UAE's Axiom in supply agreement with BlackBerry maker

Mobile retailer expects deal to have a 'positive impact' on gross profits and margins
UAE's Axiom in supply agreement with BlackBerry maker
SUPPLY AGREEMENT: Axiom Telecom has signed a direct supply agreement with RIM
By Reuters
Wed 24 Nov 2010 12:32 PM

Dubai based Axiom Telecom, which this week launched the UAE's first initial public offering for two years, has signed a direct supply agreement with BlackBerry manufacturer Research in Motion.

The non exclusive deal, which is listed in Axiom's IPO prospectus seen by Reuters, is for one year from Nov 19, but can be renewed.

This agreement will enable Axiom to obtain BlackBerry handsets and accessories directly from the manufacturer, rather than through an intermediary. The deal covers the UAE, Saudi Arabia, Kuwait, Lebanon, Qatar, Oman, Jordan and Bahrain.

"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," Axiom wrote in its prospectus.

Terms of the deal were not disclosed, but Axiom said in the prospectus that its BlackBerry distribution supplier had learned of the deal and cut supplies from August, which will likely impact revenue in the second half of 2010.

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

Axiom said it 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 will be sold, with 93 million in the form of new shares, while the remainder will come from the selling 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.

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