UAE's Axiom to boost profits via Blackberry deal

Company expects to list on the Nasdaq Dubai in early December
UAE's Axiom to boost profits via Blackberry deal
SUPPLY AGREEMENT: Agreement allows Axiom to procure BlackBerry handsets and accessories directly from the manufacturer
By Reuters
Wed 24 Nov 2010 07:26 PM

Axiom Telecom, which launched an IPO this week, has signed a supply agreement with BlackBerry maker Research in Motion that is expected to boost profit by up to $38 million in 2011.

The non-exclusive agreement, detailed in the mobile handset retailer's initial public offering prospectus seen by Reuters, is for one year from November 19, but can be renewed.

It is expected to add $32.67 million to $38.11 million in profit for Axiom in 2011, a source familiar with the deal told Reuters. According to the prospectus, the fast-growing company's net profit in 2009 was $5.98 million, while first half 2010 profit was $17.9 million.

The agreement allows Axiom to procure BlackBerry handsets and accessories directly from the manufacturer, rather than through an intermediary. It covers the UAE, Saudi Arabia, Kuwait, Lebanon, Qatar, Oman, Jordan and Bahrain.

In the prospectus, Axiom said: "We believe that this master supply agreement will have a positive impact on our results of operations and, in particular, on our gross profit and gross margin, as we will be able to source BlackBerry smartphones directly (which have generally been a high gross margin product for us) at a lower cost than through a distributor."

Terms of the deal were not disclosed.

Axiom also said in the prospectus that its BlackBerry distribution supplier had learned of the deal and cut supplies from August, which would likely impact revenue in the second half of 2010.

Axiom said it would use $100 million of proceeds from its IPO and a $55 million property sale to pay down part of $354 million in existing credit lines.

The company expects to list on the Nasdaq Dubai in early December after selling up to 35 percent of its shares to institutional investors, with a price range of $0.80 to $1.15.

Up to 332.35 million shares are due to be sold, including 93 million in new shares, with the rest from existing shareholders.

Al Bannai Investment currently holds a 53 percent stake in Axiom, according to the IPO prospectus, with 40 percent held by a subsidiary of TECOM, which itself is part of Dubai Holding. A further 7 percent of Axiom is owned by Al Zarooni Enterprises.

Deutsche Bank is the global coordinator and joint bookrunner for the IPO, while Citigroup and Shuaa Capital are joint bookrunners.(Reuters)

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