Telstra Corporation Ltd’s credibility shot on mobile outages

Credit: Jason Howie

Telstra Corporation Ltd’s (ASX: TLS) complaints department is likely to be running hot this morning after the company’s nationwide mobile network reportedly crashed for the second time in under a month.

This is a humiliating result for new chief executive Andy Penn as the outage affected some 8 million mobile users for a number of hours, with some internet connections also interrupted on Friday morning in a potentially related consequence of Telstra’s technological problems.

The telco is offering all of its customers a free day of data on April 3 as compensation for the mobile outage. It’s also now under pressure to avoid a repeat of the outages to demonstrate it has identified and fixed a problem that threatens its reputation as the nation’s best mobile network provider.

The mobile business has been its strength recently with revenue up 3.7% for the six months ending December 31 2015, and 235,000 total new retail mobile customers added over the prior corresponding period.

Telstra shares are flat at $5.26 in trade this morning, although any further outages to its dominant mobile network could erode its market-leading advantage and ability to charge a premium over rivals like Vodafone that is in various joint ventures with TPG Telecom Ltd (ASX: TPM), or the Singtel owned Optus network.

Telstra’s customer churn has also been extremely low recently, although if the company cannot put the network outages behind it customer churn levels could head higher and the share price lower.

Telstra pays a juicy dividend around a fully franked 5.5%, but it doesn’t have the growth outlook of The Motley Fool’s favourite dividend stock identified below.

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