Scribd Logo
Upload

Welcome to Scribd!

  • 1K views

    Omnitel Case Team 5

    Uploaded by

    atefzouari
    Team 5 analyzed the case of Omnitel, Italy's second GSM operator. Omnitel launched in 1995 with 40% network coverage and 4% market share. It focused on superior customer service but had similar plans to the incumbent, TIM. Six months later, Omnitel only had 4% market share. Consumer research revealed that customers disliked monthly fees and call setup costs. Team 5 recommends Omnitel launch the "Libero" no-fee plan to target cost-sensitive customers, with adjustments to avoid a price war and convince stakeholders.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd

    Omnitel Case Team 5

    Uploaded by

    atefzouari
    1K views14 pages
    Team 5 analyzed the case of Omnitel, Italy's second GSM operator. Omnitel launched in 1995 with 40% network coverage and 4% market share. It focused on superior customer service but had similar plans to the incumbent, TIM. Six months later, Omnitel only had 4% market share. Consumer research revealed that customers disliked monthly fees and call setup costs. Team 5 recommends Omnitel launch the "Libero" no-fee plan to target cost-sensitive customers, with adjustments to avoid a price war and convince stakeholders.

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Team 5 analyzed the case of Omnitel, Italy's second GSM operator. Omnitel launched in 1995 with 40% network coverage and 4% market share. It focused on superior customer service but had similar plans to the incumbent, TIM. Six months later, Omnitel only had 4% market share. Consumer research revealed that customers disliked monthly fees and call setup costs. Team 5 recommends Omnitel launch the "Libero" no-fee plan to target cost-sensitive customers, with adjustments to avoid a price war and convince stakeholders.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    1K views14 pages

    Omnitel Case Team 5

    Uploaded by

    atefzouari
    Team 5 analyzed the case of Omnitel, Italy's second GSM operator. Omnitel launched in 1995 with 40% network coverage and 4% market share. It focused on superior customer service but had similar plans to the incumbent, TIM. Six months later, Omnitel only had 4% market share. Consumer research revealed that customers disliked monthly fees and call setup costs. Team 5 recommends Omnitel launch the "Libero" no-fee plan to target cost-sensitive customers, with adjustments to avoid a price war and convince stakeholders.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 14

    TEAM 5

    The Omnitel case


    Team Members: Amin Haj Said Atef Zouari Ikram Ellouze Khaled Ben Abdeljalil Mohamed Salah Ben Ammar Neil Fourati Reyad Mohamed Hobba

    Company Background
    Omnitel was able to obtain GSM license after liberalization and paid Lit.750 bn in Dec 94 to become Italys second GSM operator and launched its commercial service in Dec 95. The existing competitor is the state-owened TIM whos in a monopoly situation. They started with a network coverage of 40% of Italian territory. Market share was 4% of the total Italian telecom market. Initially they offered plans similar to TIM but prime focus was on its high-quality customer service, which led to happy customers and low churn rates. Financially, Omnitel was not as strong as their competitor i.e TIM, hence they wanted to avoid getting into a price war situation.
    2

    Our vision is to position the cellular phone in a manner akin to the positioning of the wristwatch
    Omnitels vision 1995

    Question 1: What was Omnitels advantages when the service was launched in Dec 1995 ?

    Omnitels competitive advantages when launched in 1995: Superior customer service quality (compared to TIMs)
    Polite operators with personalised assistance Minimum customer waiting time One-stop calling without transfers Speedy account activation

    Only one existing competitor + big market to penetrate

    Question 2: Why did the launch not perform to expectations ?

    6 months after launch, Omnitel had a market share of 4% only.


    Main reasons of under-performance:
    Omnitel offered essentially plans similar to TIMs (no real competitive advantage: no differentiation) Existing TIM customers were not service sensitive (Studies for customer
    dissatisfaction showed that only 5% of dissatisfied customers register complaints leaving little room for Omnitel to capitalize on its superior service)

    Customers viewed the monthly fee as a tax and disliked it Cost for call setup not popular with consumers TIM's strong distribution network and aggressive incentives Cellular phones were viewed as status symbol rather than a necessity

    Question 3: How do the revenues from Libero compare to those of existing plan ?
    Existing plan vs. Libero plan:
    Existing plan Monthly call setup fee Monthly fee Lit. 10,000 Lit. 10,000 Libero plan Lit. 10,000 Lit. 0

    Price per min (peak) Price per min (off-peak)


    Handset subsidised ?

