Telstra cut millions in bonuses to its senior executives because of the network outages

Radek Mica/AFP/Getty Images.

The pay of Telstra’s senior staff has suffered from a series of outages which left mobile phone users without access to the network.

And CEO Andrew Penn has revealed that the customer service part of annual incentives, the customer advocacy result, hasn’t been paid to executives and staff.

“There were a number of factors which influenced this including the network service interruptions we experienced in the second half of the year,” he told the annual general meeting.

Penn gave no detail on the dollar amounts lost in incentives. However, when presenting the annual remuneration report, he said: “No incentive payments were made to senior management in respect of customer service performance.”

This meant that senior executives got an average of 40.5% of the maximum opportunity under the 2016 short term incentive plan.

Penn himself lost $438,996 in 2016 from the previous year, according to short term incentive cash payment numbers in Telstra’s annual reports. Other senior executives to see a drop include departing COO Kate McKenzie (down $717,450) and interim COO Brendon Riley ($640,950)

And in 2017, Telstra is adding a new measure, called the Service Experience Index, against the incentive plans.

“This is a measure of the experience that our customers receive each time they actually use us or are in contact with us to fix a problem,” says Penn.

This chart shows the fall from about a 60% payout in short term incentives:

John Mullen, at his first AGM as chairman since the departure of Catherine Livingstone in April, apologised for the outages, saying customers are expecting more and more capacity at a lower and lower price.

“To give you a sense for the demand we are seeing, a single 4G wireless broadband modem on the network today can deliver more than the total combined network data throughput of 10 years ago and data traffic on our wireless network continues to double every two years,” he says.

“It is for this reason we were disappointed to let customer down through the network interruptions we experienced in the second half of this financial year.

“We are sorry for the impact this had on our customers.”

However, Mullen insisted that Telstra’s network was world class.

“There is nothing, I repeat nothing, inherently wrong with Telstra’s core networks,” he told shareholders.

“But we need to keep investing, to stay ahead of demand by simplifying our products and platforms, retiring old technology and legacy systems that slow down and complicate how customers are served, and investing in materially greater capacity growth and speed.”

Telstra in August committed to investing up to an extra $3 billion over three years in the network and digitisation program.

Penn says a program to improve mobile network recovery times is progressing.

“We are well progressed with this program and have already substantially improved our mobile network recovery times,” he says.

“In parallel we have continued to build our network capabilities. This work is critical because all of us are relying more and more on smart devices, smart technologies and fast connectivity every day.”

Telstra in August posted a 35.9% rise in full year profit to $5.8 billion and announced it is is giving back $1.5 billion in capital to shareholders after banking $1.8 billion from the sale of Telstra’s Autohome shares, the Chinese online car sales business.

The company also declared a fully franked final dividend of 15.5 cents a share, bringing the total dividend for the financial year to 31 cents, up 1.6% on the prior year.

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