Wake-up call: how Telstra’s ‘unreasonable’ price rises may cause customers to hang up | Telstra

Telstra has long maintained the claim that it has better and much wider mobile coverage than its rivals to justify its higher pricing premium, which has accelerated in recent years.

But the telco’s recent changes, which include steep price increases and the closure of its cheaper “starter” plan to new users, combined with a dramatic rejection of coverage claims by the industry regulator, risk stalling many of its traditional customers, according to consumer advocates.

Telstra recently announced sweeping price changes, including increasing monthly fees on its mobile plans, in a major money grab for Australia’s largest telco.

Telstra’s standard monthly mobile plan will increase from $70 to $74 for 50GB of data, representing an aggressive second price increase in less than a year.

The announcement paved the way for rivals, including Optus, to make similar increases. Vodafone, which is owned by TPG, also announced some price changes.

This is all happening at the worst possible time for consumers, many of whom are grappling with rising mortgage rates and unstable oil prices as inflationary pressures reignite.

Investment bank UBS recently observed that many retailers, including telcos, do not yet believe consumers are under enough financial pressure to significantly change their spending habits, allowing them to weather price increases.

Indeed, Telstra increased its retail mobile customer accounts to 581,000 in the most recent six-month reporting period; But that was before interest rates rose and oil prices skyrocketed.

Carol Bennett, chief executive of telecoms consumer advocacy group ACCAN (Australian Communications Consumer Action Network), says the telco’s price increases are “unreasonable” given it is reporting strong profits. Telstra shares are also trading near decade highs, up nearly 25% in the last 12 months alone.

“This is starting to become a pretty significant issue for people’s overstretched budgets, especially those on lower incomes,” Bennett said.

“This is disproportionate because customers should not be spending more than 2% of their budget on connectivity and Telstra is asking people to choose between this as well as other things like food, petrol and essentials.”

increased profit

While Telstra has always charged high for mobile services, the price difference used to be smaller and it has historically offered more data than its rivals to make up for its higher prices.

Rewind to 2022 and Telstra offered 40GB on its standard mobile plan, compared to Optus’ 30GB, and charged just $9 more per month, according to Canstar Blue’s analysis.

Once the latest increases take effect, Telstra will charge $14 more per month than Optus on the same plan but provide 10GB less.

Optus’s high-profile network failures in recent years have left consumers without a real rival to Telstra, allowing the larger telco to lure customers away from its rival and raise prices more safely.

Telstra says the price increases are necessary because it needs to invest in the “performance, reliability and security” of its mobile network.

Telstra says this includes expanding and upgrading its 5G network and improving measures to protect customers from fraud. The telecommunications company says the communications industry has delivered real increased service and falling prices to consumers over the past decade.

Telstra’s financial results were strong. Mobile has seen steady growth in revenue, has a modest level of debt, and has participated in significant share buybacks; An application used to distribute excess cash.

In its latest half-year results, there was a nearly 10% increase in net profit to $1.2 billion.

Canstar Blue’s utilities editor Tara Donnelly says although major telcos have pointed to network investments to justify recent increases, this is no reason for customers to foot the bill.

“Instead, consumers should take these increases as a signal to shop,” says Donnelly. “Better plans and prices are available, but only for those who seek them.”

Telstra hopes some customers will switch to lower-cost brands such as Boost and Belong; Although prices are being increased there too.

mercy decision

Telstra’s high premiums may have become even harder to justify following a new ruling from the Australian Communications and Media Authority (Acma).

The regulator this week announced it will measure mobile signal coverage for the purposes of coverage maps, in a decision that sees Telstra’s advertised coverage area reduced by around 1 million sq m around Australia (an area larger than the size of New South Wales).

While Telstra fought against Acma’s decision that areas with signal levels below -115 decibel-milliwatts (dBm) would be considered “no coverage” areas, TPG and Optus agreed with the regulator.

Shailin Sehgal, Telstra’s group director of global networks and technology, says areas currently labeled “out of scope” are used by 1.5 million customers a month and 57,000 emergency calls are made to these areas each year.

“Nothing has changed on Telstra’s network,” Sehgal said. “No sites have been closed. No coverage has been removed… The only thing that has changed is what will be shown on a comparable map.”

Telstra argues it must take steps to ensure customers are not confused and have appropriate information about the services it provides.

Sehgal says this could involve releasing another coverage map separate from the version required by Acma.

However, in the presentations made to the investigation informing Acma’s decision, the discomfort in the regions was remarkable.

The National Farmers Federation argued that coverage maps should “set realistic expectations” so people know that values ​​lower than -115 dBm will result in reduced reliability.

The Central Highlands Volunteer Ambulance Association says Telstra’s coverage maps are “often misleading and deceptive”.

“They often overrepresent the geographic scope of trusted service, creating a false sense of security for travelers and emergency personnel,” the association says.