Telstra: We let our customers down

Telstra has admitted seven network outages let its customers down, with the resulting drop in net promoter score meaning executives missed out on part of their remuneration package.

Telstra has apologised for letting down its customers and shareholders through the network outages in the first half of calendar 2016, revealing it dropped four points off its Net Promoter Score (NPS) customer experience measurement over the same period.

According to Telstra chair John Mullen, there is "nothing inherently wrong" with the telco's networks, with the strain caused by a dramatic rise in traffic partially responsible for the seven outages between February and June.

"There is virtually no technology innovation that does not fundamentally rely on a network ... to give you a sense for the demand we are seeing, a single 4G wireless broadband modem on the network today can deliver more than the total combined network data throughput of 10 years ago, and data traffic on our wireless network continues to double every two years," Mullen, speaking at Telstra's annual general meeting (AGM) on Tuesday, explained.

"I am not sure that anyone predicted this level of change or the speed of change even a few years ago. Customers are expecting more and more capacity at a lower and lower price. I cannot think of many other large, established businesses in Australia where usage of its core products and services are increasing at such a pace.

"It is for this reason we were disappointed to let customers down through the network interruptions we experienced in the second half of this financial year.

"There is nothing, I repeat nothing, inherently wrong with Telstra's core networks."

Telstra's NPS -- a score gauging the percentage of customers who would recommend its business to others -- fell by four points over the year, which led to its executives not being paid the NPS portion of their remuneration package for the year.

"We were disappointed our customer advocacy results, which we measure using the net promoter score, fell four points," Telstra CEO Andrew Penn said at the AGM.

"We did not deliver the service experience we should for our customers."

Customer experience is now consequently Telstra's "most important priority", with much of the designated investment being spent on digitising its legacy customer service platforms.

Mullen said Telstra customers make 55 million calls and 365 million data connections daily on average, and Penn said the network consists of 230,000km of fibre-optic cabling, 170,000 routers and switches, 8,500 mobile sites, and 5,000 exchanges.

Telstra said it will be improving service levels across its ADSL broadband network, and will be enhancing the breadth and depth of its mobile network by ensuring greater in-building coverage in metro areas.

However, Telstra said its core network and therefore its shareholders' investments are under threat as a result of the current Australian Competition and Consumer Commission (ACCC) enquiry into whether to declare wholesale domestic mobile roaming.

"We still have regulatory risks on a regular basis; one of these is the current declaration inquiry into mobile roaming by the ACCC ... one of our competitors is seeking regulation to close this competitive gap by cheaply riding on our network to avoid spending their own money," Mullen said, referring to Vodafone Australia.

"One can understand why some competitors would lobby for this -- it would be a free Christmas present ... If the ACCC decides to declare mobile roaming, it would absolutely be at the expense of you, the Telstra shareholders."

The Australian government's mobile blackspot program would also be at risk if roaming is declared, according to Penn.

"The principle advocate for mobile roaming is a foreign company that has chosen not to invest to the extent Telstra has," Penn said, also referring to Vodafone. "A foreign company that is very capable of investing and a foreign company that has argued against roaming in other markets where it suits it to do so."

Mullen revealed that Telstra's previous claims of reaching 99 percent of the Australian population with 4G mobile coverage by mid-2017 will only occur "if the regulatory settings for such investment remain favourable".

The National Broadband Network (NBN) will also impact shareholders of Telstra by AU$2 to AU$3 billion reduction in earnings before interest, tax, depreciation, and amortisation (EBITDA) per annum once it is rolled out.

"Our task is to offset these impacts over the next few years through a number of strategic initiatives, including driving value and growth from our core by reducing our fixed costs, enhancing share through digitisation, simplification, and process improvements, and building new growth businesses," the chair said.

Penn, pointing to the fact that Telstra has 50 percent NBN reseller market share and has won contracts worth more than AU$1.6 billion with the company, detailed that much of Telstra's future-proofing core network program will consist of using software-defined networking (SDN) and network function virtualisation (NFV) to "build a more programmable, flexible, and resilient network that we can scale easier and at lower cost".

Telstra is also exploring opportunities in e-health and through new growth businesses throughout the Asia-Pacific region, including Pacnet in China and Telkomtelstra in Indonesia.