$24 million paid out: Telstra under fire

The industry watchdog hammers major telco for basic failures in its billing systems, which slugged thousands of customers for no service.

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Telstra Group Ltd (ASX: TLS) and its shares are under pressure on Wednesday after it was revealed the telco has been slugged $24 million for billing violations.

The Australian Communications and Media Authority announced that the ASX-listed telecommunication company had been caught once again incorrectly charging 6,532 customers — mostly small businesses — for "inactive internet services".

These violations of the telecommunications consumer protections (TCP) code kept going over a period of 11 years.

Telstra has so paid out a staggering $17.7 million in refunds and paid a $3 million penalty. It's expected another $3.4 million will be paid to victims before the year is over.

Telstra shares have lost more than 14% since mid-June, while paying out a 4.5% fully franked dividend yield.

A history of failures

The latest breaches follow a pattern of false billing by Telstra.

Last year ACMA found the telco overcharged more than 11,000 customers, and back in 2020 an investigation showed 10,000 customers were falsely slugged $2.5 million over 12 years.

According to ACMA chair Nerida O'Loughlin, her team has "lost patience with Telstra".

"Telstra has a history of incorrectly billing customers and it's just not good enough," O'Loughlin said.

"At a time when many small businesses are facing economic pressures, unaccounted costs can create very real stress and financial hardship."

Court action could come in the future

O'Loughlin pointed out an accurate charging mechanism has to be a basic priority for a major telecommunications provider.

"Telstra is a major player in the Australian telco sector and it needs to continue to prioritise its billing compliance and get its systems in order," she said.

"All telcos must have robust billing systems in place to ensure that consumers, including small businesses, are only paying for agreed and active services."

The latest batch of overcharging occurred because the company failed to process all the steps required when deactivating ADSL internet connections.

According to ACMA, Telstra has now put in controls to manage the risk of these errors occurring again, including a check that an ADSL service is actively in use before billing.

Telstra will also report back to ACMA in six months to report how effectively these measures are working.

The telco watchdog warned that court action could follow if any further breaches by Telstra are found.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. 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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