Inside a challenging year for Telstra, Optus and Australia's telco sector

The first half of 2018 has been a horror show for many of Australia's leading telcos. 

Shares in major listed telecommunication companies Telstra, TPG, Vocus have all dropped sharply since the start of the year, while Optus parent Singtel has also seen its value decline in the past six months. 

The recent decision by Telstra to axe more than 9000 jobs – possibly the largest corporate culling in Australian history – was just the sharp edge of a six-month period that has seen major challenges for many of the top carriers.

It comes during a continued period of transformation and disruption as the rollout of the National Broadband Network continues, and new competitors arrive to challenge the dominance of the industry's top carriers.

Click or swipe through for a recap and analysis of the major upheaval in Australia telecommunications sector.

Optus sued by mobile phone dealer TeleChoice, claiming millions in losses and damages

9 January

Mobile phone dealer TeleChoice late last year filed a lawsuit against Optus for a litany of alleged wrongdoings during their decade-long partnership that the reseller claims cost it hundreds of millions of dollars.

The reseller is looking for more than $100 million in compensation for alleged breaches of its contract with Optus, including allegations the telco unlawfully clawed back commissions as well as taking customers direct without permission.

Optus denied all allegations and legal proceedings are ongoing.

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Vodafone busted for failing to check customer identities

11 January

Vodafone was reprimanded for failing to confirm the identity of at least 1028 prepaid mobile customers before activating their services.

The breaches, which occurred between January 2015 and January 2016, were the result of a change to Vodafone's IT system, which allowed customers to claim their identity had been confirmed in-store when activating a service online, even if this was not necessarily the case.

Australian telcos are required to verify customer identities before activating their services using the minimum amount of information necessary in order to aid law enforcement and national security agencies for use in their own investigations.

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Complaints about Telstra, Optus, Vodafone and others up 35 percent

25 January

Complaints lodged against major telco providers including Telstra, Optus and Vodafone increased to 8.7 complaints per 10,000 services in the final quarter of 2017, up 35 percent from the same period in 2016.

Data from the Telecommunication Industry Ombudsman, which tracks complaints per 10,000 user services across participating service providers Telstra, Optus, Vodafone, Amaysim and Pivotel, found that Optus copped the brunt of user grievances of the group between October and December 2017, at 10.6 complaints per 10,000 services.

Telstra followed close behind at 9.2, with Vodafone and Amaysim trailing at 4.9 and 1.4 complaints per 10,000 services, respectively. Pivotel was untarnished during the period with a complaint ratio of 0.

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Telstra writes off $273 million in goodwill from Ooyala, exits ad tech business

2 February

Telstra wrote down the carrying value of its intelligent video business to zero and cop a $273 million impairment in goodwill and other "non-current assets".

The telco acquired 98 percent of US-based Ooyala for $354 million in 2014 as part of a broader strategy to offer end-to-end solutions to video broadcasters and over-the-top companies.

Telstra impaired the business' value 18 months ago after identifying "challenges in the business and changing market dynamics". Telstra group executive of technology, innovation and strategy Stephen Elop said there had been substantial efforts to turn the business around over the past 18 months.

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Digital marketing firm Impelus threatens to sue Telstra over direct carrier billing shutdown

9 February

ASX-listed digital marketing firm Impelus threatened Telstra with court action over its decision to cease providing direct carrier billing (DCB) services to all of its current customers.

Direct carrier billing is a service that allows mobile customers to purchase for content like mobile apps, game and entertainment over a mobile network, with the costs charged to their phone bill.

Telstra’s move to cease DCB or premium direct billing follows announcements made in August last year that the telco would crack down on unexpected additional charges on mobile phone plans by disallowing third-party content providers to include new subscription fees on customer phone bills.

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Vocus chief executive Geoff Horth exits

26 February

Vocus chief executive Geoff Horth left the company after two years at the helm after coming to a mutual agreement with the telco.

The company said in a statement that Horth and Vocus had been considering a change in leadership since the start of the year, but had decided to bring the process forward.

Vocus went on to hire former Telstra consumer boss Kevin Russell as Horth's replacement in May.

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Vocus drops off ASX 100

9 March

Vocus dropped off the list of the top 100 companies on the Australian Securities Exchange.

The ASX 100 is a benchmark index curated by the S&P Dow Jones Indices of the top 100 companies by market capitalisation listed on the Australian Securities Exchange.

Vocus was admitted to the ASX 100 in 2016 after merging with consumer telco M2 Group. That year, the company's share price hit a high of $9.29 each, but then nosedived.

