“Misinformation”: Kogan enters open war with Telstra on disconnections



news The troubled mobile division of consumer electronics giant Kogan has accused Telstra of misleading the public about the telco’s willingness to continue to support Kogan’s mobile customers abandoned by the failure of wholesale ispONE, in a furious statement alleging commercial impropriety by Telstra on a range of fronts.

Earlier this week, mobile wholesaler ispONE, which has been reselling Telstra’s 3G mobile services to several retail players, such as ALDIMobile and Kogan Mobile, entered administration. The company’s administrators cancelled its contracts with Telstra, potentially leaving several hundred thousand mobile customers in the lurch.

In a statement on Telstra’s Exchange blog yesterday, Telstra wholesale chief Stuart Lee noted that Telstra had entered into a new agreement with Medion, the supplier of ALDIMobile, so that customers could continue to receive 3G services. However, Lee wrote “To date, we have not been able to reach an agreement with Kogan.” Telstra was, the executive wrote, “currently providing an interim service at our own cost to Kogan end users”, so that Kogan customers could continue to receive services until they could transition to another provider. Another wholesale option for Kogan may be Optus, which provides wholesale 3G/4G mobile services to other telcos, such as iiNet.

However, in a furiously worded statement published on its company blog this morning, Kogan has taken the extraordinary step of accusing Telstra of not telling the truth about the issue and of misleading the public, as well as of a range of other inappropriate actions.

“Yesterday, people may have seen a communication from Telstra responding to Kogan Mobile in relation to Telstra’s disconnection of Kogan Mobile’s customers,” Kogan wrote. “We are concerned at the misinformation and confusion that may arise as a result of Telstra’s communication. Telstra indicated that it is “prepared to enter into direct arrangements with both Kogan and Medion (who supply ALDImobile) on commercial terms”. This is news to Kogan Mobile, and is music to our ears. The only problem is that we’re not too sure it’s actually true.”

According to Kogan, Telstra had not sent Kogan any proposal for the future of its customers which was “even remotely ‘commercial’, let alone competitive”. “Kogan Mobile has done everything possible to protect its customers: if commercial terms of continued supply were available, of course Kogan Mobile would have taken them up, and still will,” the company wrote.

Kogan invited Telstra to disclose whether there was any company currently operating which was able to provide enablement, platform and billing services in respect of Telstra’s 3G prepaid platform, implying that Telstra will not provide such services itself, and that ispONE was the sole company Telstra had authorised to connect to its network to provide such services.

Kogan also invited Telstra to publicly disclose whether it had: “… in any way induced, facilitated, or otherwise participated in or profited from the entry by ispONE into a sale contract in respect of the transfer of its assets (including the sole platform and billing system which is integrated with the Telstra Prepaid 3G Network) in the days, hours or minutes prior to ispONE appointing voluntary administrators.”

It appears that Kogan is implying that ispONE has sold its billing platform which integrates with Telstra’s network, and because of this, Kogan is unable to connect to Telstra’s network as a reseller. It also appears that Kogan is implying Telstra had some influence on that sale. The Financial Review has reported that ispONE administrators Ferrier Hodgson had planned to sell parts of ispONE to Melbourne firm Conec2, but that the sale process was not immediately completed because ispONE was placed into administration.

Kogan questioned Telstra’s seriousness with respect to its entry into the wholesale mobile market. “Telstra refers to its “leading role in the highly competitive” mobiles market,” wrote Kogan. “In light of that statement, we ask Telstra to explain why it established ispONE as its sole distributor of Prepaid 3G mobile services? Why did it establish terms with ispONE that were seemingly doomed to commercial failure? Why was there only one supply channel to market? And why did Telstra act to terminate ispONE without establishing an alternate channel of supply?”

“We also invite Telstra to publicly respond to the written communication from ispONE to Kogan, in which ispONE stated: ‘We are lacking … (Telstra) support right now due to the in-market pricing – (Telstra) simply see Kogan Mobile as gutting the market with ispONE support and not willing to support’,” wrote Kogan. “Does Telstra accept ispONE’s allegation that it ceased “supporting” ispONE due to concerns that Kogan Mobile’s retail pricing was too cheap?”

“We hope and expect that Telstra will come clean with the Australian public, and Kogan Mobile’s 120,000 customers on these matters. In the absence of public responses to the above questions, we respectfully say to Telstra that it cannot legitimately say that it is “concerned at the misinformation and confusion” surrounding these affairs.”

“Finally, to Telstra’s Managing Director, Mr Stuart Lee, who authored yesterday’s communicationwe ask this simple question – if you are truly and sincerely “concerned” about the 120,000 customers using your network via Kogan Mobile, then you ought certainly be willing to disclose to these customers whether your concerns were important enough to prompt you to personally attend a single meeting with Kogan to discuss these affairs, or perhaps even whether you were concerned enough to enter into or be copied on a single piece of communication with Kogan concerning Telstra’s actions which impact all of Kogan’s customers. We believe that the 120,000 customers and the Australian public deserve to know the true depth of your “concerns”.”

“Kogan Mobile keeps its agreements,” the company wrote. “We have paid every bill on time or early, and kept every obligation we owed.  Despite this, our growing mobile business was eliminated as a result of “decisions” made by our upstream providers, not us.”

Opinion/analysis on this subject will be found on our subscription site, Delimiter 2.0, on Friday morning.


  1. I woudlnt be supprised if all of the cheaper MVNOs get new terms or end up being cut off.. the ACCC seems pretty happy with the main 3 players so why sell something wholesale when you can sell the same service for more retail.

  2. “Why did it establish terms with ispONE that were seemingly doomed to commercial failure?”

    It seems to me that they weren’t. I think the question is: Why did ispONE establish terms with Kogan that were seemingly doomed to commercial failure?

