Empire building

Itsalat International, the Saudi registered, Dubai-headquartered mobile phone wholesaler, distributor and retailer has been making headlines all year regarding its unrelenting expansion drive, which has attracted the interest of equity investors and content developers alike. The company's charismatic president and CEO Abdul Hameed Al-Sunaid describes why the rush, and offers a few tips as to why his company is a leader.

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By  Published  October 31, 2006

There is not a moment to waste in terms of securing a key position in the Middle East and Africa\'s burgeoning mobile telecoms space.

This at least is the view of Abdul Hameed Al- Sunaid the Dubai-based president of Itsalat International (i2), the Middle East's largest mobile phone provider.

Having roots in Saudi Arabia, i2's management sits in Dubai, where the commercial buzz associated with the city helps them act with agility and guile as they go about building a mobile phone service empire of substantial proportion.

“One of the most important things is that we do not want to be late in each market and that is why we are expanding very quickly,” comments Al- Sunaid.

“The markets in Africa are happening now, they are developing.

At this point there are no official distributors, there are no proper retailers, and the more these markets develop, the more difficult it will be to enter and penetrate them.

This is why we are on a fast track” On November 4, for example, i2 is set to officially mark its arrival in the Tunisian market, having previously announced investments in markets such as Sudan and having already established a presence in Morocco, Senegal and the Ivory Coast.

Al-Sunaid\'s investment outlook is one of pragmatic risk-taking, with the firm belief that significant gains can only be made where uncertainty exists.

So far though, he seems to have taken some considered risks that are paying off in terms of adding substantial value to the organisation.

In July, Abu Dhabi-based Gulf Capital made a AED150 million (US$41 million) investment in i2, in what Al-Sunaid describes as an acknowledgement of the value in the business.

The participation of Gulf Capital in i2, which remains a privately held organisation, is also, Al- Sunaid reveals, an inevitable step towards taking the company public.

“I am asked this question every week,” Al-Sunaid quips when CommsMEA enquires whether an initial public offer is in the pipeline.

“It is very transparent.

A boy, when he comes of age he wants a bicycle, then a motorcycle and then a car.

The same thing with us.

We have an establishment, a fully owned establishment, the dream is to convert it to a company.

Once you have converted it to a company, the dream is to convert it to a public company because that's the highest value in terms of the company.”

Al-Sunaid is not willing to be drawn on the timing of the IPO, suggesting instead that the company still has many internal matters to develop, and businesses to consolidate.

However, he does acknowledge that the inclusion of private equity is a first step towards going public, given the recognition his company has received through the Gulf Capital investment.

“Private equity funds have an exit strategy, which is often an IPO.

Now we are working with the private equity fund to convert the company into a public one.

As a company, are we hurrying to IPO?

No, we want to ensure we have done the most we can do in-house, we want to make sure we have implemented our plan, we want to make sure that when we go to the public we don't disappoint our shareholders and the people who have invested and trusted in us.”

i2 is already present in over 20 countries and while Al-Sunaid does not believe in placing a figure on the number of countries he would like to see his company in at a certain point in time in the future, he confirms that his organisation remains fiercely competitive.

“We have never thought that we need to be in a specific number of countries, because this is what might drive me to be in a country just because I want to complete the numbers,” asserts Al-Sunaid.

“So we currently follow whatever opportunities are available, and whichever markets are ready, we go, to the markets that can add value to us.”

Given the pace of acquisitions of subsidiary companies and the expansion into new markets, there's little doubt that i2 is consolidating its position ahead of a move to a public offering.

Last month the company announced the acquisition of the entire equity of Allied TC, a leading GSM handset provider based in London.

The deal follows the acquisition of Cellempower, a Dubai-based company specialising in mobile value-added services and mobile marketing in September, and forms part of i2's threepronged approach for the growth of the company.

The expansion plan includes new market penetration, the reinvigoration of its retail network and several corporate acquisitions.

Allied TC was already a subsidiary of i2, and while no figure was given for the 100% integration of Allied TC into i2, Al-Sunaid believes it to be a move that offers strong strategic value.

“Allied TC is one of our subsidiaries, and we have been growing our stake in it up until we reached 60%, and now we own 100%.

For us to own all the equity creates a lot of value for us,” he says.

Allied TC represents all major brands in the UK including Nokia, Sony Ericsson, Motorola, Siemens, NEC, Alcatel and Samsung.

Like many companies growing rapidly, there is a real risk that resources may be spread too thin, and the organisation becomes a victim of its own success.

Staff numbers currently exceed 1,700, up from 1,500 last year, and operations continue to expand rapidly.

The threat of over-heating is one that Al- Sunaid is blatantly aware of, though his goal-driven instinct appears to be powering him to ever-greater gains.

