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SingTel Optus takes pay cut for customer satisfaction

Australian telecommunication companies are being put under pressure by customers who want better service as a reward for their business.

In the past it seemed the customer service provided by telcos was a take it or leave approach. Now they’re facing a saturated but still highly lucrative mobile market where the best marketing strategy is word of mouth. Social media is playing an increasingly big part in making providers accountable for their services.

Telstra (ASX: TLS), Australia’s biggest mobile provider with over 15 million customers, has acknowledged the trend of the industry and has attracted customers with better service, networks and reliability. A rapidly growing number of customers is proving it’s a winning combination.

Rivals like Singapore Telecommunications’ (ASX: SGT) Optus have also begun to play a card of their own. Earlier this week Optus said more than 350,000 Australian customers will save 1% per month on bill payments.

Like Telstra and Vodafone – part-owned by Hutchison Australia (ASX: HTA) – Optus had been charging customers 1% for bill payments using a credit card.

Getting charged to pay for something seems ridiculous but it’s an example of the legacy the telecommunications sector provided its customers, which still grips us today. Vodafone boss Bill Morrow said in the last seven years Australian telecommunications companies have neglected customers. “The [Australian] market has gone backward in customer experience while other international markets moved forward.”

Choice Spokesman Tom Godfrey said, “In an industry where excessive charges had become standard practice, any reduction in fees is welcome news for consumers.” Optus said the decision to pass up the $3 million per year fee was “as a result of feedback from customers.”

In addition to cutting the direct debit credit card fee, payments that get rejected by the customer’s bank will no longer be charged an additional $22. However, the company will still charge the processing fee for non-direct debit credit card transactions.

Foolish takeaway

Whilst Telstra’s number of customers have grown rapidly in the past two years, Optus has remained largely flat and Vodafone has lost a significant customer base. Optus’s increased competition in both mobile markets and fixed line services like broadband and business solutions is squeezing on margins and forcing the company (and many others in the industry) to give more back to customers.

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Motley Fool contributor Owen Raskiewicz does not have a financial interest in any of the mentioned companies.

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