Simultaneously we saw many
digital services, like eBooks, digital
banks, NFC technologies emerging
in all parts of the world. As we
believe that these digital services
will play a very important role in
the future, we were thinking
about which role TIM can play in
this emerging digital world. That is
why we decided to work on the
whole Telecom Italia platform to
create a unique and coherent
network of services and products.
We call our solution the TIM

When we were asked to
think about how to attract
and keep TIM subscribers,
we tried to get an idea about
the TIM's domestic market
situation, doing this we
realized that there are two
trends in the italian market
that are becoming or at least
might become a big threat to
Telecom Italia.
First we have identified
increasing churnrates in the
telemobile sector of around
32% and at the same time
the competitor WIND is
winning many market shares
especially in the north.





The telecommunication sector is an industry that changed and developed drastically since the 1990s.
Most of these developments resulted in a commidization process. Reasons for these changes are
changing economic regulations, technological developments and changing consumer behavior. For
example, the liberalization lead to an increasing number of new providers entering the market. The
increasing competition and the difficulties to differentiate then ended up in a destructive price war.
Moreover, new developments in
technology lead to more radical
and frequent innovations. Today
substitutes such as Skype and
Whatsapp constitute a big threat
to the telecommunication
industry. All these factors created
negative effects on the industry
causing substantial problems to all


Even if Vodafone is the biggest loser (-2,5%),
Telecom Italia lost 0,9% of its market share
during these 4 years. So we belief that WIND
could pose the biggest threat to Telecom Italia
in the future. (Source: Bernstein Research)

According to a strategy outline of Bernstein
Research, the biggest change in Italian Wireless
sector is the expansion of WIND into Northern
Italy and a general network improvement. Even
if WIND is historically a southern Italian
telecommunications provider, it could increase
market share in the north of Italy, which lead to
an overall growth of 3,2% in less than 4 years.

Aggrevantly, TI domestic
Blended Wireless Average
Revenue Per User (ARPU) is one
of the lowest in the Italian
telecommunications market
decreasing from above 21€ in
Dec 08 to only around 13€ in Jan

In the meantime the churn
rates in Italy have risen
from around 27% in March
2010 to around 32% in
December 2013, making it
even more difficult for
Telecom Italia to keep their
So we believe that a long term
differentiation strategy, which
decreases the churn rate in the
Italian telecommunication
sector is necessary in order to
maintain TIM‘s market
leadership in Italy.

However, since prices in
telecommunication industry
underwent a commi-ditization
process during the last years,
we think that a differen-tiation
strategy which is focused only
on prices and segmentation is
not enough anymore to protect
TIM from its competitors.

TIM will have to cooperate on this with
Intensa SanPaolo, which is already an
existing partner and an important
shareholder of TIM. In the best case both
companies develop a digital bank
following the example of Hello Bank, a
start up Bank of BNP Parisbas. A digital
bank would be a coherent and naturally
linked service for TIM.
Moreover digital banking combines the benefits
of two worlds: a new customer experience on
the outside and an efficient, effective barrier for
TIM on the inside. Customers benefit from fair
prices with increased transparency and
comparability. Moreover, they will be able to
obtain points through the latter mentioned
point systems.
As customers need to create a new TIM bank
account TIM will be able to decrease the
churn rate to the corresponding churn rate of
a bank. According to some industry estimates
the churn rate is believed to be around 20%.
As the churn in the telecommunication sector
is 32% this represents a drop of the churn
rate of around 12%.
0 1 2 More than 2
How many times did you change
your bank account?
0 1 2 More than 2
How many times have you changed
your mobile phone provider?
This significant difference is consistent
with our outcome of our survey.
While 80% did not change their bank
account a single time, only 19% of the
participants never changed their
mobile provider.
In addition to that, TIM has all the
necessary attributes to develop a bank.
According to the outcome of our survey
44% of all participants saw in TIM the
most safest telecommunication provider.

