Telstra's Aggressive Price Rises Set Stage for Industry-Wide Hikes
Telstra's recent sweeping price changes, including steep increases in monthly mobile plan charges and the closure of its cheaper "starter" plan to new users, have cleared the path for rivals such as Optus to implement similar hikes. This move comes at a challenging time for consumers, many of whom are grappling with rising mortgage rates, volatile petrol prices, and inflationary pressures.
Consumer Budgets Under Strain
Carol Bennett, chief executive of the Australian Communications Consumer Action Network (ACCAN), has labeled Telstra's price rises as "unreasonable," particularly given the telco's strong profit reports and shares trading near decade highs. Bennett emphasizes that these increases place a significant draw on overstretched budgets, especially for lower-income households, where connectivity costs should ideally not exceed 2% of spending.
Investment bank UBS notes that many retailers, including telcos, believe consumers are not yet under enough financial strain to dramatically alter spending habits, allowing for continued price rises. Despite this, Telstra saw a robust increase of 581,000 retail mobile customer accounts in its most recent six-month reporting period, though this was before recent interest rate hikes and petrol price surges.
Shifting Competitive Landscape
Historically, Telstra justified its pricing premium with claims of superior mobile coverage and more data offerings than rivals. However, analysis by Canstar Blue reveals a narrowing gap: in 2022, Telstra offered 40GB on its standard plan compared to Optus's 30GB, charging only $9 more monthly. After the latest increases, Telstra will charge $14 more than Optus but provide 10GB less data.
Optus's network failures in recent years have weakened competition, enabling Telstra to attract customers and confidently raise prices. Telstra defends its hikes as necessary for investing in network performance, reliability, security, and 5G expansion, citing falling real-term prices over the past decade.
Financial Performance and Consumer Advice
Telstra's financial results remain strong, with a near 10% lift in net profit to $1.2 billion in its most recent half-year results, supported by steady mobile revenue growth and share buybacks. Tara Donnelly, utilities editor at Canstar Blue, advises consumers to view these hikes as a signal to shop around for better plans, noting that Telstra may hope customers switch to its lower-cost brands like Boost and Belong, though prices are also rising there.
Regulatory Scrutiny on Coverage Claims
The Australian Communications and Media Authority (Acma) has issued a new ruling that will reduce Telstra's advertised coverage by over 1 million square meters, an area larger than New South Wales, by redefining "no coverage" areas with signal levels below -115 dBm. While Telstra opposed this change, arguing it affects 1.5 million monthly users and 57,000 emergency calls annually, TPG and Optus agreed with the regulator.
Shailin Sehgal, Telstra's group executive of global networks and technology, asserts that no actual network coverage has been removed, but the company may publish separate maps to avoid confusion. Submissions to the inquiry, including from the National Farmers' Federation and the Central Highlands Volunteer Ambulance Association, criticized Telstra's coverage maps as misleading and over-representing reliable service, creating safety risks.
This combination of price increases and regulatory challenges risks alienating loyal customers, prompting calls for greater transparency and consumer vigilance in the telecommunications sector.
