Telecom’s Subtle Changes Increase Profits By Millions

Telecom is in a pretty static market, so boosting earnings is mostly about reducing costs and increasing yields from customers.

Costs have been cut effectively over the years and Telecom continues to show it is a master at eking out that last cent of value from its customers.

In recent years, it has increased the value extracted from customers by bringing forward the billing cycle one week, increasing the wiring maintenance charge hugely, getting rid of part-minute toll charging, introducing a fee for 018 inquiries and devaluing the talking point scheme on two occasions.

These are all minor changes for the customers, but have increased Telecom’s profits by tens of millions of dollars.

The latest alteration is in Telecom’s sponsorship of schools. It has been the biggest supporter of schools outside the Government, traditionally giving 4 per cent to 5 per cent of the toll spending of parents who have signed up in support.

Telecom has changed “School Connection” from a cash-based payout to a points scheme that schools can use to buy computers. The company claims that annual sponsorship will increase from $9 million to $10m, but this is hard to believe.

The reduction in cash grants to schools comes at a time when falling overseas student numbers are also whittling away at the income base of our educators. Principals and school trustees will in the next six months awake to the fact that they face a significant funding hole next year (probably 2% to 3% of most schools’ budget) because of Telecom’s changes.

Telecom will now give points on the parents’ entire spend rather than just on tolls, with one point for each $25 paid to Telecom. If you look at a household with $100 of tolls a month, one line and an internet connection, the support to the school will go from about $5 in cash to six points which earlier literature on the Telecom web site suggested will in total be worth $1.20.

Some households with Telecom mobile phones may generate more value to schools, but given that most mobile phones are provided by employers, and that pre-paid phones will not accrue any benefit, this effect is likely to be small.

Then, of course, there will be the issue about the “value” Telecom puts on the various computers the schools will be invited to buy with their points.

When the company operated talking points, electronic equipment like printers and digital cameras tended to be superseded models, obviously picked up for bargain prices.

Telecom’s subtle value moves on its customer base have probably hardly been noticed by most consumers, but this latest change will certainly make a huge difference to the schools which have become dependent on Telecom’s previous generous support.

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