealand on Wednesday said that earnings before interest, tax, depreciation and amortisation could decline by between 5 and 8 per cent, higher than the 4 to 6 per cent fall it had previously forecast.

The company said it would introduce its 3G service to 97 per cent of New Zealand by June, about a year ahead of Vodafone, the UK telecoms group.

Paul Reynolds, chief executive, said the new mobile network would have the best nationwide coverage and the fastest internet on mobile phones.

It said the extra spending on the 3G network would lift total capital expenditure to NZ$2.4bn over the next two years.

Telecom New Zealand added the NZ$574m cost for the 3G network would be mostly covered by existing funding facilities.