As senators line up to probe Telstra executives over a nationwide outage, telecommunications analysts say the telcoβs reputation is heavily bruised but a mass exodus of customers is unlikely.
Last weekβs outage cut hundreds of people off from Triple Zero, halted trains in Victoria and NSW and brought down eftpos systems nationally, prompting three investigations and a Senate inquiry that is set to question executives including boss Vicki Brady at midday on Friday.
Eamon Gallagher
But leading market analysts believe the incident will not permanently damage the mobile providerβs subscriber base or its ability to charge a premium for its services, largely because of the spotty track records of its primary rivals.
MST Marquee equity research analyst Fraser McLeish said he expected the customer and financial impact to be minimal, provided the failure was not repeated.
βTelstra generally has a very strong track record on network reliability and I donβt expect many customers to look to change provider because of a single outage,β McLeish said.
βThe recent outage does put a bit of a dent in Telstraβs reputation of network reliability, but customers have generally had a good network service experience from Telstra over a long period, so I donβt expect a one-off incident to materially impact its ability to charge a premium.β
This masthead first revealed the outage was likely to have been caused by a server that had reached the end of its supported life almost a decade ago and was never replaced, despite newer devices costing less than $30,000.
The federal government was swift to condemn the disruption with Communications Minister Anika Wells stating the failure demonstrated why telecommunications was the least trusted sector in Australia.
The Australian Communications and Media Authority will conduct a full investigation into the crash, placing particular focus on the Triple Zero failures.
However, Morningstar analyst Brian Han said past reactions to major outages proved they rarely resulted in permanent commercial damage, despite βmedia and government histrionicsβ.
Han said Telstraβs market premium was not built on a promise of zero faults, but on geographic coverage, brand strength, and relative reliability when compared to Optus and Vodafone.
βThey can go to the two other only network mobile operators or their budget brands, if they are bothered to or if there are enough opportunistic inducements,β Han said.
βAt the end of the day, outages happen, will continue to happen and can happen to any one of the three mobile network operators.β
The Telstra failure follows a nationwide Vodafone disruption in June and multiple significant Optus outages over recent years, including a crisis that took its network down for up to 14 hours in late 2023.
UBS analyst Lucy Huang said the bank was monitoring the market for potential customer churn, but noted Telstraβs early estimates of the disruptionβs scale were smaller than previous incidents experienced by its peers.
Huang said the broader issue was that the public perception of alternative networks still lagged behind Telstra due to their own historical outages.
βTelstra still has one of the higher brand perceptions across the industry for network reliability in our latest UBS Evidence Lab survey,β Huang said.
She said the main risk to Telstra was not that customers would move to the Optus or Vodafone networks, but that unhappy users would switch to cheaper providers that lease space on the Telstra network.
Telsyte senior analyst Alvin Lee agreed, noting that mobile virtual network operators now accounted for more than 20 per cent of the market and were growing on a value pitch.
βAn outage like this adds a reliability argument to that shift,β Lee said.
Lee said while network reliability consistently ranks as a top priority for consumers in Telsyteβs research, a single bad day would rarely trigger mass switching on its own.
βThe real risk to Telstra is whether reliability concerns turn into a pattern,β he said.
Independent telecommunications analyst Paul Budde said public expectations of mobile providers were already depressed before the July 8 failure.
βTo be honest I donβt think it will make a lot of difference,β Budde said. βCustomers are getting used to these sort of issues.
βCustomer expectation of the telcos in general is at an all-time low anyway. Sure their ego and status will have suffered and they will work on that.β
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David Swan is the technology editor for The Age and The Sydney Morning Herald. He was previously technology editor for The Australian newspaper.Connect via X or email.