Telstra (ASX:TLS) to repay up to $25 million to customers for slow internet

The industry regulator says Telstra did not deliver on its promises to customers.

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Telstra Corporation Ltd (ASX: TLS) will have to refund its customers up to $25 million after an adverse finding by the communications industry watchdog.

The Australian Communications and Media Authority (ACMA) found between the years 2018 and 2020, Telstra omitted to tell almost 50,000 customers that maximum internet speeds it advertised were not possible at the time.

Under ACMA rules, telcos must verify maximum internet speeds and notify customers when speeds cannot meet those advertised. Customers are then entitled to move to a cheaper plan or exit the contract without cost.

ACMA says it expects the company to repay “around $25 million” to its affected customers. That figure includes additional cases beyond those ACMA considered. The authority says Telstra is working regularly with it on this issue and that remediations are already underway.

If Telstra fails to comply, it could be slapped with an additional $10 million fine. It remains to be seen what this could mean for the Telstra share price.

ACMA and Telstra responses

In a statement, ACMA chair Nerida O’Laughlin said:

The ACMA is very concerned with this conduct as these customers have been paying for a level of service they were not receiving.

Telstra denied these customers the opportunity to downgrade their plan or exit their contract.

She added:

We will take a very close look at the results of the independent audit to make sure we are satisfied that the action Telstra has taken will adequately address the flaws that led to the problems.

In a blog post from last month, Telstra executive Sanjay Nayak said the company was “very sorry” for letting customers down. He further said Telstra is making “significant improvements” to the way it communicates NBN speeds to its customers.

When contacted by Motley Fool Australia for additional comment, a spokesperson for the company said Telstra self-reported these breaches and it was “disappointing that the regulator as [sic] singled out Telstra and rewarded our self-reporting in this way”.

Telstra share price snapshot

Over the past 12 months, the Telstra share price has increased by 8.82%. Only yesterday, the business reached its 52-week high of $3.79 per share.

In other news affecting Telstra shares, the company announced last week it would sell a 49% interest in its mobile towers business to a cadre of investors for nearly $3 billion.

Telstra has a market capitalisation of $44 billion.

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Returns as of 15th February 2021

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation 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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