Telecom New Zealand has been busy overnight selling its 18.24 per cent stake in iiNet Ltd (ASX:IIN) as part of a strategy to stop rival TPG Telecom from extending its position in the Australian market.

iiNet Ltd shares were suspended from trade at the request of the company yesterday ahead of an expected announcement in relation to the deal.

The Australian Financial Review reports that Telecom NZ’s shares in iiNet shares have been sold to institutions in a move designed to prevent TPG from buying into the telco.

The deal comes after iiNet emerged as a bidder for Telecom NZ’s struggling AAPT unit with an offer reported to be worth $60 million following previous bidder TPG Telecom Ltd's collapsed offer.

The newspaper reports that TPG Telecom had previously offered more than $200 million to buy AAPT.

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