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SingTel Overcharging Customers In Australia?

Ser Jing - Do You Know Exactly How Much You Might Be Losing Out in Fees for Funds (pic)

Singapore’s telecommunications giant SingTel’s (SGX: Z74) wholly-owned Australian subsidiary Optus recently admitted that it has been overcharging mobile customers in the country for years.

At an end of year media party, Fairfax Media quoted Kevin Russell, chief executive of Optus, as saying:

Let’s be crystal clear. As an industry, we know how people use their phones, we know young people will get their first smartphone and go bananas on it, we know people are going to get hit with a A$500 or A$600 bill, and we know that if they don’t complain we’ll get an extra whooping bit of revenue.”

Russell also criticised data roaming plans, saying, “The idea that you’re on holiday and you get a $5,000 bill is a shocker.”

But he said that Optus had taken steps to address what has become known as ‘bill shock’. In October, he said the telco industry in Australia needed to tackle the problem of bill shock, and give customers certainty over how much their end of month bill will be.

Optus has steadily introduced more generous mobile phone plans that can limit the amount of overcharging, by giving customers higher allowances for data and call usage.

An enquiry by the Australian Communications and Media Authority (ACMA) estimated that Australians spent A$1.5b more than they need to every year, simply because they picked the wrong mobile plan.

Telcos in Australia, including Telstra Corporation, Optus, and Vodafone – the number one, two, and three telco operator in the country respectively – spent A$108m resolving complaints, and wrote off an additional A$113m annually in bad debts incurred through bill shock.

Complaints to the telecommunications ombudsman recently hit a five-year low, coinciding with the introduction of a tough new consumer code, designed to improve telecommunication services, and act as a guide for telcos to act in concert with their customers to eliminate bill shock.

A telecommunications consumer group, the Australian Communications Consumer Action Network, says there remains significant scope for telcos to cut complaints.

While Optus says it has taken steps to reduce bill shock, eliminating the problem across the industry in the country should be a high-priority goal. It’s not clear whether Russell’s admission opens up Optus to legal claims, but we may yet hear more about the issue over the coming days.

SingTel’s smaller local competitors in Singapore, Starhub (SGX: CC3) and M1 (SGX: B2F), have been turning up the heat: both have done much better than SingTel over the past 9 years in terms of earnings growth.

Under such a backdrop, the importance of Optus’s performance to SingTel’s overall corporate results increases with each passing year and whatever is happening in Australia’s telecommunications industry would be of big importance to Singapore’s telecommunications giant.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. This article was written by Mike King and first published on fool.com.au. It has been edited for fool.sg