Telstra has long profited from its reputation of having the largest and most stable mobile telco coverage in Australia, allowing it to charge premium prices. This was reported by Qazaqyia.kz citing The Guardian.
When its main rival, Optus, suffered a series of operational issues that culminated in a damaging triple zero outage last year, Telstra attracted new customers. It benefited again last month, when TPG-owned Vodafone Australia recorded an outage. Now Telstra is grappling with its own crisis, after it plunged into a nationwide outage for most of Wednesday morning, affecting millions of customers including those dialling triple zero, and attracting fierce criticism from politicians.
Omkar Joshi, chief investment officer at Sydney-based Opal Capital Management, says the outage dents Telstra's ability to charge a premium "if it is not delivering a premium service". "One of the main differentiators to its competitors was that Telstra didn't experience network failures. Now that they have, Telstra is lumped into the same bucket," Joshi says.
Telstra charges $74 a month for its popular SIM-only 50GB mobile plan, $14 more than Optus's equivalent product. Vodafone's rival plan costs $58 a month and has the most data. Telstra tends to receive a bump in customer numbers every time a rival suffers a significant outage, and has had little reason to compete on price.
The immediate impact on Telstra's share price has been modest, with its stock price falling 3% on Wednesday before recording a partial recovery. But as the number of outages climbs across the sector, the chances of more and stricter regulation increase. The repeat triple zero outages elevate the problem into a major issue of public safety. "More regulatory intervention and focus is never a positive from a stock perspective," Joshi says.
Telstra shares have long been a favourite among retail investors because it enjoys a dominant share of the telco market, while delivering a predictable income stream to investors via dividends. But it is facing several headwinds that could disrupt its market position and pricing power, which include a recent ruling by the Australian Communications and Media Authority changing how mobile signal coverage is measured for official maps. Telstra's official coverage reduced by around one million sq km around Australia – an area greater than the size of New South Wales – due to new signal thresholds, denting coverage claims which have been used to justify premium prices. Telstra has said its network "remains vastly larger" than any other network in Australia, and that it provides coverage in areas others don't.
The telco is also facing a threat from the Starlink satellite internet service, owned by Elon Musk's SpaceX, which has prompted investment bank Morgan Stanley to downgrade Telstra, according to a report in the Australian Financial Review. Australia is seen as a country ripe for disruption by Starlink due to its expansive geography and high telco costs for consumers. However, experts are not predicting that satellite technology will entirely replace the more powerful terrestrial networks used across the country.
Hailey Kim, senior investment analyst at Wilson Asset Management, says while satellite technology is a "genuine long-term debate for Telstra", it can't carry anywhere near the amount of traffic a mobile tower can. "Where we will be watching closely is whether it slowly closes Telstra's coverage advantage over Optus and TPG, which is one of the few things that underpinned the premium for the stock," Kim says.
The communications minister, Anika Wells, said Telstra should "face the music" and work hard to regain Australians' trust, given it had previously been regarded as the country's premium telco service. In addition to Telstra cooperating fully and transparently in its investigations, Wells said it was "only fair" that the company make people's compensation claims as easy as possible. "I would expect that Telstra provides an expedited triage process for its customers to deal with compensation here," she said.
However, at a press conference on Friday, Telstra's chief executive, Vicki Brady, apologised for "the impact this has had on so many people" but avoided answering directly when asked whether customers would be compensated. The telco's chief financial officer, Michael Ackland, said people could seek compensation by making a complaint through the "business as usual" channels.