Hutchison posts $78 million loss – here are its top five mistakes

Troubled telco Hutchison Australia has announced a $78.2 million loss for the first half of the year, a direct consequence of losing more than 375,000 customers due to a perfect storm of ongoing customer service, network and security issues.

The results were widely expected by telco analysts, which say the company is losing ground to rivals as its customer service and network issues are still being handled.

VHA chief executive Nigel Dews said yesterday the company is working to fix the mistakes that led to the mass exodus, confirming upgrades to its networks and further support for customer service.

”The decline in Hutchison Telecom’s profit was driven by a $15.6 million decrease in interest income following the repayment of shareholder loans by VHA during 2010, and a decrease in VHA profitability following the network and customer service issues experienced by some customers in late 2010 and early this year,” he said yesterday.

“It’s been a challenging six months.”

But Dews also said the company had “learned from our mistakes. We are rolling out ahead of what we need and ensuring this doesn’t happen again”.

But just to be clear, here are the five biggest mistakes:

Network services

Mobile users expect good performance, and nothing less. With so many providers now competing for service, and adding new products like 3G connectivity and higher data packs, it isn’t a stretch of the imagination that they should be able to actually use those products.

But the network problems VHA has experienced over the last 12 months have quite possibly been the biggest catalyst for consumers to leave the network.

Customers have complained of poor reception in fully covered areas, drop-outs for 3G connections and poor call quality. These aren’t just isolated cases – thousands of customers have complained about the same problems.

And these occurred not just on an ongoing basis, but during busy commercial periods – Christmas and Easter.

This downtime may not be an issue if it happened every once in awhile during regular upgrades, but telecommunications is VHA’s bread and butter. By allowing both networks to suffer during some of the biggest periods of the year, the company highlighted its unpreparedness.

After the network problems, VHA allowed customers to leave contracts early, which contributed to the financial losses. If VHA wants to regain customer trust, it needs to invest more time into its networks immediately.

An upgrade is scheduled for early next year. Hopefully it will help bring customers back in the long-term.

Customer service

Much has been written about the current state of customer service in the telecommunications industry. The regular complaints from the Australian Communications and Media Authority, along with the industry’s Ombudsman, are enough evidence to show there are clearly problems that need to be fixed.

While many companies take an approach to customer service that enables them to save as much money as possible, Dews’ comments yesterday shows this can translate into a catastrophic consequence:

“Despite the improvements now being experienced, the impact of the network and customer service issues in the first half of the financial results will result in a loss for the full year, although we expect to improve profitability in the second half of 2011.”

Vodafone’s lack of quality customer service has led to harsh backlash, which included the construction of a dedicated website about Vodafone customer service failures.

VHA responded earlier this year by adding hundreds of customer service staff, and an apology from Dews himself. But the damage has been done. To win back customers VHA needs to seriously invest in more customer service, and fast.

Social media

Any company using social media knows that you can’t use it as a place to just sell products without engaging in some sort of conversation. To be fair, the telco industry has moved into social media quite well and many customers are offered help straight away. But Dews says VHA realised this a little too late.

“We learnt a lot with social media. At first we saw it more as a cross selling environment, now it’s the place we listen to customers and try to be very responsive.”

“It has going from being an issue and a weakness at that time, to being a real strength,” he said. “The evidence I have of that is our competitors are beginning to replicate what we are doing, which of course is the highest form of praise.”

VHA’s social media presence is now snappy and quick to respond to customers seeking a problem – Dews even said yesterday it has totally revamped the customer service team using social media. But it took far too long for the company to realise this, and starting early could have saved them a lot of hassle.

Security

There have been enough examples of security breaches over the past year to show why SMEs need to protect their data. But perhaps one of the most shocking was when Vodafone admitted earlier this year that a security lapse allowed some outside users to access the company’s internal network, which hosted private details of millions of customers.

The incident sparked a Privacy Commission investigation and a huge public backlash, which no doubt contributed to the company’s hemorrhaging of users.

VHA responded by introducing new password policies for staff members, changing them every 24 hours. But many security experts said at the time this is something that should have been a “no brainer” and introduced when the network was first built.

As SMEs have been told time and time again, security is paramount. As VHA’s experience clearly shows, a breach can occur when you least expect it and crumble your customers’ confidence. Don’t let it happen to you.

Integration

Combining two companies is never easy. But when Vodafone and Hutchison first announced they would be joining forces, many customers wrongly assumed that they would be able to integrate their bills and other types of information.

That integration process is taking too long. Customers are becoming frustrated with the fact that while they can receive customer service for both the Three and Vodafone brands in the one retail store, the two customer service departments are still separate.

VHA needs to speed up its integration process and train customer staff in order to have more control over both brands.