Telstra is selling its New Zealand subsidiary TelstraClear to Vodafone for $NZ840 million ($A660 million).
The telco also announced it would return about $NZ490 million ($A380 million) in cash from the sale to its Australian business.
Telstra said proceeds from the sale of TelstraClear would be incremental to its expected three-year excess free cashflow of $A2-3 billion.
However, Telstra said it would also record an accounting impairment charge of about $A130 million in its 2012 financial year plus an additional charge of the same amount in 2013.
The charges relate to unrealised foreign currency losses.
Under the deal, Vodafone will acquire TelstraClear's voice and data-based services, network infrastructure and customer base in New Zealand.
Telstra chief executive David Thodey said the sale of TelstraClear fitted with the telecommunication giant's strategy and capital management framework outlined in April.
"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," Mr Thodey said.
The deal is subject to regulatory approval in New Zealand.