    Lit. 1,524 Lit. 170


    Yes

    Lit. 1,595 Lit. 195


    No

    Statistics / Forecast: average monthly usage time per customer


    Existing plan Outgoing peak hours calls Outgoing off-peak hours calls 13 min 75 min Libero plan 13 min 90 min

    Incoming peak hours calls


    Incoming off-peak hours calls
    6

    25 min
    75 min

    25 min
    75 min

    Monthly per customer revenue comparison:


    Existing plan Monthly call setup fee Monthly fee Outgoing peak hours calls Outgoing off-peak hours calls Total revenue
    Assumption: Incoming call are not charged.

    Libero plan Lit. 10,000 Lit. 0 Lit. 20,735 Lit. 17,550 Lit. 48,285

    Lit. 10,000 Lit. 10,000 Lit. 19,812 Lit. 12,750 Lit. 52,562

    Conclusion: revenues per month per customer will drop by Lit. 4,277. Yet, Omnitel hoped to offset this and increase revenues because Libero would attract many more customers (bigger penetration rate / market share).

    Question 4: Why is the churn rate so high in some Eurpoean countries ? Will the churn
    rate increase with Libero ?

    Why is churn rate so high in European countries?


    The handset subsidies attract customers and encourage them to switch operator Contract costs are high, so customers tend to terminate the contract once it expires Churn rate is high mostly among low-end customers that are pricesensitive (especially in countries where a war price is waged and /or exit barriers are not important)

    Would Libero increase or decrease the Churn rate?


    Churn rate will most certainly increase because: Handset subsidies incentives will disappear Customers not bound by contract (exit barrier) anymore TIM will most likely fight back by either reducing its prices or offering similar services / promotions

    Question 5: What do you learn from consumer research in Exhibit 5 ?


    Learnings from consumer research and conjoint analysis:
    Consumer interviews Consumers happy with Omnitels customer service Consumers unhappy with monthly fee and the call set-up charges Consumers used fixed phone lines until the off-peak periods start (at 20:30) Consumers perceived cell phones as a status symbol rather than a necessity Conjoint Analysis Consumers prefer to have different tariffs for local, long-distance 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 (about 30%) 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

    Exhibit 5 to 8 show that the size of cost sensitive market is significant: 35% of current users, 30% of the prospects and 61% of the rejectors. Exhibit 8 shows that individuals who have considered cellular phones before rejecting them are extremely sensitive to costs monthly cost, traffic cost, and an activation cost.

    Question 6: Will Libero lead to a price war ? How can Omnitel avoid one ?

    LIBERO and Price War?

    At this stage, No risk of a price war:


    Omnitel is not targeting TIMs customer segment It is more of a positioning war Price sensitivity varies across segments LIBERO has the potential to enhance the market (presently 7.5% penetration) for cellular so TIM can also take advantage. Since Omnitels resources are still growing there is going to be enough market for two players

    Question 7: Would you Launch Libero ? Why or Why not ? What changes to make and why ?
    Innovating / visionary plan Good consumer research Targets a large segment with a big growth potential Aggressive advertisement campaign Create own distribution channel

    Unchartered territory Not all customers are interested (brand loyals, etc..) No strategy for reassuring TIM CEO not convinced (yet)

    SWOT
    Draws new customers inc. Rejectors Attract existing customer willing to switch Free up handset subsidies budget (can
    be used for advertising)

    TIM might perceive this as price war Net loss in case revenue shortfalls not offset by an increase in market share Might become a very low-end customer company (customers having
    phone but not using it frequently)

    Distributors might not be convinced

    Omnitel should proceed with the Libero plan. Some suggested adjustments though:
    Different pricing for local, long-distance and international calls Might introduce bundled offers / different prices during different periods Might increase off-peak prices to Lit. 200 instead of Lit. 195 (customers are
    willing to pay this price)

    Introduce pre-paid cards to target low end consumers (students, etc..) Incentives to distributors for volumes of sales without giving an impression of waging a price war

    How to convince the CEO ?


    Demonstrate that Omnitel is not waging a war price against TIM Show him that Omnitel is not losing money by giving up the fixed price

    Make it clear to him that Omnitel is targeting the mass not only a niche. And that the way to implement Omnitels vision: Cellular = Wristwatch

    Thank you

    You might also like