Telstra's pain cave

Telstra generated a lot of headlines last week for plans to sack another 550 employees (in addition to 2,800 last year). But the layoffs should have come as no surprise. Most of the layoffs will come in Telstra's enterprise and fixed line businesses, both of which have been going down like Messerschmitt 109s in August 1940.[[The Royal Air Force reportedly shot down 2,692 German aircraft during the battle of Britain, many of them ME-109s. One of the few surviving ME-109 pilots moved to Hervey Bay, Queensland, after the war and became a successful home builder. Herr Becker built a house for my parents, which still stands today.]]

What should have surprised the market more was Telstra's decision to ram through the fifth annual above-CPI price rise in succession for most of its mobile phone customers from July 1. With the RBA's trigger finger poised and headline inflation down to 2.4 per cent, Telstra went pedal to the metal and raised prices for some of its more popular plans by around 7 per cent.[[In 2024, Telstra briefly toyed with – but ultimately rejected – a plan to moderate its annual mobile plan price rises. Telstra subscribers briefly cheered as they caught wind of the mooted price freeze, then cried as Telstra bumped prices after all. Telstra didn't make the same mistake this year, bumping most mobile plan prices another $4-5 per month.]] 

Clearly, Telstra CEO Vicky Brady is following in the footsteps of her predecessors. Telstra's network dominance has allowed it to ram through above-CPI price rises for more than a decade. Those mobile price rises have anabolised Telstra's executive bonus pool as surely as Lance Armstrong's daily cocktails. 

Former Telstra executives are surprised that the company is still going gangbusters on price rises when the changing market environment might warrant a more cautious approach.