Telstra’s aggressive price rises have cleared the path for rivals, including Optus, to make similar increases. Photograph: Hollie Adams/ReutersView image in fullscreenTelstra’s aggressive price rises have cleared the path for rivals, including Optus, to make similar increases. Photograph: Hollie Adams/ReutersAnalysisWake-up call: how Telstra’s ‘unreasonable’ price rises may cause customers to hang upJosh Taylor and Jonathan BarrettThe telco’s sweeping price changes and the closure of its cheaper ‘starter’ plan risk putting off many of its loyal customers
Telstra has long traded on its claim to have better – and far more expansive – mobile coverage than its rivals to justify a steep pricing premium that has accelerated in recent years.
But the telco’s latest changes, which include steep price hikes and the closure of its cheaper “starter” plan to new users, combined with a dramatic rejection of its coverage claims by the industry regulator, risk putting off many of its traditional customers, according to consumer advocates.
Telstra recently announced sweeping price changes including raising monthly charges on its mobile plans, a big money printer for Australia’s biggest telco.
Telstra’s standard monthly mobile plan will increase from $70 to $74 for 50GB of data, representing an aggressive second price hike in less than a year.
Its announcement cleared the path for rivals, including Optus, to make similar increases. TPG-owned Vodafone has 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 volatile petrol prices, while inflationary pressures are reigniting.
View image in fullscreenTelstra increased its retail mobile customer accounts by 581,000 during its most recent six-month reporting period. Photograph: Bianca de Marchi/AAPInvestment bank UBS recently observed that many retailers, including telcos, don’t yet believe that consumers are under enough financial strain to dramatically change their spending habits, which is allowing them to push through price rises.
Indeed, Telstra increased its retail mobile customer accounts by a robust 581,000 during its most recent six-month reporting period, although that was before interest rate increases took hold and before petrol prices rocketed.
Carol Bennett, the chief executive of telco consumer advocacy group ACCAN (Australian Communications Consumer Action Network), says the telco’s price rises are “unreasonable” given it is reporting strong profits. Telstra shares are also trading near decade highs, up about 25% over the past 12 months alone.
“This is starting to become a pretty significant draw on people’s overstretched budgets, especially those on lower incomes,” Bennett said.
“It’s disproportionate because customers shouldn’t be spending more than 2% of their budget on connectivity and Telstra is asking people to choose between that and other things like food and petrol and essential items.”
While Telstra has always charged a premium for mobile services, the pricing gap used to be less and it historically offered more data than rivals to help compensate for its higher prices.
Rewind to 2022 and Telstra offered 40GB on its standard mobile plan, compared with Optus’ 30GB, and charged just $9 a month more, according to analysis by Canstar Blue.
After the latest increases take effect, Telstra will charge $14 a month more than Optus on that same plan but provide 10GB less.
Optus’s high-profile network failures in recent years have robbed consumers of a genuine competitor to Telstra, allowing the bigger telco to entice customers from its rival and more confidently lift prices.
Telstra says its price increases are necessary because it must invest in the “performance, reliability and security” of its mobile network.
This includes expanding and upgrading its 5G network, and improving measures to protect customers from scams, Telstra says. The telco says the communications sector has delivered increased services and falling prices for consumers – in real terms – over the past decade.
Telstra’s financial results have been strong. It has recorded steady growth in mobile revenue, carries modest debt levels and has participated in significant share buybacks; a practice used to distribute excess cash.
It recorded a near 10% lift in net profit at its most recent half-year results, to $1.2bn.
Tara Donnelly, utilities editor at Canstar Blue, says while the big telcos point to network investment to justify recent increases, that’s no reason for customers to foot the bill.
“Instead, consumers should take these hikes as a signal to shop around,” Donnelly says. “Better plans and prices are available but only for those who look for them.”
Telstra will be hoping that some customers simply switch into its lower cost brands, such as Boost and Belong; although prices are being hiked there also.
Telstra’s steep premiums may have just got harder to justify after a new ruling by the Australian Communications and Media Authority (Acma).
The regulator announced this week it will measure mobile signal coverage for the purposes of coverage maps in a ruling that will see Telstra’s advertised coverage reduced by around 1m sqm around Australia – an area greater than the size of New South Wales.
While Telstra fought against Acma’s ruling that areas with signal levels of below -115 decibel-milliwatts (dBm) would be considered “no coverage” areas, TPG and Optus agreed with the regulator.
View image in fullscreenThe Telstra chief executive, Vicki Brady. Photograph: Lukas Coch/AAPTelstra’s group executive of global networks and technology, Shailin Sehgal, says the areas now labelled as “no coverage” are used by 1.5 million customers per month and 57,000 emergency calls are made in those areas every year.
“Nothing has changed about Telstra’s network,” Sehgal said. “No sites have been switched off. No coverage has been removed … The only thing that has changed is what will be shown on a comparable map.”
Telstra argues it will need to take steps to ensure customers are not confused and have appropriate information about the services it provides.
Sehgal says this may include publishing another coverage map, separate to the Acma-required version.
But the irritation in the regions was notable throughout the submissions to the inquiry that informed Acma’s decision.
The National Farmers’ Federation has argued that coverage maps should “set realistic expectations” so that people know that lower than -115 dBm will lead to reduced reliability.
The Central Highlands Volunteer Ambulance Association says Telstra’s coverage maps are “often misleading and deceptive”.
“They frequently over-represent the geographical extent of reliable service, creating a false sense of security for travellers and emergency personnel,” the association says.
