Melbourne-based Telstra (ASX: TLS) reseller ispONE has been pushed into voluntary administration and is taking customers with it.
ispONE provides 250,000 prepaid customers with connections on the Telstra network through cheap mobile services. After Telstra threatened the company with disconnection last week, a date in court proved to be unsuccessful in remedying the differences between the two companies. According to Telstra, ispONE owed significant amounts to it for the use of devices sold through wholesale outlets such as Aldi and Kogan.
After mediation talks failed, the ABC says that of the 250,000 customers, "120,000 Kogan mobile phone services are in limbo" whilst "the 130,000 remaining ispONE users, part of the Medion network sold through Aldi, narrowly avoided the same fate".
Kogan's users will no longer be able to recharge after 30 days. Telstra said it was moving Kogan customers to a seven-day plan that will enable customers to make up to "20 voice call minutes and 20 SMS messages to Australian numbers, while data services, international calls and MMS will be excluded". After the seven-day plan, numbers will not be able to make calls or texts (except to 000) but could receive them.
All customers will be cut off after six months but can be ported out (transferred to another network) in the meantime.
Rival telcos such as Optus, owned by Singapore Telecommunications (ASX: SGT), are swooping in to catch some of the mobile customers by offering an "easy way" for customers to transfer to Optus while keeping existing numbers.
Foolish takeaway
Telstra's strategy to offer low-cost services could be part of a bigger plan to gain market share but ispONE's fall into administration has proven how hard it can be to remain competitive in the current market. After iiNET (ASX: IIN) acquired South Australian ISP Adam Internet, Telstra has been looking at other ways to increase market share.
However, its consistent network coverage, competitive prices and good customer service levels have allowed it to add more than 1.3 million customers in the past year alone. For investors, Telstra is doing a great job of controlling and expanding its market share and with a great dividend to match, it's definitely worthy of a spot on watchlists.
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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.