Vocus revised its full-year earnings guidance twice.  The first revision in 2017 is currently subject to a class action over allegedly “misleading and deceptive conduct” from shareholders.

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Telstra CIO John Romano departs

12 March

Telstra's chief information officer, John Romano, left after two years in the role and more than a decade working for the telco.

CTO Hakan Eriksson is acting in the role until a permanent replacement for Romano is found.

Romano was charged with leading Telstra's $3 billion digital transformation project, which kicked off in 2016. The massive project has already seen Telstra fork out $1.3 billion to upgrade its core network, and set aside another $1 billion to digitise its business processes.

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Telstra cuts jobs, sends work offshore in wholesale business changes

16 March

Telstra cut 135 local roles across its wholesale business, with more jobs from the telco's finance, billing and software engineering workforce either to be cut later on or to be sent for offshoring.

The company in March engaged with its staff and the Community and Public Sector Union (CPSU), and revealed it would be making a number of roles redundant, as well as creating 38 new positions, resulting in a total of 97 positions no longer required at the telco.

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iiNet and Internode refund customers for slow NBN

20 March

iiNet and Internode agreed to compensate customers who could not reach the internet speeds on the NBN they were advertised.

The two ISPs, which are both owned by TPG, compensated a combined 11,000 customers who purchased the highest speed plans advertised of 100Mbps.

The Australian Competition & Consumer Commission found that 7621 customers, or 64 percent, on iiNet's 100Mbps plan via fibre-to-the-node (FTTN) could not reach those speeds. Out of that, 2000 of those customers couldn't reach the next speed tier down of 50Mbps.

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TPG lost $21 million in margin due to NBN migrations

20 March

TPG Group profits took a hit in the first financial half of 2018, owing to headwinds in migrating DSL customers to lower-margin NBN services and rising electricity prices, the company said.

DSL to NBN margin reductions cost the company $21 million against its underlying EBITDA. A $9 million earnings hit was also attributed to iiNet fixed voice GP reductions, while a $3 million cost was attributed to increased electricity prices.

The company reported revenue of $1.25 billion for the half-year ending 31 January 2018, up about one percent from the $1.24 billion earned for the corresponding period in 2017.

EBITDA was down 12 percent to $418 million from $473 million, and net profit after tax was down 11 percent to $198.7 million from $224 million.

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Dodo, iPrimus and M2 Commander to refund 5000 misled NBN customers

23 March

Dodo, iPrimus and M2 Commander became the latest telcos to address their NBN customers’ woes, pledging to compensate 5000 customers who couldn't achieve the internet speeds they paid for.

Remediation options offered by the telcos included being moved to a lower speed plan with a refund, or exiting their plans with a refund and no exit fees.

Breaking down the affected customers, Dodo was to refund 3384 customers, iPrimus to refund 1912, while M2 Commander to refund 565.

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Optus takes down job ad seeking "Anglo Saxon" applicants

13 April

Optus launched an investigation into how a job advertisement seeking "Anglo Saxon" applicants at one of its stores was posted online.

The ad stated that "candidates who are Anglo Saxon and live near to Neutral Bay" would be preferred for the retail assistant position at one of Optus' retail stores.

The ad was sent to the telco on Twitter, and was swiftly removed. Optus said at the time that it would investigate how the incident occurred and  look to take disciplinary action as a result.

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NBN complaints skyrocket 200 percent, overall telco complaints up 30 percent: ombudsman

17 April

Service quality, delays in connecting and unsatisfactory responses from telcos were among the most common complaints about the National Broadband Network, which saw skyrocketing complaints in the past six months.

The number of complaints about the NBN tripled in the second half of 2017, according to a report from the Telecommunications Industry Ombudsman (TIO).

There were a total of 22,827 complaints about the NBN from 1 July 2017 to 31 December 2017, according to the TIO's Six Monthly Update.

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Vocus Communications fails to offload New Zealand business

24 April

Vocus Communications pulled the pin on a sale of its New Zealand business after it failed to find a suitable buyer following a seven-month sales process.

The telco said that although it received multiple offers, none of them had “appropriately reflected” the “fundamental and strategic” value of the New Zealand business, nor the certainty of funding and execution.

“Vocus NZ is an excellent business with strong leadership, an attractive growth profile, a clear competitive position and a track record of delivering solid returns on capital,” Vocus chairman Bob Mansfield said.

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Telstra cops full $10 million fine over unexpected bills

26 April

Telstra agreed to pay $10 million for misleading mobile customers about charges from third parties that were billed by its premium direct billing (PDB) service.

