Australian internet service provider TPG Telecom Ltd has entered into a binding agreement with Telecom New Zealand to purchase the latter's Australian unit AAPT for AU $450 million.

Proceeds of the sale will be used to repay debt, the company said. Further guidance will be provided during its first-half profit announcement on Feb 21 on how it will spend the remainder.

"The sale of AAPT is consistent with this strategy and with our desire to focus principally on our New Zealand operations and on the needs of New Zealand customers," Simon Moutter, Telecom Chief Executive, said in a statement.

A man talks on the phone as he surfs the internet on his laptop at a local coffee shop in downtown Shanghai November 28, 2013. China's campaign against online rumours, which critics say is crushing free speech, has been highly successful in "cleaning" the Internet, a top official of the country's internet regulator said on Thursday. REUTERS/Carlos Barria

"AAPT is performing well. David Yuile and his management team have done an impressive job during the last three years to simplify, stabilise and reshape the company."

Just at the start of 2013, Telecom implied it wants to focus and work on mobile and data operations, essentially veering away from the infrastructure space, in order to improve revenue growth.

In October, the inevitable happened when Telecom announced AAPT was up for sale. The company could be divested as much as AU$403.5 million that time, according to Australian media.

Telecom said it expects to use the sale proceeds to repay debt and will provide further guidance at its first-half profit announcement on Feb. 21. The sale is expected to be completed on Feb 28.

Stocks of both Telecom New Zealand and TPG Telecom Ltd jumped on the news. Telecom's shares hit to NZ$2.325, a jump of 1.8 per cent while TPG Telecom investors enjoyed a 15 per cent expansion.

"It gives them access to a part of the market which is attractive to them. They should be able to get some synergies out of this business," Paul Harrison, Managing Director at Salt Funds Management, told Reuters.

"It was the only business Telecom had in Australia, so it makes more sense for a local operator to own it than Telecom."