In January this year, the i2 Group — the region’s largest and most diverse mobile phone provider — acquired computer retailer CompuMe LLC in a share swap deal. In the process, the Saudi group became the Middle East and North Africa (MENA) region’s biggest provider of combined telecommunications, digital electronics and IT products.
The acquisition will pave the way for the creation of multi-concept stores, and i2 is planning to open an additional 150 retail outlets in the MENA region over the next three years, with a total investment of US$35m.
Additionally, the existing 340 i2 retail stores will be revisited for planned refurbishments to include IT and electronic product offerings.
Dikran Tchablakian, vice chairman of CompuMe, and now the senior vice president, retail of i2 Group, is now in charge of retail operations, bringing with him his professional expertise in computer-related business. Tchablakian was one of the pioneers of Sakhr, a highly successful and popular Arabic computer hardware and software business based in KSA in the mid-80s to early 90s, when over 50 retail stores were opened.
He then went on to create CompuMe in 1998 as the first computer megastore in the region with franchise outlets in the UAE, KSA’s Riyadh, Jeddah and Khobbar, Egypt and Bahrain.
In 2005, i2 and Tchablakian acquired the UAE operations of CompuMe retail outlets from CompuMe British Virgin Islands through a 60-40 partnership. Moving forward, the two began negotiations in December 2006 on a share-swap deal wherein CompuMe would be acquired by the Saudi Group.
Today, Tchablakian tells Arabian Business what the deal means, and exactly how it could mark a new era in Middle East IT retail.
Is there any reason for the timing of this agreement?
First of all, the timing has nothing to do with the market conditions. i2 has grown exponentially over the last two years and today it is the largest telecommunications player, covering 22 countries. It has been developing the retail business, but its distribution business is much bigger so it wanted some balance on the retail side. There were also requirements from Nokia in terms of customer experience, especially with the new multi-concept stores being launched. You’ll see this year that a lot of sophisticated phones are coming to the market and because of that you need to have the right consumer environment for products such as phones, multimedia and push e-mail.
i2 already had a large stake in CompuMe UAE prior to this takeover didn’t it?
Two years ago i2 took the decision to invest in the retail side and CompuMe was at that time a good opportunity. They bought 60% and I was controlling 40%. We knew each other, but we wanted to see how things would grow because CompuMe has evolved from an IT company to more of an electronics and digital company, without the brown and white goods. CompuMe comes from a background where customer care and IT knowledge is important — it’s not a plug and play company. We take care of the customer so from that perspective i2 is a good match. How does the takeover affect the franchise model you operate in Saudi, Egypt and Bahrain? You have relationships with companies such as NTG, Nordix and Fakhro Electronics in those countries. We still own the CompuMe brand. Here in the UAE it was only the operation. i2 holds the franchise rights of CompuMe in the UAE, the same as the companies in Saudi Arabia or in Egypt.
Does it mean i2 will attempt to take over the CompuMe franchises outside of the UAE?
The brand is non-exclusive, but today we are not looking at any kind of buy-back. There is no consideration of this because we have to develop the i2 multi-concept stores, even in Saudi Arabia. Maybe at a certain point of time, like two or three years, that might change.
i2 has said that it intends to open an additional 150 retail outlets in the Middle East and North Africa region during the next three years. Where will the majority of these stores be located and how will they be branded?
They’ll mostly be i2. We are in 22 markets so we can start with the largest markets. Today we have close to 340 stores and we’ll be in markets such as Saudi, Iran and Egypt. Egypt is growing — we are doubling every year — and the UAE is strong. Those are the big markets where you will see more stores.
Is there any danger of the CompuMe brand being diluted as a result of this agreement?
No, because the CompuMe brand has a value. The development of the i2 [brand] is there because they are going to IPO in a couple of years and this requires a lot of preparation.
In addition to your position at CompuMe, you are now senior VP at i2. What does this new role mean for you?
It means I am working more hours and travelling all the time! With CompuMe, whenever we went to a country we had to spend time creating a company and the logistics — that makes it very difficult to cover all the countries. But i2 has an existence in all the countries through joint ventures or direct openings. CompuMe was never looked at by the vendors as a whole group. We were segmented and they always looked at us separately in Saudi, Egypt or the UAE. But now there is a great opportunity. We are in 22 markets so what I wanted to do with CompuMe we will be able to do with i2.
Do you expect your merger with i2 to kickstart further M&A activity in the retail channel?
Absolutely. There will be some grouping and new players coming together. I can see a lot happening in terms of the grouping because buying power is the ultimate goal; volume talks. It is conceivable for two or three major companies to associate themselves with one another to be a powerful buyer, even if they do not legally merge. This model exists in Europe.
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