Omnitel Pronto Italia

Sec B, Group 15

Omnitels Entry and performance

Omnitels competitive advantage
Superior customer service
Polite operators Minimum customer waiting time One-stop calling without transfers

Reasons for performance below expectations

Existing TIM customers were not service sensitive Studies for customer dissatisfaction show that only 5% of dissatisfied customers register complaints leaving little room for Omnitel to capitalize on superior service Higher call rates in peak hour dont make Omnitels offering attractive Cost for call setup not popular with consumers TIM's strong distribution network and aggressive incentive Cellular phones were viewed as status symbol rather than a necessity

Learning from consumer research

Consumer interviews
Consumers happy with Omnitels customer service Consumers unhappy with monthly fee and the call set-up charges Consumers used fixed phone lines since the off-peak periods did not start until 8:30 PM Consumers perceived cell phones as a status symbol rather than a necessity

Conjoint Analysis
Consumers would prefer separate call charges for local, STD and international calls Present consumers sensitive to service are unwilling to switch to private operator Consumers sensitive to peak charges and fixed costs are willing to switch to private operator Prospective consumers who mainly use fixed line phones consider handset cost as a big barrier Cost and service sensitive prospects are willing to switch to private operators Largest proportion of rejectors are sensitive towards monthly costs

Libero Plan
Proposal
Drop monthly fee No handset subsidy Increase the peak time charges to Lit. 1,595 per minute and Lit. 95 for calls in offpeak periods Aggressive advertising campaign with a budget of Lit. 40 Billion

Opportunities
Dropping monthly fee can attract fixed costs users of TIM who are willing to switch Removing handset subsidy will free up budget that can be invested in advertising

Risks
Dropping monthly fee can give TIM an impression of a price war Net revenue per customers per month will drop by Lit. 2,325. If this drop is not compensated by proportional increase in number of users there will be net loss In absence of monthly fee new users may only buy the phone and not use it thus denying the revenue growth opportunity

Libero - Recommendations
Different pricing for local, STD and international calls Introduce pre-paid cards to target low end consumers Market cellular phones as a necessity and not as status symbol Incentives to distributors for volumes of sales without making giving an impression indulging in price war