Telstra's nationwide outage on Wednesday, lasting most of the morning, has severely dented its long-held reputation for having the most stable and widest mobile coverage in Australia. The outage affected millions of customers, including those dialling triple zero, and drew fierce criticism from politicians.
Premium Pricing Under Threat
Telstra has long charged premium prices based on its network reliability. Its popular SIM-only 50GB plan costs $74 a month, $14 more than Optus's equivalent and $16 more than Vodafone's rival plan. Omkar Joshi, chief investment officer at Opal Capital Management, said the outage dents Telstra's ability to charge a premium "if it is not delivering a premium service." He added, "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."
Telstra's share price fell 3% on Wednesday before partially recovering. However, Joshi warned that as outages climb across the sector, the chances of stricter regulation increase, especially with repeat triple zero failures elevating public safety concerns. "More regulatory intervention and focus is never a positive from a stock perspective," he said.
New Threats Loom
Telstra faces additional headwinds. The Australian Communications and Media Authority changed how mobile signal coverage is measured, reducing Telstra's official coverage by about one million square kilometres—an area larger than New South Wales. This dents coverage claims used to justify premium prices. Telstra maintains its network "remains vastly larger" than any other in Australia.
Starlink, Elon Musk's satellite internet service, poses another threat. Investment bank Morgan Stanley downgraded Telstra due to Starlink's potential, according to the Australian Financial Review. Australia is seen as ripe for disruption due to its geography and high telco costs. However, Hailey Kim, senior investment analyst at Wilson Asset Management, said satellite technology cannot carry the traffic of mobile towers. "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 said.
Compensation Demands
Communications Minister Anika Wells said Telstra should "face the music" and make compensation claims easy. "I would expect that Telstra provides an expedited triage process for its customers to deal with compensation here," she said. Telstra CEO Vicki Brady apologised but avoided direct answers on compensation. CFO Michael Ackland said customers could seek compensation through "business as usual" channels.
Carol Bennett, CEO of the Australian Communications Consumer Action Network, said the outage had a "profound impact" on the economy, stopping rail freight, public transport, and Eftpos terminals. "Telstra should step up and provide their retail customers with adequate compensation for not only the inconvenience but the safety risks this has caused," she said. Bennett advised affected customers to keep records of failed payments, critical calls, or missed appointments as evidence.
Telecommunications Industry Ombudsman Cynthia Gebert told ABC Radio that compensating customers was "the right thing to do." Andy Wei, principal lawyer at Slater and Gordon, which led a class action against Optus over its 2022 data breach, said telcos are bound by law to deliver services with due care and skill and "to put things right when they fail."
