Omnitel Pronto Italia Case Study Analysis

Omnitel Pronto Italia Case Analysis Introduction Omnitel is a telecom company based in Italy, which had purchased the GSM license on Dec 1994. In a country where mobile phones are considered as a status symbol, Omnitel focuses on providing superior customer service and therby reducing churn rates. The company has a marketshare of 4% and is capable of giving Telecom Italia Mobile (TIM), the market leader, a close run for their money. The vision of Omnitel is to position cellular phone in a manner akin to wristwatch, which is personal and indispensable.

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Push Strategy by the monopoly market Leader TIM Vs Pull strategy of the new comer Omnitel: Telecom Italia with a 97% share of the 7. 5% market penetration rate in Italy had a sole aim of maintaining their cash flows. Hence apart from a high priced talk plans (relative to European counterparts) in response to the new competitor, TIM decided to offer incentive to the dealers.

TIM was also responsible partly to the Italian customer perception that mobile phones more of a status symbol than a necessity. Omnitel, after paying a price of GSM acquisition in 1994 had no intention of entering a price war with the market leader.

Instead it positioned itself as a better customer service provider. Though this strategy helped to gain customer satisfaction and lower churn rate (12. 5% Vs 22% of TIM) it did not result in sales volume. Hence there was a proposal of new campaign called Libero by its Marketing Director. Libero “Libero” a unique plan proposed by Bona keeping in mind the current market and usage of the cellular phone.

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Libero plan was structured to compete with TIM, the leaders with high market share. It revolutionized the approach from the telecom company as it offered the plan without monthly fee. Libero plan has customized call rates of Lit. 595 and Lit. 195 during peak and off peak hours respectively. By eliminating the fee Omnitel wanted to increase the customer base as well as call volume. Despite of the fact that Omnitels Libero plan has higher call price compared to TIM, Omnitel was strategically ready to offer a very high quality service to the customers, a strong weakness of TIM. Beside this Omnitel didn’t subsidize the price of their handset as they were aware of the Italian consumer trend and willingness to pay. With the high quality service Omnitel wanted to develop brand loyalty which further helped for achieving greater penetration.

This increases the demand among customers directly pushing the dealers to sell their phones without any negotiations. Europe Telecom Market Europe Cellular penetration rates are relatively modest, value for money due to combination of reduced cost of the service and improved quality of service, All cellular operators in Europe have moved to digitization & the market is a competitive one, hence customer awareness is high which increases the demand in market. Growth prospects are very positive for this market. Country Name Scandinavia Finland Sweden Norway U. K Italy Penetration Subsidies/DC Churn Rate 0% 20% 23. 4% 25% 9. 3% 7. 5% N Y Y Y Y 12% 20. 5% 22% 28% 12. 5% Finland has a very interesting data having the lowest churn rate, without any subsidies/dealer commissions and a good penetration rate as compared to the other countries. Finland was the most sophisticated markets in the Europe. Analysis The plan Libero is a very good option for Omnitel to go ahead. Initially with this plan, total average revenue per customer per month is Lit. 90385 is less than when compared to that of TIM’s average revenue per customer per month is Lit. 93412. Even though there is a deficiency of Lit. 577 in the short run, but later on this plan will help Omnitel to achieve the lowest churn rate and greater penetration as what Finland has achieved with similar plan. Hence even though in the shorter run there will be lesser revenue generated, in the long run due to the increase of the customer base Omnitel will definitely make good profits by leaving TIM way behind. Also another advantage that Omnitel can gain by differentiating call rates for local and international as TIM has fixed calling rate @ Lit. 170/min. Hence segmentation can also offer a very good opportunity for Omnitel to position themselves among market segments.