Mobile maestro

Mobile maestro

by Andrew White on Saturday, 04 August 2007

When you first walk into Axiom Telecom's offices in Dubai Media City, it is difficult to escape the colour orange. It's everywhere - the walls, the skirting boards, the carpet and even the overhead lighting is all an orange of one hue or another. Your first reaction is to reach for a pair of sunglasses; your second is to reflect that Axiom's fashion isn't just to attract your attention - it's to grab you, shake you up and down, and then sell you a mobile phone.

It may not be subtle, but it is working. Founded just 10 years ago, Axiom has come out of nowhere to become the Middle East's largest mobile phone retailer. More than that, the company now leads the market as a distributor, and as an after-sales specialist. The future, it seems, is orange. "The colour is quite vibrant, and we feel it has energy," smiles Faisal Al Bannai, as we settle onto comfy sofas in his own, less brightly-decorated, office. "It's not dull, and it's a colour that reflects the attitude of the company: we're energetic, we're bold, and we're in-your-face."

The CEO and founder of Axiom is an embodiment of this attitude. He is young, bursting with ideas, and a risk-taker whose successes far outstrip his stumbles.

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"It's a matter of position and attitude - being a leading company in a fast growth business is very different from being a leading company in a business that's growing 2% a year," Al Bannai explains. "I'd rather take 10 decisions, get seven right and three wrong, and then move on. We do study and we do plan things. If we didn't we wouldn't still be here. But we really believe this is what we should be doing, and we've got more decisions right than wrong."

We realised the software company was a useless operation, and I guess we took the mobile business from there.

This approach has yielded magnificent results. Last year, turnover broke the US$1.3bn barrier as the company's 13,000-strong staff smashed their targets across the region. The business's growth has been exponential, which is all the more remarkable given the fact that the retail giant was founded almost by accident.

In 1995, Al Bannai had just finished his Master's degree at City University in London. The Al Bannai family has already invested in a series of restaurants and property concerns, but the young postgrad wanted "to create something straight from scratch".

Together with a few friends, Al Bannai launched a company that designed software for SMS messaging from mobile phones, as well as other applications. The plan was that as soon as the programmer delivered the software, Al Bannai and his partners would proceed to market and sell it across the UAE, and perhaps even further abroad. But there was one slight problem.

"The software never arrived," sighs Al Bannai, with a rueful smile.

"The programme was supposed to be ready in three months, and we put all our capital into the company, but then the deadline came and went. Four months passed, five months passed, and then the funds began running out.

"As a result, we had to very quickly look for a way to make money so we could fund the software company," he continues. The then-nearly-broke founders considered every possible line of work, "from selling bicycles to selling fish", until one fateful afternoon. "One day I was having tinted glass put on my car. The guys that were upgrading the windows were also selling in-car phones, and I thought ‘why not mobiles'?" he recalls vividly.

"I asked one of the phone sales guys where he got the phones, and we worked out a deal through which I could get him the phones cheaper. Three or four months later, we realised the software company was a useless operation, and then we took the mobile business from there."

The wheels were in motion, although Al Bannai admits that significant success was not immediately forthcoming. The company - now named Axiom - was involved exclusively in distribution, and recorded around US$40m in turnover by 2000.

Bannai’s call on subsidies

Nobody is subsidising anything - it is nothing other than an installment programme packaged in an airtime way. You're committing to pay a certain amount in your bill every month, whether it's over one year, two years, or more, and whether you use the phone or not.

Nothing comes for free - that's why you're locked in, and that's why you don't have a subsidy in prepaid. Some people think ‘wow, I just bought a phone for a dollar', but you are just paying the same price over time.

Will subsidies happen in our region? I think most operators are definitely trying to avoid that. Once an operator or two gets into the subsidy game, everyone is forced to do it. Some operators in some markets have tried to get out of it later on, but when you have four or five operators, there's always one that will make a grab for market share by continuing with it.

In our region, as long as the operators can avoid going down that road, there won't be subsidies. I don't think anybody wants to open that can of worms, because once it is opened, it doesn't really close. It ties up operator cash, and there are a lot of things in the equation, so as long as people are willing to buy the phone outright, the operators are happy.

The main benefit of a subsidy model is that you're really bringing down the entry cost for a person to buy a phone. You pay zero, or very little, up front. Why do operators do it?

The customer definitely wins in terms of not having to pay up front, but it's just easing the entry cost to the product, however, you can only do subsidies if you do contracts, and if you look at most of our markets here, you see that they are 80% prepaid.

It may happen in somewhere like India, where competition is quite aggressive and there are big numbers to catch, but they've not really opened that door yet.

Today we have to continually manage pricing, and tune our pricing, as well as serve the new market price.

When all phones are subsidised, the price doesn't change - the phone is always a dollar, or always five dollars."

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