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Sun 13 Apr 2014 07:07 PM

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Interview: Axiom Telecom CEO Faisal Al Bannai

For Faisal Al Bannai, CEO of Axiom Telecom, adaptability is key to success in a rapidly changing mobile phone sector

Interview: Axiom Telecom CEO Faisal Al Bannai
Al Bannai is optimistic about Axiom Telecom’s potential to prosper as a virtual operator.

The mobile sector has seen more than its share of change in the past decade, with numerous players — from vendors to device manufacturers and retailers — failing to evolve quickly enough to survive in an industry that has become renowned for its rapid pace of development.

As CEO and founder of Axiom Telecom, the UAE’s biggest mobile retailer and distributor, Faisal Al Bannai is all too well aware of the need to adapt to meet the latest trends and the often fickle tastes of mobile users. But while Axiom has made numerous innovations to its business, including an online store, micro distribution and mobile finance, the company is set to make what could prove to be its most audacious move to date when it launches its first mobile operation — a mobile virtual network operator (MVNO) in Saudi Arabia – this year.

Indeed, the company won one of three MVNO licences up for grabs in Saudi Arabia in June last year. Axiom, which is preparing to launch services using the network of Zain KSA, will compete with each of the country’s mainstream operators as well as the winners of the other two MVNO licences, Virgin Mobile MEA, and Jawraa Lebara, which will operate on the networks of STC and Mobily, respectively.

As CEO Middle East went to press, two MVNO licences had been handed final approval from Saudi Arabia’s telecoms regulator, the CITC, to launch services, although Axiom was still waiting. Once the CITC has checked the final documentation and issued the licences, each company will have 12 months to launch services, according to Al Bannai. “Everyone has expectations. Everyone is watching in anticipation and also preparing. From our side we are preparing things so we can get off the ground quickly,” the CEO says.

Al Bannai is optimistic about Axiom Telecom’s potential to prosper as a virtual operator. The company certainly appears to have some early advantages, not least an existing retail presence in Saudi Arabia that includes 120 branches and selling points, as well as 4,000 indirect sales channels — 2,000 of which are dealt with through direct distribution.

Furthermore, with the experience gleaned from its combined retail and distribution network in the region, Al Bannai believes that Axiom has a keen understanding of the needs of mobile customers.

“Looking at the market we have run numerous customer engagement services. We have the advantage of having our shops so we interact on a daily basis with a lot of customers,” Al Bannai says. “These customer inputs are definitely going to improve our customer service proposition.”

He adds that even when expanding in other areas, such as micro distribution, the company has focused on offering a differentiated service, and this is something that Al Bannai hopes to achieve with the MVNO. “Even though there is a good size market in the channels we launch in, we can’t rely on that. We have to rely on being differentiated from the others; offering an extra value added service that would make the customer say, ‘I would like to take this product from Axiom because they are doing it in a different way or they are giving me something different’, and we intend to continue that in the telco industry.”

As Al Bannai points out, when a regulator gives the go-ahead for MVNOs to launch in a market, the primary reason is to cater to segments of the population that may have been overlooked by the main operators and improve customer service. Certainly Al Bannai’s perception of the role of MVNOs could offer a few clues as to what Axiom’s aims will be when it enters the market as a virtual operator. “The name of the game for us is we need to come in and change the tone of the market and change how things are done, so we definitely will not plan to come in and be one of the others, we want to add our flavour to the game and add a unique layer of differentiation and customer experience,” he says. “We know it’s a high bar to cross but at the same time we think we can bring new levels of innovation to the telco industry with an Axiom flavour and hopefully the market will get to experience that soon,” Al Bannai adds.

In terms of the launch date, Al Bannai says that he would prefer the actual date to “stay a surprise”. “We would like to launch at the earliest possible while making sure that we launch with the right proposition for the market,” he says. “At the end of the day it is not about when you launch, it is about making sure you launch with enough juice in your proposition to the market. We are trying to balance an as-fast-as-possible launch with making sure there is an interesting proposition to the market.”

Al Bannai confirmed that Axiom has already hired a significant proportion of the team to set up and run the MVNO and that there are “only a few people left” to hire, including a CEO, for the venture.

But it is not just through the MVNO sector that Axiom is expanding its presence. The company is also working to drive revenue growth across its core businesses of retail and distribution. The company experienced solid growth in 2012 with sales reaching AED8bn ($2.18bn) and Al Bannai is confident that the figure will be surpassed in the 2013 results.

