2. Mobile Telephone ellular Penetration – 7.5% by 1st
Market in Italy quarter on 1996
xpected to increase to 22.8 % by
2000
rior to 1994, Italian telecom market
was dominated by single state player
- TIM.
ith liberalization of telecom industry
in 1994, Omnitel entered as the 2nd
3. Omnitel – Company
Background:
First private sector participant in Italian telecom market
GSM license in December 1994 for 750bn Lit
Launched commercial service in Dec, 1995, with network
coverage of 40% of Italian territory.
By 1996, 180,000 subscribers – 4% market share
During initial period offered similar plans as of TIM
Avoided price ware with TIM as it is not financially strong.
High quality customer service as a differentiator
– Polite operator
– Minimized customer waiting time – 85% Customer call in less than 20 s
– One stop calling
4. Telecom Italia Mobile
(TIM) – Competitor
Analysis:
Formed in July 1995 after divested from Telecom Italia and
was listed separately on Italian stock exchange.
Monopoly over the Italian Communications market.
Generated 97% of Italy’s 7.5% market penetration
Lower marketing cost compared to European counterparts
Strong distribution channel
– 20 TIM Owned stores, 150 telecom Italia stores, 1500 exclusive
dealers
Primarily directed towards the uppers echelons of Italian
society touting cellular phone as a status symbol.
5. Customer Analysis:
Perceived possession of mobile phone as a status
symbol
Willing to pay handsomely as they liked to show off
– so no need of subsidizing phones
Impulsive shoppers
Reluctance in paying monthly charges and other
activation charges as they considered it as taxation
Pay per usage
Wanted different set of tariffs for local calls, long
distance calls and international calls.
Satisfied with Omnitel’s customer services
6. Collaborator he shops that sold consumer
Analysis: electronics goods and
telecommunication goods and services
sold Omnitel’s handsets - 2000 in
number.
ommission of Lit 40,000 for each
account they activated
mnitel didn’t make any profit on the
handsets sold
7. Context Analysis:
Under pressure from business interests, the EC
liberalized the cellular telephony by January 1994,
subjected to interpretation by the country involved.
Cellular penetration rates were relatively modest.
High growth rate of subscribers – 23% CAGR from
1994 to 2004E
“Value for Money” of the service continued to
increase because of reduced costs and improved
quality.
Many European countries began to have multiple
players resulting in increased marketing
8. Omnitel Strategy:
No intention to reduce price.
Not indulge in price war with TIM
Increase market share
Maintaining churn rate at 10-15%
LIBERO
No monthly fee
Charges – 1595 for peak hours, 195 for non-peak hours
No increase in commission to distribution channels
Enhancing demand for the product
Creating and promoting the brand image
Spending of Lit. 40 billion for advertisement
9. Outgoing
Monthly Revenue Per Customer:
Minutes
LIBERO
Charges/Minute Total per month
Peak 13 1595 20735
Off peak 80 195 15600
36335
Incoming
Peak 25 1595 39875
Off Peak 75 195 14625
54500
Activation 10000
Total 100835
Existing
Outgoing Minutes Charges/Minute Total per month
Peak 13 1524 19812
Off peak 75 170 12750
32562
Incoming
Peak 25 1524 38100
Off Peak 75 170 12750
50850
Activation 10000
Monthly 10000
Total 103412
10. Outgoing
Monthly Revenue Per Customer:
Minutes
LIBERO
Charges/Minute Total per month
Peak 13 1595 20735
Off peak 80 195 15600
36335
Incoming
Peak 25 1595 39875
Off Peak 75 195 14625
54500
Activation 10000
Total 100835
Existing
Outgoing Minutes Charges/Minute Total per month
Peak 13 1524 19812
Off peak 75 170 12750
32562
Incoming
Peak 25 1524 38100
Off Peak 75 170 12750
50850
Activation 10000
Monthly 10000
Total 103412
