Telstra partner, Interactive Telecoms, has gone into voluntary administration after the company was hit by financial difficulties arising from ongoing changes in the way Telstra structures its commissions for licensed retailers.
According to the company’s former business development manager, Andrew Wulff, the changes to the commission structure - which sees the telco remunerate licensed retailers for products and solutions sold under the Telstra banner - that were implemented by Telstra were allegedly poorly communicated to its partner.
Interactive Telecoms has been a Telstra partner since its inception. In the beginning, the partnership was based on Telstra’s strong push on mobile sales, which at the time included recurring revenue for the life of a customer contract.
Interactive Telecoms was founded in 2000 and was based in Gordon, New South Wales. The company offered several types of services including corporate mobile phones, phone systems, business grade internet, site-to-site secure networks, mobile data solutions, utility hosting, cloud solutions and post-sales support.
During its 16 years in business, the company provided services to Transport for New South Wales, Anytime Fitness and Paramount Pictures, among others.
Wulff told ARN that the commission changes started 36 months ago “as a couple of indiscretions”.
“Over the last 12 to 24 months it became exponentially worse, Telstra seemed to change their rules of business that applied to us , which in turn affected the commission structure, weekly without communicating that to us effectively,” Wulff said.
“Telstra operates with the idea that they can do whatever they want because they have more power than their SMB business partners, like us," he said.
Wulff claimed that, as part of its contract with the telco, Interactive Telecoms could not sell competitive products, as it would mean a breach of contract. That meant that Telstra was ultimately the partner's only source of income.
The constant changes to the commission structure would also apply to business processes, which in some cases would mean that selling Telstra products was a “exceedingly” lengthy process with some items taking up to six months to be sold.
Wulff told ARN that the changes to the commission system reached a point where the company would be expecting to get paid close to $100,000 and actually get from $5,000 down to a negative balance.
The next knock came, Wulff claimed, when Telstra started to claw back and withhold commissions for sales that had previously been paid or included in remittance advices.
According to Wulff, Telstra would claim that Interactive Telecoms had either been paid too much previously or that there were other people working on the account and they wanted to give the commission to them instead.
“So they would be taking money away from us that had already been paid,” Wulff said.
While Wulff stressed that he did not have an explicit overview of the business processes at Interactive Telecoms or the full extent of commissions unpaid by Telstra, saying that, “I am aware it was happening, just not the full extent", he is clear that the company appealed to Telstra on the commission issue.
According to Wulff, the investigations took months and remained unresolved, ultimately forcing the company to accept the commission shortfall as an unrecoverable loss.
Wulff claims that the only other option Telstra gave the company was legal action.
Ultimately, Telstra terminated the agreement with Interactive Telecoms as the company entered into administration, cancelling future commission payments, according to Wulff.
Ian Purchas and Jason Porter of SV Partners were appointed administrators on 2 August and a meeting of creditors has been scheduled for 14 August. Interactive Telecoms stopped trading on 4 August.
Telstra has declined to comment on the matter.
Vita Group, which owns and operates more than 100 Telstra-licensed stores, has had its own share of issues arising from Telstra's commission changes, with the company telling shareholders in May about the telco's plans to dramatically drop its rate of remuneration to the retail store incrementally over the next three years.
Vita Group said at the time that from 1 July, Telstra intended to reduce its remuneration to its Telstra-branded retail store operator by approximately 10 per cent.
Further, it also announced the intent to reduce remuneration by a further 10 per cent at the start of each of the 2019 and 2020 financial years.
Wulff also mentioned a situation that ties to Telstra’s recent layoffs. The company had, without warning, been discounted an accreditation to sell a certain Telstra product. When advised to contact the Telstra team responsible for accreditation, Interactive Telecoms found that the situation could not be resolved, as the team within Telstra had all been fired.
Telstra flagged 1400 job cuts in June set to affect roles across the company’s entire business, as it goes through an urgent transformation.