THE UNIVERSITY OF CHICAGO BOOTH

SCHOOL OF BUSINESS

Ahmed Gabri
Marketing Management Omnitel
Pronto Italia Case
AHMED GABRI

Upon their entry into the mobile telecommunications market in Italy,

Omnitel Pronto Italia was the sole competitor against the state owned
telecommunications giant Telecom Italia Mobile (TIM). TIM had several advantages
over Omnitel, the main two were:
First, due to its earlier presence in the market through its mother company
Telecom Italia, TIM had enjoyed the luxury of being the sole provider of mobile
phone services in Italy until the establishment of Omnitel in 1995. This monopoly
gave TIM a head start over Omnitel, where it was able to establish & maintain a
large client base.
Second, TIM had a significantly stronger financial position than Omnitels.
This was mainly due to the fact that TIM was state owned, and its precedence in
the market and the large revenues they enjoyed from their monopoly days.
Omnitels main issue was that it wanted to acquire a larger market share,
but was unsure of how to carry out without using price cutting strategies.
Omnitels management team knew that they cannot afford competing against TIM
in a price cutting war, as TIM was financially stronger as mentioned before.
Omnitel had two main solutions to consider. First, was to charge customers
with a fixed monthly subscription, same way as TIM, but subsidize the price of
handsets.
The second solution was to introduce a completely different and radical
system of payment. Market research carried out by Fabrizio Bona - Omnitels
marketing director showed that customers resented the fact that they had to
pay a fixed monthly amount, and viewed it as a form of Tax. This system was
given the name Libero, meaning free in Italian.
Looking at the market research findings and the data presented under
Value Based Segmentation, one thing was clear. Although Italians did view the
mobile phone as a status symbol and a privilege for the wealthy, money and costs

came first. This is apparent in the lesser importance of Brand when compared to
costs such as Activation Costs, Monthly Charge.etc. Combine this with the
overwhelming

resentment

of

the

fixed

monthly

fees,

my

personal

recommendation would be to carry out the Libero proposal, for it would generate
a large client base, thus increasing Omnitels market share. Future profits will also
increase due to the growing popularity of mobile services throughout Europe as
forecasted by various professional analysts.