CASE OVERVIEW Omnitel entered the Italian telecommunication market in February 1995.

Till then the Italian telecommunication market was dominated by Telecom Italia Mobile which had a monopoly in this market. The rst private company to enter the Italian telecommunication market was Omnitel. This was facilitated by the decision taken by the European Commision (EC) in 1993 that all member states should open their markets and guarantee competition in the telephony market by January 1998. Omnitel had to purchase a license for the GSM network for 760 million dollars. Currently the biggest competition for Omnitel is Telecom Italia Mobile (TIM) which was formed in July 1995 and was listed in the Italian stock exchange after splitting from its parent company Telecom Italia. TIM had a customer base of over four million and held 97% of the market share. STRATEGY TO OBTAIN MARKET SHARE Omnitel is at a critical stage at this point unless penetration in the market is achieved prospects for growth are limited. During the initial six months Omnitel oered plans similar to TIM and focused mainly on high quality customer service. This was the only dierentiating factor between Omnitel and TIM. By means of a market survey conducted it was found that a large share of mobile phone users were reluctant to change brands. Unless new revised plans and schemes by Omnitel were oered the company would not appear attractive to prospective customers. Two high level management executives of Omnitel were of diered viewpoints. Fabrizio Bona the Marketing Director of Omnitel proposed the idea of LIBERO, which eliminated the monthly fee completely and making payments for only the time duration of the calls made by the customer. At the same time Francesco Caio, CEO of Omnitel was of the opinion of oering customers handset subsidaries in exchange for signing a contract with the company. This would be done as a substitute to eliminating the montly fee charged to its users. He was of the opinion that by doing this he would be able to guarantee a constant revenue scheme from the monthly fees. Such schemes had worked elsewhere in Europe. ALTERNATIVES AND THEIR SWOT ANALYSIS Subsidized handsets with contracts In this plan we provide the customers with a handset at lower than market rate (in addition to the usual call plan). Strengths: Proven Strategy in the other European markets. Tested and proven in several other countries. A decrease in cost of handsets might entice customers- subsidies lead to a fall in the price of the handset, thus decreasing the initial cost of acquiring a connection for a customer. Constant Revenue stream for the period of the contract- this guarantees constant monthly subscription fees irrespective of the usage thus ensuring a xed revenue from every customer.

Initial cost of acquisition is low hence this might be more attractive to the low income groups thereby increasing our market penetration. Weaknesses: Not suitable for Italian market because Italians being very brand conscious might consider a subsidized handset below their status. People are unhappy with xed charges and in this plan - here we have two xed charges i.e. the connection charge and the monthly subscription charge. Customers seek a sense of exibility & freedom in any purchase, therefore being locked in a contract might be a deterrent to their purchasing decision. When I rst signed up for a cellular phone, I got the phone for free but I had to sign a contract for a year, which seemed alright at that time. But I was shocked to see my bill at the end of the rst month. It was so very high. It included the connection fee, the activation fee and the monthly fee. I felt duped because of all these other charges. I discontinued the service as soon as the contract was up?- Previous cell phone customer. Increase in Customer Acquisition Cost - As company has to bear the cost of providing subsidies on handsets for this plan, the overall cost of acquisition per customer rises signicantly. Opportunities: First mover advantage might give us an upper hand in acquiring market share which the competitor might struggle to cope with in the short run. Threats: Italians still consider mobile phones a status symbol viz. a viz. a utility. The cellular phone was a possession that was both expensive and exclusive. Something that only people of a certain stature had the right to own. Due to a shift in the business plan, the company might lose its existing customer baseAs we have seen that the subsidized handsets might create a negative image of the company in the minds of the Italian customers, our existing customers might opt out as they might not want to be associated with a brand like that. LIBERO - No monthly subscription charges and no handset subsidy In this plan we provide a plain calls package sans the monthly subscription. We do not provide any handsets. Strengths: According to our Market research report, a lot of people have asked for a plan in which there are no monthly subscription charges. Low cost of acquiring a customer? As we dont have to pay subsidies, it reduces the cost of acquiring that connection. Lower commissions for dealer - This will further reduce our acquisition cost per customer. We are expecting to have high sales volume which will oset the decrease in commission rate. No signup fee - as there is no contract there is no signup fee.

Weakness: Higher call charge - As there is no monthly subscription fee or contract fee, we have to increase the call charges to maintain our revenue. The xed revenue is lost - Absence of monthly subscription fee translates to a loss of guaranteed xed revenue (irrespective of usage). Customers may buy the phones and never make calls thereby reducing overall revenues and increasing our administrative costs. Opportunities: First mover advantage might give us an upper hand in acquiring market share which the competitor might struggle to cope with in the short run. Large untapped market? With a penetration rate of 7.5%, such a plan may lead to a sudden increase in market share/penetration which our competitors may struggle to catch up with in the long term. Threats: Possible price war: A price war with TIM might seem imminent if such a plan is brought out in the market. TIMS responded to Pronto's entry in the market by rewarding their highest performing dealers and oering them shares. Therefore we can infer that TIM will be aggressive in its initiatives to retain its market share. Since this has not been tried in any market in Europe, the risk of employing this strategy is high. LIBERO + + ..... + Unlimited Flexibility Guaranteed In this plan we provide various options such that they can build their own plan (they can choose a subsidized handset, opt for a monthly subscription charge and/or forego both of them). Subsidy Call Charges Monthly Subscription Charge Low Low Yes High Low Yes Low High No High High No XXX Low Yes XXX High No Strengths: Flexibility to customer in terms of selecting a plan which caters to his personal constraint. Caters to all segments of the market because we are empowering the customer to choose what he wants based on his needs and wants. Entices market interest, therefore also raising brand recognition ? As this is a unique plan which is probably being introduced for the rst time in the Italian market backed by good advertising and promotional strategy, Pronto is sure to get noticed. Lower commissions - This will further reduce our acquisition cost per customer. We are expecting to have high sales volume which will oset the decrease in commission

rate. Weaknesses: Higher administration costs: Implementation of a multi faceted plan will increase the need for upgraded systems and additional employee training. Opportunities: Can increase market penetration - the USP of this plan is the incredible exibility it oers and the customer centric approach it adopts. Such a plan can, not only increase the market share, but also increase the market penetration signicantly. Large untapped market? With a penetration rate of 7.5%, such a plan may lead to a sudden increase in market share/penetration which our competitors may struggle to catch up with in the long term. First mover advantage might give us an upper hand in acquiring market share which the competitor might struggle to cope with in the short run. Threats: This is a radical initiative involving high administration cost therefore the risk involved is higher.