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Telstra share price down as ASX200 weakens

A potential $100 million compensation bill, coupled with a lower ASX200, has seen the share price of Telstra drop as much as 4.1% in recent days.

Blue-chip telecom giant Telstra Corp Ltd has started the week in the red, falling as much as 4.1% over the last few trading sessions.

Telstra stock: what’s behind the losses

It all started last Wednesday, as news spread that EFTPOS, payments and ATM access all suffered massive outages across the nation.

The big four banks, as well as major Australian retailers were all hit by these outages.

Telstra was quick to apologise for the nation-wide outage, with the company tweeting last Thursday that:

‘Many of our services are starting to restore. We’re sorry if this issue has messed up your night. We'll provide another update when we know more.’

Market sentiment weighs on Telstra’s share price

If last week’s nation-wide outages raised concerns about Telstra’s capacity to deliver high-quality services across Australia, weaknesses in the broader market did not help the matter.

Since the markets opened Monday, the ASX200 has shed 76 points or 1.1%.

Commenting on the lukewarm performance of the ASX200, IG’s market analyst, Kyle Rodda wrote this morning:

‘The ASX suffered from the same listlessness yesterday that had characterized the night prior’s trade on Wall Street. Somewhat like what was experienced last week: market participants remain effectively still and vigilant ahead of greater event risk.’

By comparison to the broader market, Telstra has outpaced the ASX200's losses since the open Monday. During the morning trade, the stock was still down 4.1%.

A potential $100 million bill

While an outage is indeed an inconvenience to customers and businesses, it was more possibly the potential of a steep compensation bill (as well declines in the ASX200 benchmark) that have combined to see Telstra’s share price lower.

According to Dominique Lamb, from the National Retail Association:

‘The amount in lost sales could be as high as $100 million for the day, however, hopefully much of it will be recouped by customers simply doing shopping today and tomorrow rather than yesterday.’

The ABC reported that Telstra Corp Ltd was considering ‘compensating its business customers’ for the outage.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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