Telstra has radically reshaped its collection of post-paid mobile plans for consumers and small businesses, whittling down around 1800 plans to 20 core offerings.
Telstra has radically reshaped its collection of post-paid mobile plans for consumers and small businesses, whittling down around 1800 plans to 20 core offerings.
Until recently, customers of Australia's largest phone and internet company Telstra could select from a bewildering array of 1800 different mobile and data plans.
But in a radical overhaul of its customer plans announced last week, Telstra will offer only 20 different plans to its consumer and business customers. Importantly,customers will also not be subjected to lock in contracts and won't be charged for going over data caps.
It's a big departure from the usual phone and internet company model of handcuffing customers to the two or three-year contract they choose from the hundreds on offer.
Instead, customers will be able to select a plan and have the option of changing it every month if they wish. If, during a particular month, they need more data, they will be able to move up to the next plan then drop back to their regular plan the following month.
However, if they go over their data limit, they won't be charged extra money. Instead, their data speed will be limited to 1.5 megabits per second, which Telstra says is still enough to watch a video in standard definition.
In adopting the new strategy, Telstra is setting itself a challenge – to hold onto customers because of the service and the offering and not because they are stuck with a contract.
The strategy is not without risk and it remains to be seen how many customers will ditch Telstra because they're no longer locked in.
But there are a couple of things which will work in Telstra's favour.
Firstly, switching phone provider is still a hassle, with some back-and-forth between the old and the new phone companies. In future this is likely to be a seamless process where everything happens automatically, but at the moment many customers will remain at Telstra simply because it's easier.
Secondly, and most importantly, it is what consumers have been asking for. There is increasing demand for flexible pricing and customisable usage plans across a wide range of industries, where customers don't want to be locked in, either with contracts or by owning things. The rise of ride-sharing businesses is an example of this; instead of buying a second car which spends most of its life in the garage, people have taken to services like Uber in droves.
Australia's largest pay TV operator Foxtel has responded to declining take up of its core services by offering a basic streaming service, which customers take by the month instead of being locked into a contract. They can add to this no-frills service by adding, for instance, classic movies or sports.
It's a trend enunciated by consulting firm Deloitte in this year's Deloitte Consumer Review.
Telstra
"Empowered by social networks and their digital devices, consumers are increasingly dictating what they want, when and where they want it. They have become both critics and creators, demanding a more personalised service and expecting to be given the opportunity to shape the products and services they consume," the firm wrote.
Telstra found something similar in research it undertook as part of its redesign of its customer plans: more than nine out of 10 people wanted individually tailored or personalised services and flexibility.
Customers will be able to add extras such as sports subscriptions or additional data allowances and remove them when they want to, or add international calls for A$10 per month.
The change is part of Telstra's T22 plan, a strategy revival which it started a year ago. The plan aims to remove A$2.5 billion in costs from the business – and 8000 jobs – by 2022. While this might make some of the telco's employees nervous, it has proved popular with investors.
For the past few years Telstra has been viewed by the market as a company in the throes inevitable decline.
But progress on the T22 program and Telstra getting the jump on rivals with the introduction of its superfast 5G mobile network has reinvigorated investors' interest the company. The share price has gone up almost 50 per cent in the last year, from A$2.62 last June to A$3.84 on Friday.
Stock market surges
Australia's share market has surged to a 12 year high in recent weeks.
It has been a bumpy ride. After falling 13 per cent before Christmas because of concerns about the US-China trade war and as the US started to raise interest rates, the ASX-200 rose 23 per cent and finishes the financial year up 6.9 per cent.
The market got a boost thanks to higher commodity prices which boosted profits for mining companies, signs that global interest rates might fall and the surprise election loss by Bill Shorten and Labor.
The Australian market got a boost from higher commodity prices and the re-election of Australian Prime Minister Scott Morrison.
But the rise comes against a background of a weak domestic economy, which should show up when companies start reporting their profit results in August. And of course, the trade tensions that contributed to the pre-Christmas fall are still bubbling away.
Retailers and builders in particular will report subdued profits. The market is has already factored that in, but if companies' all-important profit forecasts prove disappointing then the share market is likely to beat a hasty retreat.
