Telstra says it’s expensive but not overcharging as price war erupts

Rivals claim Telstra is ‘taxing’ Australians with expensive mobile phone plans. But Telstra has hit back, saying there is a reason why it charges so much to access its network.

Telstra CEO and Managing Director of Telstra, Vicki Brady, abandoned the telco’s long-standing strategy of pegging price rises to inflation last year. Picture: John Feder

Telstra has hit back at claims that it is ‘taxing’ Australians by charging up to 24 per cent more for mobile phone plans than its rivals, as a new price war erupts between the nation’s three biggest telcos.

Vodafone owner TPG and Optus switched on their $1.6bn network sharing agreement last week, vowing to end Telstra’s ‘tax’.

Under the network sharing agreement, TPG will pay Optus $1.19bn to increase its coverage from 400,000sq km to more than one million square kilometres, more than doubling its coverage.

TPG CEO Iñaki Berroeta says Australians are ‘fed up’ paying Telstra’s high prices. Photographer: Adam Yip

TPG chief executive Iñaki Berroeta plans to poach Telstra customers who are fed up with paying higher prices.

“We have heard loud and clear from Australians that they are fed up with having to pay a premium for regional mobile coverage. It’s a bush tax and we want to end it,” Mr Berroeta said.

But a Telstra spokesman said its network covered three million sq km - more than three times of Vodafone’s expanded footprint - and it was costly to maintain.

“We’re all for choice and competition, it’s what drives us to be our best, but let’s be clear about what best looks like,” the Telstra spokesman said.

“If you live or travel in rural and regional Australia, you know mobile coverage can’t just stop the moment you step out of town. Knowing you’re covered on the road, in the paddock and in more places across Australia is critical.

“Customers will always choose the option that best suits their needs, and we’ll continue to invest like we always have, so we can offer them the best choice.”

Telstra’s base sim-only mobile plan costs $65 a month for 50GB of data – more than 24 per cent higher than Vodafone’s offering for the same amount of data. TPG has also been undercutting Telstra via its budget offshoot Felix Mobile, with half-price plans. Optus’s base sim plan is also cheaper, costing $62 a month for 180GB of data.

Telstra chief executive Vicki Brady abandoned the telco’s long-standing strategy of pegging price rises to inflation last May. Some analysts believed Telstra would freeze or lower prices to prepare for increased competition from Vodafone.

Telstra says its network is three times bigger than Vodafone’s expanded footprint and its more costly to maintain.

But Telstra did the opposite, hiking plans $2-$4 or 4-5 per cent. However,, the jump in some prepaid services pushed into double digits; for example the $35 monthly plan jumps to $39, or 11 per cent. And across some services sold through retailers such as JB Hi-Fi, the price rise also comes with a sharply reduced data allowance, sparking accusations of ‘shrinkflation’.

Telstra said at the time that it was balancing cost of living increases with the need to invest in its network to keep up with the explosion in data use across the country.

A Telstra spokesman reiterated those comments this week.

“Our focus is on continuing to invest in regional Australia by further expanding our network, because we know it’s what these communities need,” the Telstra spokesman said.

“We are also continuing to expand our 5G footprint which remains Australia’s largest 5G and is available in most metro and many regional areas today.”

Still, Optus managing director for customer solutions, Anthony Shiner, who joined the telco late last year from Airtel Africa, expected the network sharing deal to increase competition not just in regional Australia but also metropolitan areas.

“Anytime you stir the market up and you get interest in that category, it forces everyone to pull up their socks and we look forward to continuing to do that,” Mr Shiner said.

TPG initially wanted to enter a network sharing deal with Telstra to expand its network but the Australian Competition and Consumer Commission objected to the move, fearing it would solidify Telstra’s grip on the telco market.

Originally published as Telstra says it’s expensive but not overcharging as price war erupts