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Telecom pays out $9.5 million to customers over Xtra breach, gets warning

Tuesday 12th January 2010

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Telecom Corp., the country’s largest phone company, has paid out $9.5 million to overcharged customers and rejigged its administration and monitoring procedures after it settled with the competition regulator for breaching the Fair Trading Act.

The breach earned the phone company a rebuke from the Commerce Commission, which has become “increasingly concerned at the number of occasions on which Telecom has acted in breach of the Fair Trading Act.”  

Between 1999 and 2007 Telecom customers who took up an offer to migrate to broadband from their existing dial-up connection were charged a monthly fee after staff failed to follow procedure in transferring them over to the new service.

From March 2007 the phone company began refunding more than 130,000 affected customers and has just reached a settlement agreement with the regulator to pay back the $9.5 million owed and implement new procedures to prevent this from occurring again.  

There were a number of small errors across the company’s administration of the offer, and “when that happens you get a snowball effect – a $9.5 million snowball,” spokesman Mark Watts told BusinessWire.

“It’s expensive trying to keep on top of everything – we have a large legal team to keep an eye on these things” and the implementation of new training manuals and procedures has not been cheap, he said.  

Commerce Commission fair trading Auckland manager Graham Gill said the regulator has become concerned at the rising number of breaches of the Fair Trading Act by the company over the past seven years, with “at least eight occasions” where it has settled, or been warned or convicted for breaching the act.  

“The commission encourages Telecom to make compliance with the Act a top priority,” he said in a statement.  

Watts said it was the Commerce Commission’s call to make, and that the company is working to “make sure it doesn’t happen again.”  

“There have been a number of breaches and that’s not good enough for our customers,” he said.  

Telecom has not been able to find about 1,400 affected customers to refund them, though a credit has been applied to their inactive accounts.  

Shares in the company slipped 0.4% to $2.54 in trading today.

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