“Spreading ourselves too thin is something that is happening to us, 100%,” Al-Sunaid confirms.

“You have to take the risk otherwise you don't take advantage of the opportunities.

We know there is not enough manpower at the moment but we are opening in new countries.

We have to take the risk, which is why our team is working almost 14 hours a day, five days a week on aeroplanes.”

The hard work is not just paying off in terms of attracting private equity funds alone.

In August, i2 announced finalisation of a content aggregation agreement with Nokia, that will result in the combination of i2 club, a catalogue of content, and Nokia's Content Discoverer, an on-device content portal that makes it easy for users to access content catalogues.

The tie-up will ultimately create a user friendly shopping “store” with a wide choice of downloadable content available to mobile subscribers in the region.

“i2 has created a mobile shopping portal, called i2 club, which allows access to a large array of downloadable entertainment such as ring tones, graphics, games, wallpapers, and JAVA applications, to name a few” explains Al- Sunaid.

“Mobile subscribers have many functions on their Nokia devices, which they will appreciate and use more as a result of this agreement, with easy access to more content and a better shopping and downloading experience,” he adds.

i2's deal with Nokia underlies Al- Sunaid's belief that content and content management on mobile devices is something that will help drive operators' revenues, and if properly developed could become a real sort-after service by end-users.

He believes what has happened in more developed telecoms markets such as in Western Europe is set to happen the Middle East given time.

“It is just the time gap between the Middle East and Europe.

I think if you go back 10 years in Europe, voice was over 90% of service revenues, now I think it is around 70% voice and 30% data.

So this is what will come eventually to the Middle East. In the next couple of years you will see more value added services.

In anticipation of the increase in traction of non-voice services, i2 is preparing to unveil its i2TV service during the course of November, which will see the delivery of television content to mobile handset devices.

The development forms part of i2's vision to be an innovation leader, an ambition that saw it launch its first digital café in Riyadh in June, with plans to expand throughout the GCC in the near future.

i2 café goers can place orders via mobile phones provided on each table, and once the order is placed, customers can also access mobile services, internet, and information on new mobile devices and accessories.

i2 café will be introduced to other parts of Saudi Arabia and across the Middle East and North Africa.

“Mobile phones are more than handsets; they have become a personal statement and an indispensable life-style addition.

In Saudi Arabia mobile phone sales grew by 44.8% in 2005, creating a greater demand on innovative services and products by consumers.

Moreover, we wanted to establish a more direct line of communication with our consumers, and i2 café will help us enhance our levels of interaction with them bringing us closer to our customers,” says Al- Sunaid.

A content portal is also under development, which Jihad El-Eit, i2's vice president of marketing believes will further improve the company's interaction with end-users.

“We have been implementing a series of activities in order to come closer to the market, and no longer be perceived as just being box-movers,” El-Eit comments.

“We have programmes such as the i2 café, the i2 club and the i2 magazine in order to help building a credible brand in the market.”

Projecting a clear brand will be essential for i2's next projected leap forward — its intention to become a service provider model in its own right, through the operation of a mobile virtual network operation (MVNO).

Al-Sunaid forecasts that 2008 is likely to be the year the service provider arrives in the Middle East, though he argues that some markets are already ready for this industry change.

“Egypt for example is ready to go for an MVNO but the operators are not ready because the regulator has no involvement in the MVNO licence, it's like something of a commercial agreement with the operator.”

Speaking with CommsMEA in February, Faisal Al Bannai, the energetic CEO of rival mobile phone retailer Axiom Telecom, also expressed his company's ambitions to move to the offer of virtual services.

“Becoming an MVNO would be quite a natural step,” said Al Bannai.

“We are a retailer, a distributor.

We do servicing and after-sales service.

We are a value added service provider.”

Al Bannai, like Al-Sunaid is of the opinion that the entry of MVNOs in the region is a matter of when rather than if.

“The question is will it be a year or three, this is the timeframe.”

Al Bannai expects the first Axiom MVNO to launch before the end of 2007.

“But I hope it is sooner than that.”

Axiom would be able to build on its experience from the partner agreement with satellite operator Thuraya, which sees it selling the company's products and services.

“We terminate the line, we activate the line, we add services, and my income is really from customers' usage.

So that is effectively an MVNO already in the Thuraya business,” explained Al Bannai.

The region can only benefit from the participation of such suppliers, and with a total of over 350 stores already, i2's vision of the handset supply business is likely to become an industry standard.

“A boy, when he comes of age he wants a bicycle, then a motorcycle and then a car.

The same is true of us”

“Egypt for example is ready to go for an MVNO but the operators are not ready because the regulator has no involvement in the MVNO licence, it's like something of a commercial agreement with the operator”

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