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Sat 4 Aug 2007 12:00 AM

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Mobile maestro

Axiom Telecom's Faisal Al Bannai talks about how it became the region's biggest mobile retailer in just 10 years.

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.

"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."

It took a restructuring programme, as well as an almighty leap of faith on behalf of group chairman Abdulaziz Al Bannai, to propel Axiom into the big league.

"I was actually spending part of my time with Axiom, but the rest with other businesses, until we had a restructuring plan in place," says Al Bannai.

"I saw potential and I wanted to put more capital into the company," he continues. "Then, in 2000, there was a big stock and land property crash. As a group we had a lot of assets in properties, and I had to convince my father to sell off his property at 50% of its value, so we could invest more in Axiom."

Fortunately, Al Bannai senior acquiesced, and Axiom moved from being "a side operation", onto the front line of the Al Bannai empire. With the money raised from property sales, the company expanded into retail and after-sales - despite scepticism from those unsure of what was then a relatively young market.

"All the banks told us to do it one store at a time - they thought we were crazy when we made our big push and opened 25 shops in eighteen months," chuckles Al Bannai. "Yet within a year and a half, we were the biggest in the region. That land has since regained its value, but we still made the right choice in going with Axiom, as the success of the company has dwarfed our property venture."

Our home market is the Middle East and Africa, and we’ll keep growing and strengthening the position that we have here.

If the company has a colourful past, its future should be no different. Axiom is ripe for expansion, and whether the company pursues an IPO or uses its own financial muscle to break into new markets, Al Bannai has clear ambitions to drive the company to the next level.

"We see the market in three parts, and we'll have a different strategy for each segment," he explains.

"Our home market is the Middle East and Africa, and we'll definitely keep growing and strengthening the position that we have." Axiom's policy, Al Bannai continues, will be to continue to build on its strength in the region and open a number of new stores. This, he explains, is another bid to "create convenience" for the customer, and match the increased expectations that come with being the largest multi brand retailer in the region.

"Customers look at us and think ‘you're the largest player, so I'm expecting more by default'," he reveals.

"By putting stores closer to our customers, we are making sure that what put us in our position continues to drive the mindset of the company. That is something we are very conscious of, and that is something that is always on our radar.

"The continuous challenge is always to come up with innovative products and services for the end-user," he continues.

"Let's face it: if you want to buy a Cartier watch or a Zara shirt, usually you have to go to a Cartier store or a Zara store. If you want to buy a phone, however, you can buy them anywhere.

"The reason we are successful is that we end up offering a better proposition than the other guys, and it could be anything - the experience of the shop environment, how well trained the staff are, or coming up with value propositions like price protection or theft insurance," he adds. In the Middle East, Axiom already enjoys a dominant position in the market. As it looks to expand, however, the challenge of breaking into more mature and developed markets is one that will require a very different approach.

With Europe on the horizon, Axiom has already opened a flagship store in London. Nestled in the heart of Knightsbridge, opposite prestigious department store Harrods, it became the company's first European outlet when it opened its doors a year ago.

"We opened it for three reasons," explains Al Bannai. "The main reason was for branding purposes, but then we also wanted to offer an extended service to cater to our high-end customers who travel from the Middle East to London.

"The third reason is that it means we have a team on the ground to scout around the market, and then we can decide from there what we want to do in the UK market. "We're definitely interested in the European market, but we will pick our opportunities and see when and how we will best expand."

Axiom — is IPO the next step?

That decision will depend on the shareholders, and when they feel it's the right time to capture the maximum value for the company. There isn't a need to raise further cash right now, and from a growth point of view, although we've grown dramatically in the last couple of years, we are just starting. If we go public now, we'll be pre-selling before a lot of the value really comes in - that's how the shareholders see it.

Today, all the shareholders have a long-term outlook for the company, so there isn't any hurry to say ‘yeah, let's sell tomorrow'. We know the company's potential and where we are. As we capture more opportunities, and as the company develops to become a global player, we'll definitely be able to unlock a bigger value for it. Going public is an option, but not something we are currently exploring. Once we realise a bit more of the growth potential of the company, and once we realise that there is a specific financial need to go public, then we will do it.

Although the intel gathered by Axiom's UK team is poured over back to headquarters, and Al Bannai admits there are "still a number of opportunities to be tapped and explored", he is undecided whether growth will best be achieved organically, or by the takeover of existing companies.

"Each market has its own twists and turns and its own dynamics, and I think that many companies don't expect that or don't understand it," he says.

"We continuously look at possible opportunities, and when we feel that the time is right for us we will make our move, whether in the UK or in one of the other markets with high potential, such as Germany or the Scandinavian markets.

"There are a few markets of a good size, but at the same time we want to be careful how we manage our expansion.

"It often depends what opportunities come about," Al Bannai continues. "For example, we were working on the India project for nine months - when we signed the agreement it matured, and now we move on."

Al Bannai might already be looking forward to the next big deal, but it's worth lingering for a moment on the ‘India project' to which he refers. In a move that has the potential to place Axiom within the very top ranks of global retail giants, the company has signed a 50:50 joint venture agreement with Future Group - one of India's largest retailers - to carry out wholesale distribution and servicing of mobile phones and accessories in India.

Each market has its own twists and turns and its own dynamics, and I think that many companies don’t expect that.

The new joint venture company will initially focus on developing back-end sourcing infrastructure with which to support the existing telecom retailing business of Pantaloon Retail, a subsidiary of Future Group. In time, a franchise agreement will mean thousands of Axiom-branded stores springing up all over the subcontinent. "When we select a country, we make sure that within two years, we are the number one player," the Axiom chief executive asserts. "Any market we go into, we don't go into for name's sake, and it will be the same with India." The Indian market currently adds over six million new subscribers each month, and boasts the highest subscriber growth rates in the world.

Safe to say, the ‘number one player' stands to make a lot of money.

"If you take a comparison, look at Saudi Arabia, which grows by six million in a year," notes Al Bannai.

"Six million a month, versus six million a year? The potential is big and we feel with the experience we have, we can definitely make an impression on that market.

"The idea now is to capture the boom of the mobile market in India, and although it's impossible to put a value on what the joint venture will be worth down the line, any person can do the calculations in terms of what we've done in our existing markets," he continues.

He says that Axiom has close to 45% of the total volume of the Saudi market, and that it has very similar numbers in the UAE. I'm not saying that we will definitely do 50% of the Indian market, but if we are aggressive and we push, I don't see why not," he adds, matter-of-factly.

"We have the experience, we have the financial means, and we have the partner, so I don't see what is missing."

If there is a suggestion of overconfidence in Al Bannai's assertions, it is tempered by his own admission that Axiom is feeling its way around a relatively immature industry. "25 years ago there was no such thing as a mobile phone business - it's still quite a young industry and there's still a lot to learn," he admits.

"However, we see today with the size and the scale of the company, the know-how and capability that we have established, and the brand name that we've built, that it is time to become a very strong global player within the next three to five years."

It has taken just 10 years for Al Bannai and his company to start a property business, re-evaluate and achieve a US$1bn-plus business with Axiom, so few would count against his achieving that next target within half the time.

His future is definitely bright. Our future, is most probably, is orange.

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