CASE STUDY

On

Submitted to : Prof. S.C. Ghai

Submitted By : Pranshu Gupta
Roll No. : 119
PGDM –B ,Class of 2009 ,
K.J. Somaiya Institute Of Management Studies &Research , Mumbai

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 TABLE OF CONTENTS
Executive Summary………………………3
Key Problems …………………………………..3
Assumptions ……………………………………4
Current Scenario ……………………………… 4
European Market…………………………….4
Italian Market ………………………………4
SWOT Analysis…………………………………5
Objectives ………………………………………5
Strategies ……………………………………….5
Action Plan ……………………………………...6
Main Features of the Plan ………………….7
Implementation & Promotion ………………….8
Profit & Loss Accounts …………………………9
Review ………………………………................9
Contingency Plan ………………………………9

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Executive Summary :

OMNITEL , the second biggest telecom player in Italy which started its
operations in Mobile telephony in December 1995 , has been able to
capture a market share of approx. 9.6% ( Ref. Exhibit 14, European
Mobile Market ) in a span of 6 months of operations . It is facing fierce
competition from the state controlled Telecom Italia Moblie (TIM) in
terms of the market share , pricing & the huge capital investments
involved . The main challenge before the management of OMNITEL is to
increase the market share & also improve upon the profit margin fronts.

The Managing Director Mr. Bona & Marketing Manager Mr. Della are
working on various strategies to increase their market share &
associating themselves with high quality customers to be suggested to
the CEO of the Company . The biggest challenge faced is the fear of
initiating a price war amongst the two players which they are bound to
lose if that really happens . So, they are trying to devise a strategy to
position themselves as a potential player in the market with a substantial
chunk of market presence .

Key Problems :

The Problem with the Plan of Mr. Bona’s Plan LIBERO by waiving of
monthly fees is :
1. It may lead to the onset of Price War with TIM
2. It may increase the Consumer Base as compared to if the
handset subsidy being offered .
3. The Increase in the revenues due to volumes generated even
when the monthly fee is waived off .

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Assumptions:
 The Profit Margins per call has been assumed as 30% , i.e. the
selling price of each call is assumed to be 130% of its cost .

Current Scenario :

European Markets :

The European Mobile telephony has recently been liberalised by The

European Commission in January 1994 & has been opened up for the
participation of Private players.Most of the European Countries are party
to such a decree .

Italian Markets:

The Telecom Market in Italy is still in its infancy with cellular penetration
being 6.5% compared to the European average of 5% at the end of year
1995 . As compared to other developed countries of Europe , Italy
presents a very promising picture of Cellular Phone market with 7.5%
penetration (at the end of March ’96) which is expected to grow to 22.8%
in less than 5 years . Moreover , Italy stands in competition with various
other European Countries in terms of the purchasing power parity which
is evident from the High GDP per capita(USD 18070 ) & the overall GDP
(USD 1029bn) which is second highest in the Europe .Also, the
Estimated Overall CAGR in Mobile Subscriber Base is 23 % over a
period of ten years from 1994- 2004 is second highest in the European
market .
There are two major players in Italian market viz. Telecom Italia Mobile
(TIM) sharing 90.4% & rest 9.6% (Ref. Exhibit No. 14 ) being catered by

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Omnitel. TIM being a State Owned Player & the first player holds a prime
mover advantage of being in a driving stage.
As Compared to the overall European Market whose penetration levels
itself have grown by a rate of approx. 150% over the last year i.e. from
1994 to 1995 ,it clearly indicates that European market as a whole itself
has tremendous potential to grow .

SWOT Analysis of LIBERO :

Strengths :
Excellent Customer Care . Weaknesses :
No Monthly Fees . Smaller Player with weak financial
First Private Player & hence has a first backing .
mover advantage. New to market so weak operations .

Threats :
Low Quality Consumers may come in
Opportunities :
the Customer base in pursuit of
To tap the huge potential Italian Market
increase in turnover .
which is still an unchartered Zone .
TIM retaliating the with an aggressive
price war .

Objectives :

Marketing Objective :

To increase the number of Customers in the Customer DataBase from

502000 consumers(Ref Exhibit 14) to 800000 consumers in next 3 yrs .

Strategies :

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  Strategy 1 : The Plan devised by Mr. Bona ,i.e. LIBERO in which
monthly payment is done away with should be implemented to
achieve the company’s objectives of attracting the customers to
increase the customer data base by December 1996.
 Strategy 2 : Focus On Impulse Calling :There should be focus
on making the consumer feel that he needs to stay connected all
the time & once he starts calling it is nearly impossible for him
revert back to control the impulsive calling attitude .

