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1. What was Omnitel's competitive advantage when the service was launched in December 1995?
Omnitel believed that their competitive advantage was their customer service focus. Their sole competitor, Telecom Italia Mobile (TIM), offered impersonal service, long waiting time and often sent customers to several operators for problem resolution. Omnitel positioned itself as the customer-friendly alternative, offering American-style, personal service, including polite operators, short wait times, and one-stop calling. A market study conducted six months after Omnitel's launch confirmed that customers were dissatisfied with TIM's service and extremely satisfied with Omnitel's service. One respondent summed it up by stating that "?I like the way Omnitel has positioned itself because I have never heard a polite word from TIM's customer service?"
Secondly, Omnitel expected to maintain a lower than average churn rate of 10%-15%. Churn rate is a major cost driver for telecoms. Decreasing the churn rate will decrease Omnitel's operating costs and therefore represents an Operational Efficiency that will translate into another competitive advantage for Omnitel. Omnitel can re-direct the cost savings to financing future growth (expansion, advertising, subsidies, etc).
Lastly, as an upstart against a possibly complacent and cumbersome former monopoly, Omnitel should have the advantage of being a more agile and market-sensitive company.
2. Why did the launch not perform to expectations?
By May 1996, Omnitel had only attracted 180,000 customers and a disappointing market share of only 4%. Although ...