iiNet Ltd (ASX:IIN) has emerged as a potential bidder for the AAPT unit of Telecom New Zealand.

The Australian newspaper reports that iiNet has submitted a proposal to Telecom New Zealand that would see AAPT split up, with its retail and wholesale arms sold separately.

The newspaper says that iiNet is looking to buy AAPT's consumer business following the failure of TPG Telecom's attempt to takeover AAPT's entire operations.

Telecom NZ had been looking to sell the telco in a $300 million deal but is hoping to split the business in parts and keep its wholesale fibre division for a possible sale to the federal government's National Broadband Network (NBN).

iiNet Ltd reported a $25 million net profit in the year to 30 June 2009.