XT compo: canny customers squeezing Telecom for more

Speaking at the Dunedin Public Art Gallery this afternoon, chief executive Paul Reynolds outlined details of customer compensation for last week's XT outage.

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"Last week's outage should not have happened. It was unacceptable. We let our customers down. But we are taking comprehensive action," said Dr Reynolds, referring to both today's compo and a coming independent inquiry.

Telecom retail chief executive Alan Gourdie revealed the specifics of the package, which his boss said would cost the company $5 million. 

Additionally, Telecom will donate $250,000 to community projects in the lower South Island, which bore the brunt of the blackout.

Customers whose service was "degraded" on Wednesday 27 January:
* Prepaid consumer customers: $10 credit
* Postpaid consumer customers: One week's worth of plan charges, including Telecom Extras, such as texting or data packages
* Telecom Retail SME customers and Gen-i corporate customers: two weeks' worth of plan charges, including Telecom Extras, such as texting or data packages

Customers whose service was severely impacted for up to three days between Wednesday 27 January and 10pm Friday 29 January:
* Prepaid consumer customers: $20 credit
* Postpaid consumer customers: Two weeks' worth of plan charges, including Telecom Extras, such as texting or data packages
* Telecom Retail SME customers and Gen-i corporate customers: Four weeks' worth of plan charges, including Telecom Extras, such as texting or data packages

Automatically credited
Mr Gourdie said customers usage patterns in the days immediately before and after the outage would be analysed, then the credits automatically made to each customers' account.

Prepay customers will get credits by the end of February; contract customers in their March billing cycle.

Magic top-up
Asked if XT subscribers could ask for compensation on top of that announced today, Dr Reynolds said "any customer can talk to us individually".

Some already are. An insider at a large systems integrator told NBR "I have a client that is a national company who have been sticking it to Telecom, purely as leverage to negotiate a better long term deal and handset subsidies, by threatening they will go to Vodafone - when the reality is they have no genuine intention of changing."

"A reasonable gesture"
"When peoples' lives and businesses and families had such a major disruption, sometimes you can’t put a financial value on it," Telecommunications Users Association chief executive Ernie Newman told NBR.

"Any kind of across-the-board-compensation can only be a gesture. But by that light it’s a meaningful gesture for each category of customer.

Further, it was "enough of a gesture to show their embarrassment and their determination to get it right," said Mr Newman.

"Most reasonable people will see it as a reasonable gesture and move on."

Independent review latest
"The bigger issue remains identifying the source of the problem," said IDC market analyst Rosalie Nelson.

"Two large scale outages for a significant period indicate something more than teething pains and the investigation will need to be transparent in terms of the problems, the remedy and the action plan." 

Telecom had now scoped out the "two or three" companies in the world capable of carrying out an independent review of XT, said Dr Reynolds.

The contracted reviewer will be announced in around a week's time.

No corners cut
Dr Reynolds said Telecom had "spent large" on XT and it was wrong to say corners were cut or the telco under-invested. The company bought the bes technology available, said the chief executive.

The initial launch was scheduled for December 2008, but delayed until May 2009 to allow for more testing, said Dr Reynolds.

"I hate them with a passion, but outages happen on all networks around the world," said Dr Reynolds.

Mr Gourdie said around 200,000 customers south of Taupo were affected.

No Alcatel-Lucent money
Asked whether XT technology partner Alcatel-Lucent would kick in any of the $5 million compensation, Dr Reynolds said the money would be "all from Telecom".

Earnings impact
Dr Reynolds said he would not discuss the outage's impact on Telecom earnings until its next results briefing, scheduled in two weeks.

Without offering any figures, the chief executive said XT sales remained strong.

Earlier, Forsyth Barr investment analyst Guy Hallwright told NBR he thought there would not be a significant earnings impact per se, "But it will slow XT growth as businesses thinking of moving to XT adopt a wait-and-see approach.

“I would guess it could delay XT customer growth by six to 12 months versus plan, assuming they have no further problems and do a good marketing recovery." job.”

Telecom shares (NZX: TEL) were up one cent to $2.38 in late trading.