Bill shock cost Telstra up to $90 million

“Self inflicted” bad debt costs largely caused by excessive wireless broadband charges

Wireless broadband-related ‘bill shock’ has cost Telstra as much as $90 million in the 2010 financial year through the company’s having to waive fees or write off debts owed by customers who refuse to pay their bills.

Detailing the costs at a media briefing following the company’s full year financial results, Telstra chief executive, David Thodey, claimed there had been a mismatch between customer’s understanding of the upfront cost of wireless plans and the additional fees associated with excess data downloads.

“We have had an increase in bad debt as customers expectation of what they purchase and what they get isn’t quite right,” Thodey said. “We have seen some bill shock through larger wireless data costs, and people say, ‘hey, what’s going on here?’ So a lot of work to do in that area.”

Telstra chief financial office, John Stanhope, said the costs – between $70 and $90 million of the company’s total $364 million bad debts charge for the year – had been “self inflicted” on Telstra’s behalf.

“What I mean by that is that…. The customer may be described a plan and when they get the first bill it is hard to understand or it doesn’t match the plan they thought they were going to get as described by somebody at the front of our house, or our agents,” he said. “Then, a dispute occurs with the bill.”

Stanhope said Telstra was working to address the problem through its‘simplification program’ which would help customers understand the plan they had and “what it would look like” on a bill.

“We call it a ‘self inflicted’ bad debt, but then there are other things like excess usage charges and so on that occur and sometimes they can end up in dispute,” he said. “That is part of the 364 million and has been mostly in our consumer area. The rest is the normal delinquency of debt.”

Stanhope defined ‘bad debts’ as those which consumers refused to pay. He added that rebates to customers resulting from bill disputes were not included under bad debts.

Thodey added that the $90 million cost blow-out was a “consumer phenomena” and that Telstra had a “very strong” receivables performance in the rest of its markets.

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