Is Telstra Feeling The Heat After EFTPOS Network Issue?

Electronic Fund Transfer (EFT) is a way of transferring funds or performing online transactions. The EFT payment is processed with the help of Automated Clearing House (ACH) network. EFT payment is done through direct deposit, wire transfer, ATMs, debit cards, electronic cheques, mobile applications and Internet banking.

In this piece of article, let’s look at the incident, which occurred due to Telstra’s EFTPOS network issue and how it has influenced the share price of the company.

A telecommunications sector company, Telstra Corporation Ltd (ASX: TLS) is a leading wholesaler of technology and network services in Australia. The company provides an extensive range of products and services through its networks and associated support systems to the telecommunications as well as technology providers.

Company’s Products:

• Data & IP: Under this, the company creates exclusive product packages, which help customers’ businesses to be more competitive based on simple, flexible data as well as IP solutions supported by TLS’ strong network, a variety of assurance options along with continuous technology investments. The Data & IP Solutions of the company comprises Ethernet, Wholesale Internet and Backhaul.
• Broadband & Voice: The company through Broadband & Voice provides its customers high performance broadband and voice services. Whether the customers opt for nbn™ network or its copper network, the company will work closely with the customers to create broadband and voice solutions, which are appropriate for the customers’ businesses. Customers prefer to choose TLS over other service providers because of the availability of the network where needed. Connectivity to more customers is possible through simple, flexible and cost-effective means with Broadband Aggregation. Also, the company provides unmatched technology and services to offer a better experience to its customers. The company remains committed to innovation and technologies in order to meet the business requirement of its customers.
• Mobility: The company seek ways to create extraordinary mobile experiences. Through its team of experts, the company assist its customers to create new services with the modern technologies to offer incredible mobile experiences to its customers. The company offers greater network coverage in more sites across Australia, with 4G network reach of 97% and 4G and 3G technology together reaches 98.8% of the population.
• Telstra Wholesale Applications & Services: With the revolutionary Wholesale Applications & Services, TLS help its customers deliver fascinating experiences and add value as well as create business opportunities in the new environment. Customers of TLS generally opt for these services as the network of the company provides coverage and low latency along with the security, which is required for deploying transformative technologies and services to its clients in Australia. The company also continue to invest in its solutions so that its customers remain more productive and also be ahead to scale up their businesses.

Telstra EFTPOS Network Issue: EFTPOS stands for Electronic Funds Transfer at point of sale, which is used for transferring electronic funds through debit or credit card at the payment terminal located at the point of sale.

The shares of Telstra Corporation Ltd were under the watch after an outage, which caused a lot of havoc for shoppers on Thursday, 11th July 2019 at small businesses and retailers like Caltex Australia Limited (ASX: CTX) and Woolworths Group Ltd (ASX:WOW). On Thursday, the shoppers were asked to pay for the items and services in cash as a result of a failure in the EFTPOS network and ATM.

This outage impacted the system that was used to carry out low value transactions as well as property settlements, however, the system used for high value transactions was safe. The outage has also influenced various businesses of different sizes, for which, the company already apologized on a social media platform. The impact was seen at local cafes, Australia Post, and major four banks.

The customers of Commonwealth Bank of Australia (ASX: CBA), a provider of the banking, financial and related services, also faced a similar problems due to Telstra’s outage and at present, is working with Telstra to restore the services to normal. Other banks have also reported the widespread issue with the EFTPOS terminals in Australia.

Financial Highlights (1H FY2019): 1H FY2019 results were at par with the guidance. The company reported a decline in the total income, EBITDA and NPAT as compared to the previous corresponding period, which was in line with the expected nbn impact. More than half of the nbn impact was absorbed with ~ 55% of the premises connected. Apart from the impact of the nbn, the company reported a solid performance of the underlying business in the existing market. Around 239,000 additional retail postpaid mobile services were added during the period. With this, there was a growth in revenue through mobile prepaid services by 2.1%.

Stock Performance:

The shares of TLS have given a YTD return of 41.77%. At market close on 16th July 2019, the shares of TLS were trading at $3.740, down 1.837%, with a market cap of $46.26 billion and ~ 11.89 billion outstanding shares, PE ratio of 14.90x and a dividend yield of 3.21%.

Conclusion:

With the EFTPOS network issue, it is obvious that Telstra will be answerable to most of its customers who were impacted by the outage and there is a possibility that the company’s shares can be influenced by this incidence. However, it is a technical issue which would soon get rectified with the technical expertise of the company.

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