The Government will invest $929 million directly into Telecom's network arm, Chorus, following Telecom's success in winning the deal to build the bulk of the ultrafast broadband network.

Telecom has won the bulk of the contract to roll out ultrafast broadband, the Government has announced.

Enable Networks, which is owned by Christchurch City Council, will build the network in Christchurch, Rangiora and surrounding areas. However, Telecom said it intended to enter into discussions with Enable which could see Chorus take up to a 50 per cent stake in that venture.

The long-awaited decision paves the way for the break up of Telecom into two listed companies by the end of the year and the start of New Zealand's biggest-ever infrastructure project.

Telecom saw off competition from electricity lines companies and fibre companies that had coalesced under the banner of the Regional Fibre Group for the contract in 24 of the 33 cities and towns to be covered by the scheme, including Auckland and Wellington. Together they account for about 70 per cent of the network.

Its share price was up 13 cents to $2.41 during mid-morning trading.

Wel Networks and Northpower were awarded separate contracts to build about 16 per cent of the network in December and are responsible for building the network in Hamilton, Tauranga, Whangarei, New Plymouth, Whanganui, Tokoroa and Hawera.

Telecom's ex-pat British chief executive, Paul Reynolds has estimated the cost of the UFB network at about $5 billion to $6b. He is expected to stand down following the separation of the company, which remains subject to approval by shareholders.

The Government is supporting the UFB scheme through an investment of $1.35b that is designed to reduce the financial risk for network builders. Telecom, Wel, Northpower and Enable will need to pay back the government investment, but only as customers connect to the network and begin purchasing services.

The network is due to be completed by 2020, providing three-quarters of homes with the choice of 30 or 100 megabit per second broadband over shared fibre connections. Businesses and other "priority users" will be able to get dedicated fibre connections, initially capable of providing speeds of 1 gigabit in either direction.

Chorus said its 30Mbps fibre service would wholesale for $37.50 a month and its 100Mbps service for $55. There would be no connection charge for homes.

The speeds should increase by many orders of magnitude, over time, as the cost of technology that allows more data to be transmitted over fibre comes down.

The Minister for Communications and Information Technology, Steven Joyce, says the UFB will provide an economic boost to New Zealand as we leapfrog many of our competitors to become one of the most wired countries in the world.

Telecom said half of the Government's $929m invetsment in Chorus will be in the form of equity and the other half will be a loan.