Reach is one of Asia's biggest telecoms operations

Telstra cut the book value of Reach by $546m to zero, a change which will be included in results next week.

"I am embarrassed by the need to make these write downs," Telstra chief executive Ziggy Switkowski said.

The joint venture was formed by Telstra's global wholesale business and Hong Kong Telecom, owned by PCCW, in 2000 to sell bandwidth for voice, data and the internet.

PCCW reduced the book value by $1.06bn to $507.8m, a move which will hit profits when it reports full-year results in March.

Market rates

Mr Switkowski said neither Telstra nor PCCW planned to put more money into the joint venture.

Falling revenues at Reach, because of strong competition in the broadband market, was to blame, the companies said.

Reach's revenues were subsidised by above market rate contracts with Telstra and PCCW which made up about 40% on earnings, Mr Switkowski said.

Those contracts have finished and the joint venture partners now pay the market rate for bandwidth.

Telstra shares fell to five-year lows after the announcement, closing down 3.9% at A$4.20 while in Hong Kong, PCCW fell 5.1%.