Tim wallet is system that allows to buy everything paying easily with own phone.The technology
used by Tim Wallet is the Near Field Communication (NFC). NFC is a set of standards for
smartphones and similar devices to establish radio communication with each other by touching
them together or bringing them into close proximity. NFC devices can be used
in contactless systems, similar to those currently used in credit cards and electronic
ticket smartcards, and allow mobile payment to replace or supplement these systems.
Thanks to this technology the payment system turns out to
be very easy. Indeed, when it comes to making payments,
for expenses below €25 bring your phone close to the
payment machine in order to automatically request the
purchase. For amounts higher >€25 your device will
request you to insert a PIN number to authorize the
Nowadays there is a large diffusion of the NFC
technology among smartphones. The majority
of the phones currently on the market are
entitled with the NFC technology. In Italy more
than 14 million of NFC’s phones will be in the
market by 2014. Also the American forecasts
about this phenomenon are very promising: for
Emarketer the single person transactions
through a mobile will pass from 0,64$ in 2012 to
62,24$ in 2016.
The data from our Survey suggest
that although 76% of the people
surveyed do not know the Tim Wallet
the 54% think that the mobile
payment is safe and would be willing
to use it. This means that Tim should
increase the promotion of the Tim
Wallet to reach more customers.
Do you know Tim Wallet?
Is the mobile payment safer?
Together with the bank account the consumers get the opportunity to pay with the emerging
NFC technology. This technology enables the customer to use smartphones to make
contactless transactions at NFC-enabled Pos terminals throughout Europe. To introduce this
technology TIM will have to cooperate with VISA, which is already an existing partner for the
TIM wallet. There are a multiple advantages for both partners.
On the one hand Telecom may use the Visa
platform for the Tim Wallet service and on the
other hand Visa will benefit from a greater
number of customers and revenues of fees.
Since Intesa San Paolo and Visa obtain
interchange fees every time TIM customers pay
with the NFC Technology and since TIM helps
both companies to acquire new customers, we
believe that TIM can negotiate with both
companies in order to get a small fraction of
these fees. These fees can then be used to
finance the ecosystem.

Alternatively to the mobile payment we
introduced a specific debit card called “Tim
card” to allow also other people, that at first
might be reluctant to adopt a mobile payment
system , to use own Tim account. This card is the
result of the collaboration between Telecom
Italia and Intesa San Paolo and works as a
normal debit card granting the same benefit of
the mobile payment system
The point-system is the third element in the ecosystem: it is a mechanism which
allows the customer to obtain points every time he pays through Tim Wallet or the
Debit card.

The points obtained are related to the
amount of money spent. That means that
the more the customer pays, the more
points he'll get. The points the costumer
collects can be used for discounts, special
offers and exclusive contents in the
loyalty program (the last step of the
Such a system is a powerful link between the
payment services and the loyalty program
and it is very convenient for all the
customers. In order to avoid an explosion of
costs TIM can implement a regressive
conversion system. This way, TIM is be able
to control the costs of the point system.
The churn rate problem could only be solved by
attracting new consumers and keeping them
inside the company. Moreover, the digital bank
and the payment system need an effective
boost to reach the critical mass of the fixed
target. The point system is an adequate service
to adress these problems.

The “loyalty program” is a reward program
offered by a company to customers who
frequently make purchases. A loyalty program
may give a customer advanced access to new
products, special sales coupons or free
merchandise. Loyalty programs provide two key
functions: they give a customers rewards for
brand loyalty and they provide the issuing
company with a wealth of consumer
While companies can evaluate anonymous
purchases, the use of a loyalty program
gives additional information about the
type of products that may be purchased
together, and whether certain offers are
more effective than others. The churn rate
problem could only be solved by attracting
new consumers and keeping them inside
the company. Moreover, the digital bank
and the payment system need an effective
boost to reach the critical mass of the fixed
target. The loyalty program is an adequate
service to adress these problems.

The value of the program is deeply related
to the two different types of rewards
Cubo services − CuboVision, CuboMusica, CuboGiochi and CuboLibri ¬− deal with
the latest digital trends for the entertainment consumption, especially in the
young market segment. Moreover, they represent an effective way to keep the
consumers inside TIM ecosystem; in fact, within all the Tim products and services
that could be used as “exit barriers” to reduce the churn rate, Cubo are most
suitable for a young target group, because it is oriented to streaming and
downloading activities.
The rewards can be discounts on the
subscription fee, free limited
downloads of movies, streaming
songs or ebooks, access to exclusive
contents, and similar offers.

