“It’s how we connect.” These days subscribers might add, “or don’t.” to Telstra’s motto. As the country’s premium network service provider ( some people call them a phone company ), another outage might not be the best way for Telstra to uphold its network reputation. The latest service interruption, which occurred in the latter half of May, affected users across the country.
Might customer actually leave Telstra after all this ? Let’s take a considered view. We’ll talk in detail about:
- The numbers behind Telstra’s popularity,
- The reasons telco subscribers switch companies,
- Whether those reasons could reasonably impact Telstra, and
- What Telstra is doing to keep its customers.
What Does Telstra’s Market Share Look Like
Let’s face it. Telstra has been the market leader for years. People rely on Telstra’s network coverage from Woolongong to Whoop Whoop. Will a small number of network outages really cause people to leave ?
Even with three network outages in the last few months, Telstra actually gained share last year, rising from 39.7% to 41.1 % of the market, according to an April 2016 report from the research house Kantar.
Breaking it down across the product portfolio, that’s:
- 41.7 % of the prepaid market (up 4.1 % points) and
- 43.6 % in post-paid (up 1.2 % ).
- Telstra has only gone down in no-contract plans by one point, and now holds 30.1 %.
Following behind are :
- Optus, second in line with 22.7% market share (up from last year’s 21.3%),
- Vodafone, who’s grabbed 15.2%, down from 16.5%.
Virgin Mobile is in fourth place. Like Vodafone, Virgin got a bit of a market battering, however. They went from 6.5 percent of the market down to 5.6 %. Virgin gave away 1.6 % of her no-contract gains to Optus, and the smaller companies Amaysim and Aldi. Optus took a huge leap in no-contract from 16.8% to 20.6%. This is where Telstra lost 1%. Vodafone stayed the same in no-contract (congrats) and TPG took a cut going down 2 percentage points. Other MVNOs moved down collectively in no-contract, from 14.3% to 13.8% of the market.
No-contract has been one of the biggest rising trends over the last two years. People seem to have reached the obvious conclusion, that they don’t want to be bound by a contract. They want to move to whoever is doing a great deal at the moment. So wait, why did they go to Optus, Amaysim and Aldi –not Telstra? And why did Telstra lose that 1 percent?
Why Subscribers Switch to a Different Company
What might change that? Could the recent spate of outages cause her base to churn?
According to, Sandra Rossi at Computerworld concluded her research by stating:
“The number one reason for switching is price followed by service problems…”
Putting those two things together, it looks like Telstra might have a problem. On average their pricing is up to 40% higher than the competition. And now, with these outages, people are questioning the service they get.
Is Subscriber Dissatisfaction Having an Impact on Telstra?
The Sydney Morning Herald reported on May 22, “Analysts believe the impact the outages will have on Telstra’s customer numbers, though noting Telstra’s problems are still below those experienced by Vodafone in 2010 and 2011 when over 20 per cent of customers jumped ship…
“Deutsche Bank analysts have previously said they expect Telstra’s “customer churn” (the number of customers exiting the service) could increase slightly as a result of the [current] outages.”
At the end of last year, Telstra had a complaint ratio of 6.4/10,000 SIO ( Services in operation, an industry term for the number of customers they have ). Optus had the highest rating of 7.9/10,000 SIO. However, in the first quarter of 2016, the Telecommunications Industry Ombudsman said Telstra’s complaint index is low, despite well publicized outages prior to May.
This makes it seem as if the outages are just temporary glitches in Telstra’s operations, and have little effect on the loyalty of her customers.
What’s Andy Penn Doing to Keep the Lady Singing?
Telstra CEO Andy Penn has a few tricks up his sleeve in the interests of lady Telstra’s health. Most notably, he promised to make 4G available for the MVNOs AldiMobile, Telechoice, Better Life and Woolworths, and he did it ahead of schedule. ZDNet commented on the likely outcome:
“The wholesale 4G network will reach 92 percent of the Australian population across the 1800MHz/700MHz spectrum bands, as well as the 2600MHz band for extra capacity in some areas, and will facilitate maximum download speeds of 100Mbps.”
While Telstra isn’t the first to offer wholesale services, the giant’s contributions to 4G expansion are certainly significant.
But the real pain point remains. Kantar data suggests that “users are moving from pre-paid and post-paid plans to no contracts, which represents 14.3% of the mobile market after recording growth of 4.8%.”
Last year, no-contract plans only made up 11.9% of the market. However, while Telstra gained heavily last year with a jump of 6.9 percentage points in no-contract, this year they fell off slightly. Customers are finding better deals elsewhere.
According to Kantar, “Australian consumers are becoming increasingly exposed to the benefits of SIM-only tariffs, which offer 4G connections, rollover data, no lock-ins, and a generous amount of data, to name a few, for a comparatively low cost.
Summing up Telstra’s network nightmare
All things considered it seems fair to say that there is definitely a risk that Telstra will suffer losses from the network outages it has seen. It’s hard to justify an often 40% price hike if the signal drops out ‘regularly.’ The Complaint levels they show are evidence that this spate of network outages happens against a background of generally improving levels of customer satisfaction in the industry. Of course, all of this is based on the outages we have seen so far. What we don’t know is what happens next. Every time Telstra’s network nightmare continues, with every new outage, the risk of an exodus increases – and we don’t yet know if we’ve seen the last of it.