Wednesday, April 21, 2010

Regulator to get tougher on phone companies

Telstra abuses a big factor behind the change

TELEPHONE, mobile and internet providers will face hefty fines for breaching tough new customer service standards that will replace cumbersome voluntary industry codes.

Amendments to the Telecommunications Act will give the Australian Communications and Media Authority power to write consumer protection regulations and issue penalties of up to $250,000 for corporations and $50,000 for individuals in breach of the standards.

At the moment ACMA can issue infringement notices to broadcasters, but only has power to issue a formal warning to telecommunications companies before pursuing matters through the courts.

The Communications Minister, Stephen Conroy, said the changes would stem the flow of complaints made to the Telecommunications Industry Ombudsman; there had been a 118 per cent increase in customer service complaints last year.

The chairman of ACMA, Chris Chapman, said he would begin a formal inquiry into customer service in the telecommunications sector to "shine a strong light on complaints handling and the unresponsiveness of the industry to its customers".

He said codes developed by the industry took too long to develop and were cumbersome to change, leaving customers exposed to bad or deceptive service.

Telstra at work

An overzealous Telstra salesman nearly cost Sue Abbott, of Scone, $1400 after he convinced her to upgrade her mobile phone last year. But instead of the better deal she was promised, Ms Abbott promptly saw her bills double, including charges for a data plan she did not want or need.

Ms Abbott complained to Telstra, which caused her to run up even higher bills as she was "either left on hold or shipped around the world". "I would ring and try and explain my predicament and no-one listened. No one ever rang me back when I asked them to, or even offered to."

After a nine-month impasse, Telstra contacted Ms Abbott last week to say the charges would be erased from her account.

She said the inquiry was long overdue. "We're so in the dark about what the telcos can do," she said.


Monday, April 19, 2010

Fleeing customers dent Telstra revenues

And it's no wonder customers are fleeing. Just ask almost any Telstra customer who has had problems with them

TELSTRA is unlikely to meet its current revenue forecasts, analysts have warned as they highlighted a decline in customer numbers as the company's biggest challenge.

Analysts and investors say declining customer revenue is a more significant threat to Telstra's long-term revenue than the proposed national broadband network. They are urging the company to cut retail prices to arrest customer attrition.

Telstra's cash flow was likely to be $400 million less than forecast this financial year, at $5.6 billion, a Goldman Sachs JBWere analyst, Christian Guerra, said in a research note.

His forecast is based on the decline in fixed-line customers and uncompetitive mobile and broadband plans. "The [first half of 2009-10 financial year] result highlighted some of the most concerning operating trends seen in Telstra's recent history," Mr Guerra said.

Its mobile phone plans were the least competitive, and its customer growth declined by 83,000 in the last six months last year. "Telstra's dilemma is clear. It does not want to lower its mobile pricing to accelerate the shift of high-margin traffic away from its fixed network and onto Australia's three mobile networks," Mr Guerra said.

Telstra's recent attempts to improve fixed and wireless broadband packages would slow customer attrition rates, but the prices were still uncompetitive, he added.

On December 18 Telstra warned sales revenue in 2009-10 would be lower than previously forecast because customers were leaving its fixed phone and broadband services faster than expected.

But the long-term trend was a more significant threat to Telstra's long-term profitability than the government's proposed broadband network, said a Perennial Growth partner, Richard Macdougall.

Institutional investors could expect Telstra's share price to weaken further if it does not make a deal with NBN Co, because that would add even more uncertainty to the company's future.

The government has threatened to forcibly split Telstra's retail network, divest its interest in Foxtel and deny it wireless spectrum if it does not migrate its fixed line traffic to the national broadband network.

Mr Guerra said a deal with the government was nearing and this could boost Telstra's share price.

Meanwhile, the Federal Court in Melbourne will hear a case this morning between Telstra and the Australian Competition and Consumer Commission on alleged breaches of the Trade Practices Act and Telecommunications Act.

The regulator alleges Telstra denied its competitors access to seven metropolitan exchanges to connect equipment to customer homes.