Telstra Corporation Ltd (ASX: TLS) shares are in the green today despite news the company will have to pay a record $1.5 million fine. This came after it was found to have breached the rights of its customers during the initial stages of the COVID-19 pandemic.
The Australian Communications and Media Authority (ACMA) said in a statement Telstra’s actions of blocking consumers from swapping their phone numbers to other providers between March and June 2020 was in contravention of the law.
The ability to keep (or port) your phone number between providers was introduced in 1997. It is intended “to provide service continuity for consumers changing telcos and to facilitate competition in telco markets,” according to the government agency.
At the time of writing, the Telstra share price is trading 0.57% higher at $3.51.
Telstra’s record fine
Telstra blocked porting facilities in March last year, as its overseas service centres were shut down by government lockdowns due to the raging virus. The company did not partially resume the service until July and did not clear the backlog of requests until October.
As a result, 42,000 services were unable to switch providers while keeping their landline numbers during this time. It should be noted customers can have up to a few hundred services. The number of breaches, therefore, is most likely below this figure.
Telstra both prevented new requests and unilaterally cancelled existing porting requests when the pandemic struck. At the time, Telstra said it had cleared this suspension with the regulator. ACMA denied this, investigated the company, and then issued today’s contravention notices.
The telecommunications watchdog says the company may face penalties of up to $250,000 if it breaches the portability code again.
While the $1.5 million fine is a record for the industry, it is arguably relatively minor for a company with a market capitalisation of $41.5 billion. And judging by today’s performance of the Telstra share price, investors don’t appear overly fazed by the news.
Telstra paid interim, fully franked, dividends worth approximately $950 million in February this year to shareholders.
What did ACMA say?
ACMA said it can issue fines of up to $12,600 per breach. However, ACMA chair Nerida O’Laughlin said the agency took a more lenient approach because of the circumstances at the time.
“We appreciate Telstra had difficulties due to COVID-19 and we took this into account in our enforcement actions, including the size of the financial penalty,” Ms O’Laughlin said.
“However, it is clear Telstra, for a sustained period, did not have sufficient plans in place to comply with an important consumer safeguard that promotes competition in the telco market.”
Ms O’Laughlin also made it clear Telstra’s actions had wide-reaching and lengthy impacts on residential and business consumers, as well as the broader telco industry.
“Australian consumers must have the freedom to change their telco provider to take up services that best suit their needs. This includes keeping your own phone number even if you take your business elsewhere”.
“Local number porting is important for consumers and supports a competitive telco sector,” she added.
What about Telstra’s response?
When asked for comment by Motley Fool Australia, a spokesperson for Telstra said:
We agree that it’s important customers have the ability to take their numbers with them if they choose to move between providers.
This issue happened at the height of the first global wave of COVID, a time that tested everyone’s resilience and crisis management. Given the number of our people and services affected by the pandemic, we could not guarantee that numbers would be ported correctly and decided to hit pause until we could be sure that we would not leave people without a service. We did this in a way to ensure that Telstra did not receive any advantage over our competitors. We worked hard to get all our porting services operating again as quickly as possible.
Since then, we’ve made a range of changes to ensure we can continue to meet our regulatory obligation to provide number porting services.
Telstra share price snapshot
The Telstra share price has rallied by more than 16% in year-to-date trading. The telco giant’s shares are also up by almost 14% over the past year. Telstra shares are currently trading just 0.85% off their 52-week high seen in July last year.
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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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