“Overall 2013 was a good year. We experienced over 10 percent growth in the overall size of the business. We have seen growth in all the markets, UAE and Saudi Arabia, so overall we closed a good year,” he says.

The company made numerous investments in 2013, opening 21 new stores, bringing the total number of retail points to about 600, and hiring 300 new members of staff. But it is in the wholesale area that Axiom has staged some of its most aggressive moves. Indeed, the company has made major headway in micro distribution, a project that it started back in 2007, much to the scepticism of many industry insiders. Indeed, some questioned the logic of entering into a work-intensive business that initially looked as though it would provide fairly small returns, particularly when compared to the high volume wholesale business.

But today, the investment is paying off. Axiom’s micro distribution — which involves about 80 deliverymen in vans servicing thousands of small retailers around the UAE and Saudi Arabia — now accounts for a significant and growing slice of the company’s sales. “The initial investment was pretty high, and you have to be seriously committed to be able to do it,” Al Bannai says.

The deliverymen each typically visit 25 to 30 small, independent stores selling limited amounts of kit such as a single smartphone and two or three sim cards to individual shops. While the business might lack the big sales of its wholesale counterpart, the sales nevertheless add up to a significant business. “The micro distribution business in the UAE covers 95 percent of all shops in the market. We will invoice and deliver to every single shop. You are talking about nearly 1,800 shops that we will invoice and deliver to directly without any middle men,” Al Bannai says.

The CEO is guarded on the proportion of sales that micro distribution accounts for within the company’s overall wholesale businesses. However, he insists that micro distribution is growing, helping the company to diversify its channel sales and “get closer to the customer”. “Although we don’t disclose exactly what specifically is micro distribution, about a third of our business comes from wholesale, and around a third comes from retail and micro-distribution, while before 2007 about 80 percent of the business used to come from wholesale. So we have aggressively diversified into this other channel and we are continuing to invest,” he says. Al Bannai adds that in Saudi Arabia the company more than tripled the size of its micro distribution between 2012 and 2013.

For Al Bannai, diversifying the path to market is also crucial to gain greater control of the channel. “If you are reliant on 20 wholesalers they can dictate your life, but if you are in control of the channel and you can sell to the final shops yourself — even if it’s one product at a time — you definitely have control of the channel and have influence in the channel,” he says.

While Axiom’s growth in 2013 stemmed from its diverse retail channels, Al Bannai is keen to point out that smartphones continue to be one of the main drivers. In this area, Al Bannai also believes that Axiom has an advantage over bigger retail outlets that have less focus on the mobile sector.

“People are moving from feature phones to smartphones and we are positioned strongly with smartphones and with people who want to experience connectivity,” Al Bannai says. “It is one thing buying your phone from a place that will sell apples or tomatoes, another if you are buying it from a specialist place. So we think there is more demand for more expertise, more demonstration of the phones, and our retail outlets have benefitted from that.”

Axiom moved into Saudi Arabia as a retailer and distributor in 2004 and some 40-45 percent of the company’s revenues now come from the country. Al Bannai expects to see higher retail and distribution growth in Saudi Arabia than in the UAE in the next two to three years.

“From a top line point of view, in the UAE we are still seeing the mix between top line growth and bottom line growth. Top line growth will still grow in the UAE but we believe the bottom line will grow at a faster rate because we already have the scale.”

Al Bannai adds that Axiom has introduced new product lines such as white label smartphones and accessories, which have also helped to lift sales. “All of these contribute to your margin mix as a company,” he says.

Axiom is also expanding in other areas including mobile payment services. The company has a business unit that is dedicated to mobile payments. The unit is due to be spun off as a separate legal entity from the rest of the company early this year, and Al Bannai has high hopes for the venture. “This entity enables e-payment across the channel, whether it is things like du voucher payments, enabling the electricity department payments, enabling payments for iTune products or whatever it may be. We cover today all the convenience stores of petrol stations in the market. By the end of 2013 we covered about 3,000 retail stores through this e-payment platform. By February in Saudi Arabia, we will touch 10,000 stores,” Al Bannai says.

While this sector is taking some time to gain traction, partly owing to the many players — from banks to regulators — who are involved, Al Bannai is optimistic that it will bring multiple benefits to Axiom and its customers. “We have taken a large step in this area in 2013. We have expanded our channel and we are putting all the infrastructure in place. It won’t generate a lot of money quickly, because there is a massive investment in the beginning, but we are optimistic about its potential,” Al Bannai says.

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