Telstra is in strife again. Here's why

Telecommunications provider's reputation takes yet another battering after it picked on its most vulnerable customers.

| More on:
Several fingers point at stressed looking man in the middle.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Major telecommunications company Telstra Group Ltd (ASX: TLS) has taken a hit to its reputation after the industry watchdog reprimanded it for harassing its most vulnerable customers.

The Australian Communications and Media Authority (ACMA) on Thursday revealed its investigation found the company took "credit management action" against clients who were already on financial hardship plans with the telco.

The authority directed Telstra to follow the telecommunication consumer protections (TCP) code, which compels telcos to suspend credit management action if a hardship arrangement is enacted.

Credit management can include actions such as suspension of service, disconnections, or debt collection.

In inflationary times such as now, it was critical that telcos supported clients in difficult circumstances, according to acting ACMA chair Creina Chapman.

"Telco services like phone and internet are now essential to daily life, used for everything from work and education, through to health and government services," she said.

"So even briefly suspending or disconnecting customers can cause a real disruption to their lives."

The Telstra share price was up 0.13% at the time of writing on Thursday.

Yet another problem with legacy systems

The ACMA investigation found that credit management action was taken against 70 Telstra customers when it shouldn't have been, between August 2019 and April this year.

Twenty-two customers had their services restricted, four were suspended, five were disconnected, and two were pursued by debt collectors. The remaining received letters or phone calls demanding payment.

Telstra customer service executive Kate Cotter told The Motley Fool that the problem was "caused by legacy systems not synchronising properly".

"We found and fixed the vast majority of these errors quickly, but we're sorry that our processes let these customers down," she said.

"We are well on the way to ensuring this is a thing of the past, by replacing these old systems with seamless digital experiences. In the meantime, we have implemented IT fixes and regular manual checks to prevent further issues while we complete our systems overhaul."

This isn't the first time ACMA has taken enforcement actions against Telstra for problems arising from legacy technology.

"Telstra must continue to address these longstanding issues as a matter of urgency so that its systems can deliver on customer safeguards," said Chapman.

"Protecting telco customers experiencing financial hardship is an ACMA compliance priority and all telcos can expect greater scrutiny of their dealings in these matters."

While the current action remains a direction only, the watchdog stated that any further breaches could lead to up to $250,000 in penalties.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Communication Shares

a woman in business wear looks at her phone against the window of a high rise space with a city landscape view of tall buildings outside.
Communication Shares

Still under $4 despite strong recent results, is Telstra stock too big a bargain to pass up?

Is it time for this telco giant to break free? Let's see what analysts are tipping for the telco giant.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Dividend Investing

Invested $5,000 in Telstra shares in 2021? Here's how much passive income you've already earned

Atop the share price gains, how much passive income have investors earned from their Telstra stock?

Read more »

4 teenagers playing mobile game
Communication Shares

Are brokers bullish or bearish on Telstra shares in November?

Are analysts feeling bullish or bearish about the telco giant's shares?

Read more »

A happy man and woman sit having a coffee in a cafe while she holds up her phone to show him the ASX shares that did best today.
Communication Shares

Where will Telstra stock be in 5 years?

Profit forecasts show a change is coming for the big telco.

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Dividend Investing

Passive-income champion: One ASX stock yielding more than 4%

Brokers like the dividend potential from this stock.

Read more »

Ordinary Australians waiting at the bus stop using their phones to trade ASX 200 shares today
Communication Shares

Telstra stock: Buy, hold, or sell?

What are analysts recommending investors do with this telco giant?

Read more »

A woman is excited as she reads the latest rumour on her phone.
Earnings Results

Guess which ASX 300 stock just reported a 21% jump in a critical measure

Growth is the word for this telco, and investors like what they see in the company's Q1 numbers.

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Communication Shares

Under $4, do Telstra shares look an irresistible bargain?

Is this an opportunity calling too good to ignore?

Read more »