The service was offered to Telstra's mobile customers, allowing them to purchase online content like apps, games and entertainment from third parties with charges showing up on their phone bills. However, some third parties signed up close to 100,000 customers without consent or requesting payment details or identity verification.

The Australian Competition and Consumer Commission (ACCC) estimates that Telstra earned up to $61.7 million on commissions from 2.7 million mobile customers.

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Vocus head of enterprise and government Scott Carter exits

27 April

Vocus Communications' head of enterprise and government, Scott Carter, left the company after seven years with the group.

Carter was appointed chief operating officer of Vocus in February 2016 when the company merged with consumer telco group M2. He was previously COO of M2 Group prior to the merger, having joined in 2011 working in the wholesale division.

He was appointed as chief executive of the consumer business in March 2017, before taking over the enterprise and government portfolio when Vocus split its wholesale and enterprise divisions into two separate units.

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Telstra hit by multiple outages

1 May to 19 June

Telstra experienced a series of outages with its mobile network, wholesale network and the triple zero emergency service from May to June.

A nationwide outage of its 4G network striked on 1 May; a damaged cable in regional NSW caused another outage 3 days later; 3G and 4G services were down again on 21 May; a number of Sydney households had an outage caused by a damaged fibre optic cable on 7 June; and an issue with technology vendor Ericsson caused an outage in Telstra's wholesale network on 19 June.

The Department of Communications called in an investigation into the damaged cable in regional NSW after it caused a triple zero outage.

iiNet outage blamed on WA data centre losing power

2 May

iiNet confirmed a major outage occurring on its network due to issues with a data centre in Western Australia, disrupting broadband and voice services.

The telco reported said it had "lost power to a data centre in WA".

There were as many as 1103 reports on service disruption aggregator Aussie Outages, with reports coming from across Perth, Melbourne, Sydney, Adelaide and Brisbane.

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Telstra halts sales of ZTE phones after US ban hits manufacturer

10 May

Telstra ceased sales of its branded ZTE phones following a US government-imposed ban that has forced the device manufacturer to shut down.

The US government issued an order against ZTE, forbidding firms from supplying it with components and technology after it was found to have violated US export restrictions by illegally shipping goods to Iran.

Telstra announced it would stop selling Telstra-branded ZTE mobiles and mobile broadband devices through its stores and partners.

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Telstra takes Optus to court over "Empires end" advertising campaign

11 May to 30 May

Telstra took rival Optus to court over its "Empires end" advertising campaign, which spruiked the results of a mobile network benchmark showing Optus was the leader in voice and Telstra was the leader in data performance in Australia.

Telstra at first was granted the injunction on 17 May and was given the go-ahead to proceed with the lawsuit, but the courts eventually sided with Optus on 30 May.

“Telstra has failed to establish that Optus has engaged in conduct that is misleading or deceptive, or likely to mislead or deceive, in contravention of [the Australian Consumer Law]; or that Optus has made false or misleading representations as to its services,” the ruling said.

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Telstra flags weak earnings as NBN impact continues

14 May

Telstra warned that earnings are expected to be at the bottom end of previous expectations as the impact of the NBN continued to drag down the telco’s bottom line.

Chief executive Andy Penn informed shareholders that EBITDA for the 2018 financial year is expected to be $10.1 - $10.6 billion and while still in the previous guidance range, is towards the lower end of predictions. Revenue for the year is expected to be in the range of $27.6 - $29.5 billion.

Penn blamed the lagging earnings on competitive dynamics that have impacted both fixed and mobile margins, as well as the ongoing negative impact of the NBN.

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NBN retail service provider Buzz Telco shuts down after feud with AAPT

15 May

Brisbane-based Buzz Telco shut its doors following a legal battle with one wholesale provider, AAPT, and after a second wholesale provider, Vocus Communications, "terminated" its contract.

The budget-focused retailer service provider (RSP) ceased operating on 24 April, according to Buzz Telco general manager Jeremy Chequer, who said he was "devastated" at the outcome.

Meanwhile AAPT and Vocus are claiming a combined $1.8 million in debts from the now-shuttered telco.

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Telstra shares crumble below $3 for first time since 2011

15 May

Telstra's profit warning on 14 May sent its share price below $3.00 for the first time since 2011.

The value of shares in the country's biggest telecommunications company have been falling steadily all year, down from $3.64 at the start of 2018 to $2.95 in May and now at around $2.60.

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Optus takes Telstra to court over unlimited data advertisements

19 May

Optus took Telstra to court over an advertising campaign featuring Telstra’s unlimited data plans, accusing its rival of misleading conduct.