Action Plan :
 In support of his plan ‘LIBERO’ , Mr. Bona should convince his
boss Mr. Caio that the monthly payment of Lit.10000/-will be
dropped down but at the same will be still there , but not as a
fixed payment rather the one in which the consumer is offered an
equivalent talk time .
Let us consider the existing plan which offers Peak Hour calling
charges at Lit.1524 as compared to Lit. 170 in Off- Peak Hours .
Assuming the Data given for average consumption per month as
193 minutes (93 minutes O/g & 100 minutes I/c).Out of the 93 Out
going calls , 13 minutes are during Peak period & 80 are made
during Off- Peak time.
OmniTel should provide equivalent Talk Time for the Lit. 10000 /-
that it is charging to its customers .The detailed analysis is
tabulated as below :

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 Avg.Peak Time Consumption @ 13*1524 = 20735

Avg.Off-Peak Time Consumption @ 80*170 = 13600

Monthly Payment = 10000
TOTAL(in Lit.) 44335
New Plan
Peak Time @4*1524
6096
Off -Peak Time @ 25 * 170 = 4250
Now, for the remaining 64 calls @Lit.738 = 47232
TOTAL 57578

The calls made over & above these shall be charged @ Lit.738 per call &
for remaining 64 calls (From Avg,consumption Pattern )the Additional
revenue generated is Lit. 47362, which is way above the collection that
was done when calls were made with the Existing Plan .
Net Revenues = 10346 + 47232 = Lit.57578
Compared to Lit.44335 giving us a clear margin of Lit.13243, with
which dealer’s commission etc. can be easily serviced .Another point to
be noted here is that the Call Rate that is charged subsequently is much
lower than the existing ones & gives the consumer the freedom to call
anytime & he doesn’t have to wait for off-peak Periods .

Main Features of the modified LIBERO Plan :

• No monthly fees of Lit. 10000

• 4 minutes in Peak Period
• 25 minutes in Off Peak Period
The subsequent offering is @Lit.738 per call anytime of the day
, which is reasonably above the normal tariff charged by the
TIM. The biggest advantage with this plan is that it will not
offend the TIM & won’t give it the impression of being engaging

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 in price cut. Apart from above , the company is able to
generate enough profit margins so that all the expenses viz,
Dealer commissions etc. are met comfortably.

 The need is to increase the market share & improve the average
talktime which can be done by provoking the impulse call making
of the customers which is evident from the Exhibit No.5,6,7 which
shows the behavioural segmentation of the consumers where 48%
of the consumers were Brand Loyal & Service oriented & could
see their benefits easily .

Implementation & Promotion :

With company going Strong on the Pricing Front & targeting a huge
chunk of potential Customers , it should focus on its Visibilty in the
Market place , which can be done by following ways :

• The Local & National TV Channels should be flooded with fillers &
advertisements during the prime time.
• Moreover , a sponsorship of a soccer event in the country shall be
able to give the required visibility & mileage that the country is
aiming at .
• Apart from the above, the positioning should be done in such a
way that you pay for what you use & not for being associated with
us.
• So , the whole idea can be summarised by the below mentioned
punchlines :

• Pay for u r bills ,not fines

.
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 • Need to liberate, just call
…
The above campaign can be popularised by the aggressive
advertisements in Newspapers & weekly magazines so that the
theme can be communicated .The Overall expenditure for whole of
above advertising can be summed up as under :
Advertisement Expenses for LIBERO
TV Channel Stripes @Lit.15000/stripe* 5
stripes/day*15days*3Months = 3375000
TV Commercials @75000/5s
*5times/day*15days*3months = 16875000
Sponsoring a Soccer Event = 1503000000
PrintMedia Advertisements
@7000*5Sqcm*30Days*6papers*2months = 70001800
TOTAL 1523250000

Profit & Loss Account :

S.No. Description (all figs. In Lit.) Amount
Total Sales (With a base of 502000 customers &
1 ARPU of Lit.57578) 10364040000

(-)Cost of Sales (With a base of 502000 customers&

2 ARPU of 43802) 7884360000
(-) Advertisements( Including all the Print ,Media,
3 Sponsorships etc.) 1523250000
(-)Miscellaneous expenses(Administrative,Stationery
4 etc .) 10000000
5 Net Profit (in Lit) 946430000

Review :

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The Above marketing & advertising strategies should be reviewed on a
monthly basis & a final assessment should be made after three months
for the after effects of the policies & strategies .The retaliations of TIM if
any should be analysed critically & hence a future course of action should
be decided .

Contingency Plan :
If the above proposed plan is implemented & the results are not as per
the expectations ,the management should take a prompt action in
deciding the future course of action .They may decide to rollback the
LIBERO Plan & may decide to have a strategic tieup with the TIM .

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