The Success of 3G Services in Italy: A Case Study

SUMMARY

This report explains why the Italian market now leads Europe in 3G service penetration with over 10 million users at the end of 2005. The report analyses the pivotal role played by H3G in developing the Italian 3G market. H3G has secured 4.5 million 'high value' 3G customers in the last 21 months through the development of extremely innovative 3G service products and promotions. The current report highlights how H3G has sought to boost customer lifetime revenue via a host of measures aimed at securing greater customer loyalty.

These include initiatives to:

• Encourage number porting to the 3 network (those porting generally deliver higher ARPU and lower churn)
• Overcome market specific barriers to the development of the contract consumer market in Italy, further improving customer life expectancy
• Enable the introduction of heavily subsidised prepay handsets in return for minimum monthly top up commitments over an extended period
• Introduce innovative top-up schemes which stimulate ARPU and keep customers active, thereby delaying the potential for churn.
• We also explore how H3G's success has forced the incumbents Vodafone and TIM to respond in kind, with a variety of service innovations of their own.

TABLE OF CONTENTS

1 Overview

2 H3G

• 2.1Background
• 2.2Consumer Tariffs
• 2.3Promotion of Video Call Services
• 2.4VoIP Initiative for International Calls
• 2.5SIM Lock and Handset Subsidies
• 2.6Stimulating Prepay ARPU Through Innovative Top-up Vouchers
• 2.7Successful ARPU Values
• 2.8Plans for an IPO
• 2.9Key Role in the Mobile TV Value Chain

3 Vodafone

• 3.1Background
• 3.2Basic Non-voice Tariffs
• 3.3Stimulating Traffic & Reinforcing Loyalty Through Vodafone 'Infinity' Offers
• 3.4Vodafone live! Introductory Offer
• 3.5Other Traffic Stimulation Initiatives
• 3.63G Handset Offers

4 TIM 22

• 4.1Background
• 4.2'Relax' Bundles & Handset Offers
• 4.3TIM Promotions of Video Call Services
• 4.4Promoting Fixed & Mobile Convergence