Former ACCC chair expresses alarm over accusations Telstra has misled mobile phone consumers

Australia’s biggest telco could be fined hundreds of millions of dollars if the competition watchdog finds in favour of rival TPG’s claim the telco significantly overstated its mobile coverage.

TPG has urged Telstra to “come clean” over its mobile coverage claims.

Telstra could potentially face hundreds of millions of dollars in fines, depending on how the consumer watchdog assesses allegations the telco “tricked Australians into paying top dollar”.

Rival Vodafone’s owner, TPG alleges Telstra overstated its mobile coverage by about one million square kilometres.

Former competition tsar Allan Fels expressed shock at the allegations, given Telstra’s “not infrequent court summons” over misleading conduct.

Telstra has denied it misled Australians but has removed its “unrivalled three million square kilometres claim” from its website.

A Telstra spokesman said it had always calculated its coverage based on outdoor mobile phone use and external antennas, which can cost thousands of dollars.

But TPG said those extra costs were never disclosed, and that consumers believed they had access to those three million square kilometres when using a regular mobile phone. This is the way TPG and Optus calculate coverage.

Professor Fels – who called for Telstra to be broken up when he headed the Australian Competition and Consumer Commission – said it looked as though Telstra was at risk of breaching laws relating to misleading and deceptive conduct.

Companies can be fined up to $50m per breach and TPG said Telstra had made such claims for the past 15 years, costing it potential customers.

“Many people who travel around Australia purchase Telstra products because of their belief that they’ve got unsurpassed coverage,” Professor Fels said.

“It’s obviously been a considerable marketing attribute that it claims to cover three million square kilometres in that it causes them to attract more customers away from other competitors.

“If the allegations are true, I’m surprised that Telstra, with its not infrequent court summons over the years regarding misleading conduct, hasn’t prevented this.”

Allan Fels, when ACCC chair, called for Telstra to be broken.

Telstra has been fined $75m in the past seven years for making false or misleading representations or engaging in unconscionable conduct.

In February, the Federal Court found that Telstra made false or misleading representations about Belong’s upload speeds to almost 9000 residential broadband customers. Telstra failed to notify customers that it halved their upload speed to 20Mbps without cutting the price of the service. This was despite NBN Co charging Telstra $7 a month less per plan.

In late 2022, Telstra was fined $15m after it admitted making false or misleading representations to consumers when promoting certain NBN internet plans. That followed a $50m fine imposed on the telco in May that year for engaging in unconscionable conduct when it sold mobile contracts to more than 100 Indigenous consumers who were unable to cover their cost.

And in April 2018, Telstra was fined $10m for making false or misleading representations to customers in relation to its third-party billing service known as “Premium Direct Billing”.

If Telstra statements regarding its coverage cost TPG just 1 per cent of its customer base, it would have cost the company about $360m in lost revenue over a 10-year period. This is based on a mobile plan costing about $50 a month.

“Those maths make sense to me,” TPG’s group executive in charge of consumers, Kieran Cooney, said.

Telstra chief Vicki Brady. Picture: John Feder

An ACCC spokeswoman said the watchdog was considering TPG’s claims. “The ACCC recognises the importance of accurate mobile coverage claims, particularly for regional and remote consumers,” she said.

A coverage war erupted earlier this year when TPG and Optus launched a $1.6bn deal to share mobile towers, with both telcos vowing to end Telstra’s “tax”, citing the premium it charges for its mobile plans.

During the company’s earnings call in February Telstra chief executive Vicki Brady said: “We have expanded our coverage to more than 3 million square kilometres, now reaching 99.7 per cent of Australia’s population.

“To put that in perspective, our mobile network covers more than double the area of Optus’s network, and around three times the area of the Vodafone/TPG network.”

Telstra says it now provides “at least” one million square kilometres more coverage than TPG – or twice the amount of its rival. It did not respond to this masthead’s questions about exactly how much coverage it provided Australians based on normal mobile phone use.

“Any suggestion that we’ve misled the public about the size of our network is completely untrue,” a spokesman said at the weekend.

“Now that Vodafone has communicated to us how it’s chosen to calculate its coverage footprint, to help the public understand the difference we’re highlighting that our 3 million square kilometres of coverage is based on using an external antenna.

“On any measure, Telstra’s network is at least 1 million square kilometres larger than Vodafone’s – that’s an area more than 14 times the size of Tasmania.”

Originally published as Former ACCC chair expresses alarm over accusations Telstra has misled mobile phone consumers