• Control: the ownership of the
service allows to manage and
to control easily and quickly
customers and it permits also
to keep a lower cost.
• Promotion and diffusion of
Cubo itself, improving both
the brand recognition and
the brand recall. In fact,
according to our survey,
around 50% of people don’t
know what Cubo services are.

• A fierce competition, with big
companies entering into the
market (e.g. iTunes, Spotify,
Deezer, MySkyHD, Mediaset
On-Demand and in the near
future Amazon Instant Video,

Which services do you prefer?
Transports (flight service, train service, urban public transport)
Football matches and other sports
Cultural activities (theaters, museums)
Bar, restaurants, fast food
The point system, associated with some partnerships,
should be a great effort for Tim. Indeed, as shown in
the graph from our survey, there is a large variety of
activities and preferences that customers would be
likely to choose, and a great interest and participation
in this system. In fact, the preferences are well
distributed and have an almost peer amount of
persons for every variables.

We can see that the largest part of the respondents
(20%) would like to spend their points at the cinema.
Another large part would prefer transports and
concerts, respectively 19% and 18%. The rest of
responses is distributed among the other activities
suggested by us: 12% bookstores, 11% bar,
restaurants and fast food, and both 10% cultural
activities and sport matches. This data are useful to
select potential partners, to take into account the
preferences of consumers and their interests.

The examples provided are consistent with the consumers’ tastes and
interests: restaurant and coffee shop chains, sports centers (e.g. gym) and
voyages (Italian transports).

Finally, to make the whole system easier to use and
even more coherent, TIM will have to work on one
application combining all the services mentioned
earlier. The customer can download this application in
the TIM appstore. Doing this the customer will be able
to have all the services such as the digital bank account
and the point system all combined in one app.
The idea is that in the morning the customer can go
shopping thereby collecting points, which he can then
spend for the services in the loyalty program in the
evening. He can do all this with one single. With the same
app he also can check his bank account information,
whenever he wants to. This app therefore offers the
customer a convenient service.
Most importantly the ecosystem can reduce the churn rate. Since our customer need
an TIM bank account to join the network, we believe that the new churn rate can be
similar to a bank churn rate (20%). The estimated benefits for TIM are:

• The total population between 20 and 45 in Italy is 19.500.076
• Tim has 34.7% of the mobile market share so we can assume that the total Tim’s
costumers between 20 and 45 are 6.766.526
• According with our survey we have seen that 75% of the 6.766.526, is the people
which will join our system. So 5.074.894 of Tim customer are willing to stay in Tim.
• Through the introduction of a new bank account, realized in collaboration with
Intesa San Paolo, we assumed that Tim new churn rate will be reduced to reflect
the lower churn rate of the bank, correntrly equal to 20%.
• In this case Tim would be able to retain 4.059.915 of customers.

Note that we only considered the bank churn rate. Our ecosystems, however provides
further effective barriers, like the point system and the overall coherent and
convenient services will prevent customers from leaving TIM. So we believe that the
churn rate can be even lower.
Moreover the ecosystem attracts new customers due to
the incentive system and the participating collaborators.
Concerning the target customer is very flexible. TIM can
attract older and less technology oriented people with
collaborations such as opera, theatre or other services
aimed at this customer segment. The point system will
provide a huge contribution by attracting people willing
to obtain and spend their points, making them involved
in the system and giving them an effective effort,
different according to their specific interests and
Furthermore this ecosystem gives an incentive to
use the Cubo services. The point system therefore
increases awareness of these services, which is an
important aspect as according to our survey only
56% know about the cubo services.
Another important advantage of our project is
that it is very cost effective. Our Ecosystem only
works with already existing collaborations and
partnerships. Except for the new collaborations
for the loyalty program no big investments are
needed. Moreover, we believe that TIM
ecosystem itself is a self financing network. TIM
will be able to generate revenues out of the
mobile payment and bank services which can
be used for the costs in the loyalty program.