Optus took issue on the wording used in the campaign, specifically “One word from Australia’s best mobile network. Unlimited.”, claiming that there was no qualification or explanation accompanying it.

The Federal Court of Australia ruled in favour of Optus four days later, saying the advertisements were misleading.

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Optus fined $1.5 million over NBN migrations

23 May

The Federal Court handed down a $1.5 million fine to Optus for making misleading representations to customers about their transition to the NBN from its Optus HFC network.

The ACCC filed court proceedings against Optus to court in December last year. It accused the telco of misleading its customers by writing to them between October 2015 and March 2017 and advising it would disconnect their HFC service within a specified time period as the NBN would soon be available in their area.

The ACCC said the timeframes set out by Optus were earlier than the telco was contractually allowed to cancel services. Optus was also accused of wrongly telling customers they had to sign up to Optus’ NBN services, when they could have chosen any ISP.

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Virgin Mobile to shut down in Australia, with up to 200 jobs at stake

24 May

Optus pulled the plug on its Virgin Mobile brand, closing 36 stores and putting up to 200 jobs at risk across Australia.

A spokesperson from Optus told CRN that affected customers would be contacted about the changes and their options. The Virgin Mobile brand is set to be phased out over the next two years.

Optus said the retail outlets would begin closing from 4 June until 30 June and it would also stop connecting new services on 15 June.

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Overseas attacker swamped Telstra's triple zero service in attempted toll fraud

1 June

The triple zero emergency service, which is operated by Telstra, was swamped by an onslaught of calls made by a hacker using a compromised telephone switching system, which led to a number of calls from genuine emergencies unanswered.

Telecommunication provider Vocus confirmed to CRN that the attack originated from one of its customer's compromised private automatic branch exchange systems (PABX), which had been hacked in an attempt to commit toll fraud. It is understood the hacker was operating from overseas.

“At 8.30am Saturday, Vocus was made aware of unusual inbound VoIP call activity to 000 call centres between 6.09am and 7.55am that morning,” a Vocus spokesperson told CRN.

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Telstra freezes job ads after hack of Australian SaaS provider PageUp People

6 June

Telstra was one of at least three major Australian organisations have suspended recruitment activities following a malware infection at their recruitment portal provider PageUp People, amid concerns job applicants’ personal information was compromised.

Australia Post and the Reserve Bank of Australia also released advisories or notices on their websites after learning of the breach. 

“[PageUp People] have advised us that their investigation is continuing and while this is occurring we have suspended our use of their services,” Telstra human resources group executive Alex Badenoch wrote in a blog post.

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Telstra to axe at least 8000 jobs, reorganise management in major overhaul

20 June

Telstra will cut at least 8000 employees and contractors from its payroll, and slash between two and four layers of management, the telco revealed earlier this month.

The cuts are part of a three-year strategy called Telstra2022, which seeks to simplify the telco's structure, reduce costs, improve customer experience and turn the carrier around following its continued disappointing financial performance.

Through the cuts, Telstra expects to add an extra $1 billion into its previously announced target of $1.5 billion to see its “productivity program” hit $2.5 billion by financial year 2022.

The telco also plans to scrap all 1800 of its mobile plans and replace them with 20. The infastructure business will be spun out as InfraCo, which Telstra said could pave the way for a possible demerger in the future.

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Communications Workers Union begins fight to save 9500 Telstra jobs

27 June

The Communications Workers Union kicked off its campaign to save up to 9500 jobs that Telstra plans to axe over the next three years, calling on the federal government, the community and other key stakeholders to step in.

The union launched a petition calling for the government to intervene and work with Telstra find an alternative to the job cuts.

CWU national president Shane Murphy commented on Telstra’s decision to cut 8000 positions earlier this month represented one of the largest job cuts in Australian corporate history, criticising the move as “putting short-term profits above long-term services” for Australians.

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Amaysim CEO Julian Ogrin departs for Foxtel, co-founder Peter O'Connell steps in 

26 June

Amaysim co-founder Peter O'Connell assumed the role of chief executive and managing director following the departure of Julian Ogrin, who has joined the merged Foxtel and Fox Sports.

His departure followed continued erosion of the telco's share price, which today sat at 84c, down from a 2018 high of $2.10 in February and a lifetime high of $3.15 in January 2016.

As chief executive, Ogrin led Amaysim's expansion beyond its heritage as a mobile virtual network operator partnered with Optus and into a range of sectors, including home broadband, reselling devices online, and its $120 million acquisition in the energy sector.

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