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Is Telstra Corporation Ltd (ASX:TLS) next to face a Royal Commission flogging?

Australia is going Royal Commission-crazy with a telco industry insider fearing the sector will be next to front a public enquiry into bad practices.

The group executive for Macquarie Telecom Group Ltd. (ASX: MAQ), Luke Clifton, wrote in an opinion piece published in the Australian Financial Review that he’s worried that the high number of consumer complaints will prompt the Morrison government to target telecommunications after its decision to launch a Royal Commission into Aged Care in the new year.

The news had sent the share prices of Japara Healthcare Ltd (ASX: JHC) and Regis Healthcare Ltd (ASX: REG) into a free-fall while shares in Commonwealth Bank of Australia (ASX: CBA) and AMP Limited (ASX: AMP) are still reeling from the ongoing Banking Royal Commission.

Telstra Corporation Ltd (ASX: TLS), TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC) could be next if Clifton’s prediction is taken seriously. I am all for Royal Commissions but even I think this warning is a furphy.

The examples cited in the article about false advertising by some telcos on their mobile phone plans is a genuine concern and it seems that vulnerable consumers will need protection against unfair charges and fees, but I don’t believe the level of misconduct and the consequences are as extreme as those uncovered in the financial or aged care sector.

Royal Commissions should only be reserved for the worst kind of institutionalised behaviours and the Australian Competition and Consumer Commission (ACCC) has sufficient power to deal with the telecommunications industry.

The consumer watchdog warned telecom companies last week to pull their socks up in regards to their advertising claims, particularly how the term “unlimited” is used.

This perhaps explains why the Telecommunications Industry Ombudsman receives four times the complaints than that of the financial sector ombudsman. But even Clifton admits that that in itself isn’t reason enough to call for a Royal Commission.

Such bad practices do exist in the telco space but I don’t think it’s widespread, and I should know as I am a keen user of budget mobile plans.

Also, I don’t think going after the telcos is quite as big a vote-winner for the embattled Morrison government. It’s far more likely that the federal government will aim at the utilities sector instead given the market power of the large vertically integrated power companies like AGL Energy Limited (ASX: AGL) and Origin Energy Ltd (ASX: ORG).

Intense competition and the rapidly changing industry landscape have turned Telstra into a shadow of itself. The once mighty telco is struggling to redefine itself – but at least it doesn’t need to worry much about a Royal Commission.

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Motley Fool contributor Brendon Lau owns shares of Telstra Limited, TPG Telecom Limited, and Vocus Communications Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited, TPG Telecom Limited, and Vocus Communications Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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