Axiom outlines its ambitious plans to take India by storm and move into mobile operations.
When entrepreneur Faisal Al Bannai started importing and distributing mobile phones in the UAE a decade ago, he viewed the venture as little more than a short term measure to fund his main business interest, a software development start-up.
But it soon became apparent that the side project had more potential than the business it was supposed to be supporting. For Al Bannai, the decision was simple.
We are a retailer with a distribution arm, with a back-end after-sales service arm, and a content arm - so adding an MVNO is a clear transition that would make us one of the key players in the region.
He ditched the software operation and put all of his resources into the mobile distribution company - now known as Axiom, the UAE-based mobile phone retail giant.
Al Bannai tells Roger Field how Axiom became the region's leading mobile phone retailer and distributor, his plans for conquering India's mobile retail sector, and the company's plans to become an operator via an MVNO licence.
How did Axiom develop into a leading mobile phone retailer?
To start with it we were purely trading mobile phones. We were importing phones and selling a lot of phones to wholesalers. That was the initial project and then we realised there was good potential to do more local distribution and not just rely on the wholesale.
In 2001 we started operating and expanding our first retail stores in the UAE.
From 2004 we started opening in Saudi Arabia. It was the first country we entered outside the UAE and then we started opening in the other Gulf countries. Last year we opened in Egypt, and we did a joint venture in India last year.
Was there much competition in the early days?
Not much from foreign companies, but there was a lot of competition from local companies. It was a matter of who moved faster, who was more innovative, and who would be able to make decisions that would affect the business down the line at that time.
Overall we did well in terms of differentiating with the end customer and growing aggressively. We were also developing our other core services in that regard. Today there is a bit more consolidation going on in the market. There aren't as many new players coming in as there were nine years ago. Now it is a matter of scale, productivity and what you can offer the customer.
What differentiated Axiom from its competitors?
In the early days even before we started in retail, one of the things we recognised was that we distributed leading brands such as Nokia and Ericsson, and there were other people selling the same phones in distribution.
We realised that if we kept selling the same products we would either get squeezed by the retailers or the wholesalers because we were offering the same products, so we started with the slogan "Ask for the Axiom Nokia, or the Axiom Ericsson, where you also get other benefits."
We offered free theft insurance and a free two year warranty on our phones. We did a number of these things and we said to people: "Ask for a Nokia that comes from Axiom."
So we started creating a demand for products that had come from Axiom. That happened in distribution, after sale and in our retail outlets.
We kept adding these things to make sure we differentiated. So if you're phone breaks down, we'll come round, collect it and repair it for free, as long as you bought it from us.
At the end of the day the product is the same as what everybody else is selling, so we have to differentiate on our sales proposition, and that is what we keep trying to upgrade every year.
What will your $400 million loan be used for?
The financing was to consolidate all of our current funding markets, all the banking lines into one syndication.
The other part is to have extra lines to support the company's growth for the next two years - mainly working capital to support the requirement of the company in terms of growth from funding, buying items, inventory and things like that.
What geographic expansion plans does Axiom have?
We are continuing our expansion in the GCC. We opened last year in Egypt, we completed our joint venture in India at the end of last year and we are about to open now in South Africa.
We have a number of areas we are focusing on and normally as a strategy, rather than trying to open in 30 countries, we would rather open in the key markets, because there is always time to go back to the smaller markets - hence our focus in on UAE, Saudi Arabia, India, Egypt, South Africa. We are also about the open now in Iran. So the main focus is to make sure we are focused on the key markets.
How do you go about entering new countries?
It really depends on the market. If we were really to break it up, in Saudi Arabia we have around 165 stores. In a market like Qatar we would probably only open 10 stores. But in India, through our joint venture, by the end of the year we will have over 500 stores. Within two years we like to be the key player in any market.
How competitive is the market in India?
Our other competitors in India definitely have good people, but we have one key advantage on all the players there, and that is that we have been in this business for quite a while and most of the players in India have only been offering organised mobile retail or distribution in a big way for the last two years, because before that the duty was high, about 50, and the grey market was more competitive than the official market.
Most of the growth happened when the duty was dropped. The know-how, systems and services of most of the players have only been tested aggressively in the past two years. The experience that we have gained over the past 11 years has definitely given us an edge in India.
One in terms of setting up our distribution and another in terms of bringing the best practice of standards and retail to India. We have a strong team and the leverage of the systems, tools and know-how which the other companies are only developing now. You have got to grow fast and as long as you make less mistakes than your competition, that's what counts.
How do you find working as part of a joint venture?
All of our operations are company owned except for the Indian operation. We have got a good working relationship with our Indian partner and we each have a clear understanding of our roles and responsibilities. We took nearly a year to discuss all the terms and contracts.
The Indian partner brings the India know-how, relating to setting up in the market, getting access to the market faster. Axiom's contribution is to bring its mobile and telecommunications business know-how, how to operate, best practice, and relationships with different manufacturers.
What targets do you have for the Indian operation?
We have set a target that by 2010 we need to have somewhere in the range of 2,000-plus stores in India and definitely be one of the key retail players. That is something strongly in our mind. It is part of our global expansion plan.
As we expand beyond the Middle East, India is going to play a key role in our development and expansion. India is the largest market in terms of net sales worldwide - around 6 to 7 million phones a month which surpasses any other market.
Will you be going after mainly higher tier customers in india?
We are going with a dual strategy in India. We are going with a premium, middle to upper-end store and we also have another store positioning for the mass market, because we can't ignore the mass market.
We need to be able to address both segments of the market. Axiom will be addressing the middle and upper-end segment and have the mass market offering to address people who are more concerned with price.
We will be launching the brand name at the end of August. We target the mass market across the Gulf with our "One Mobile" brand.
When and where do you plan to launch as an mvno?
Jordan's regulator has already allowed for an MVNO licence to be acquired, and the same with the Omani regulator. There is no other regulator in the region allowing MVNOs. We are in discussion in a couple of markets, and let's say there may be some news soon.
We will definitely be a key player in this game. It is a very obvious extension of what we do. We are a retailer with a distribution arm, with a back-end after sales service arm, and a content arm, so adding an MVNO is a clear transition and would make us one of the key players in the region.
Do you hope ultimately to have networks across the region?
It is not a matter of if we will go in that direction. We are in discussions with different operators. Usually for a successful MVNO to launch, it needs to be that you have a clear win-win strategy with the operator.
At the end of the day, the MVNO is taking a cut from the operator's share so unless the MVNO is going to add value, you are not going to have the right deal. If you sign a deal that is not right, it will not be commercially viable.
You need to make sure you strike the right balance between when you decide to launch, which market you are launching in and having the right commercial terms with the operator. If you try to over squeeze, the operator will probably not sign.
If you just try to sign anything, it is not commercially viable.
For us, moving into an MVNO stage as the regulators start opening up is one of our key priorities. When we do it we want to do it right. It is about how well you execute it and how well you roll out to other markets.
Are you experiencing any particular challenges in the market?
The only challenge we are facing at the moment is the cost of people and the cost of living. It is a cost burden that all companies, are facing. It is making sure that as you grow you find more and more good people for your organisation.
As you grow rapidly there is a need for more people and more talent. There is definitely a shortage of skilled telecom professionals, and all these sectors are starting to compete for staff.
For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.