    If I bought oranges at $1 each, and sold unlimited oranges to Kogan at $30 per month would he expect me to stay financially solvent when he regularly ate more than 30 oranges every month? Would he be blaming my orange farmer if I went bankrupt and the farmer wouldn’t sell him unlimited oranges for $30 per month?

  3. After a rant like that, Telstra ought to just pull the pin on all Kogan (mobile) services.

  4. The 3 network owners are increasing the fees charged to MVNO’;s at more or less the same time, Would the ACCC investigate this considering it borders on price fixing – or price colusion

  5. Luckily went with ALDI. Sad news. I am under the impression that Kogan doesn’t want to pay enough for Telstra whilst ALDI did. This explains why Optus and Vodafone also bailed out of the Kogan discussion.

  6. “We hope that Telstra comes clean”? Yeah like that will ever happen. They have the biggest corporate spin machine in the country, I’d wager.

  7. I think it’s troubling that ALDI was able to strike a deal with Telstra while Kogan wasn’t. Just having a good guess here but if Telstra did in fact offer Kogan a deal, they weren’t the same terms offered and agreed to by ALDI. I doubt ALDI accepted terms that Kogan claim were “not even remotely ‘commercial’, let alone competitive”.

    I don’t think it’s appropriate for Telstra Wholesale to offer differing prices for the same product (access to its speed limited 3G network) to businesses wanting to access it.

    • This is business.

      You sell what you have; to whoever will buy it, at the price you can get for it. You aren’t obligated to sell anything to anyone. (there are caveats on that; but certainly in this kind of transaction there is no requirement to sell to Kogan at any price).

      This isn’t a declared service like Telstra ADSL, Telstra aren’t *required* to sell it to anyone, and they aren’t limited to selling it at certain prices when they do.

      Kogan’s problem is that Telstra implied they offered to sell services to Kogan, Kogan disputes this.

      • Not quite true the Trade Practices Act does also come into it for business to business transactions also. Particularly when there is a large bargaining position difference between the parties.

    • I’d guess Telstra offered Kogan the same or similar terms as Aldi.

      Aldi clearly charge more (EG $35 monthly) for less (5 gig) and their “poorer” value might have attracted less of the heavy users. So, Aldi may be able to stay profitable with a to move to a per-unit pricing. Kogan, with heavier-usage users may not.

      But who knows? That’s all commercial in confidence between the parties involved. Kogan are idiots for demanding and/or expecting Telstra to make their wholesale pricing public. They can go on about how “disruptive” they are but clearly their main disruption was to ispONE’s solvency.

  8. The difference between Kogan and Aldi is that their phone services are sold as an enticement to users to buy more groceries, and therefore at break even prices almost. Kogan is there to make money off every connection. Aldi is likely to have settled on a higher buy cost than Kogan would expect.

  9. That’s what you get for believing there is such a thing as a free lunch, and giving money to a SHYSTER like Ruslan Kogan. Russian con artists are the best in the world, not sure why Australians haven’t learned that yet.

  10. I used to work with and re-sell ISPOne… I’m not surprised that they are in administration, from a wholesaler perspective they were always terribly disorganised and gambled an awful lot with Unlimited* voip and dsl plans.

  11. Why should Telstra be the first to show their hand? I haven’t seen Kogan come out saying we are prepared to pay this much for unlimited. and if Telstra weren’t being competitve, why was Kogan with them in the first place.
    It seems to me that the issue with Kogan, is they entered a per user agreement with ISPOne and ISPOne entered a usage agreement with Telstra, once ISPOne started seeming the amount of data and usage coming from Kogan customers, they knew it wasn’t profitable and started to cut heavy users, Kogan sued, ISPOne was forced to basically make a loss…
    Maybe Kogan is used to selling cheap chinese stuff on the Aussie market and didn’t realise how small a margin there was…
    Ultimately though it seems kogan really did sweet FA when it came to KoganMobile, Network by Telstra, Billing and platform by ISPOne, Kogan just grabs the cash…..

    • Being the entity that “grabs all the cash” is also the entity that “grabs all the risk”.

      IE. If someone didn’t pay their mobile bill, Kogan still has to pay ispOne for any services used by that customer. (but; this was a prepaid system wasn’t it?)

      Finally, I think Kogans main point; was that Telstra haven’t approached Kogan with a deal they thought was reasonable, but in their (press?) release they implied they had.

      • Kogan’s main point has a glaring hole in it. It sounds like the terms that they had with ispONE contributed to the downfall of the wholesaler (ie below cost). Why would Telstra offer them similar terms?

        Kogans idea of reasonable, and Telstra’s idea of reasonable are obviously different. In fact I doubt you would find greater polarisation anywhere. Telstra is known for gouging where ever they can, and Kogan is known for sacrificing everything to allow it to undercut its competition. Its amusing really.

  12. have a read of the article about Auspost (zdnet) not getting their MVNO off the ground..

    The 3 main mobile Telcos are moving away from this type of offering and the push is charging for data i’m not sure why they maintain voice seperately as it’s still data , just low bandwith :P

  13. Every one of ispONE’s other customers has managed to negotiate some sort of deal, if not with Telstra, then with Optus or Voda for support of their own customers.

    When it’s you against the world (or in this case the mobile carriers) it may be worth reflecting on whether the the problem lies with the world or with you.

  14. This statement by Kogan is stupid and shows that he doesnt know how to deal with Telstra.
    By publicly calling them out like this he has left Telstra no room to negotiate and guaranteed that the details of Telstras initial offer will not significantly change

  15. Telstra Wholesale in the mobile area would a be a rip off just like it is in the ADSL wholesale area.
    Telstra’s motto should be “TELSTRA … HOW CAN WE RIP YOU OFF TODAY”

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