Virtually ready

Axiom Telecom CEO Faisal Al Bannai talks to George Bevir about his plans to utilise the mobile retailer's brand and network of stores as a virtual mobile network

Tags: Axiom TelecomUnited Arab Emirates
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Virtually ready Al Bannai is confident that Axiom can leverage its assets, including its knowledge of its customer base, to become a virtual operator.
By  George Bevir Published  June 1, 2009 Communications Middle East & Africa Logo

The global handset market has been in dire straits for some months now, with the first quarter of 2009 heralding the fastest rate of annual decline ever experienced by the cellphone industry, with shipments of mobile devices falling for the second consecutive quarter.

The Middle East has not escaped; the latest figures from research firm Strategy Analytics show that handset shipments to Africa and the Middle East fell by 24% year-on-year in the first quarter of this year, compared to a global figure of 13%.

Cost conscious customers appear unwilling to spend in the current economic climate, and the drop in demand has caused retailers to de-stock inventory in order to improve cashflow.

Axiom is one of the biggest mobile retailers in the region and its CEO, Faisal Al Bannai, is not overly concerned about the challenges posed by a shrinking market.

"This will be a tough year, but it is a year when we can aggressively widen the gap between us and the competition," he says. "Now that the market is down, I think it is really separating who has an established set up and who doesn't."

He concedes that the amount of investment being made by Axiom "may not be at the same level as before", but he points to the planned opening of 135 new retail outlets - predominantly in India and Saudi Arabia - as a positive sign, and he says that companies with a strong infrastructure stand to gain from the turmoil.

Despite the bullish sentiment, Axiom made 5% of its 3000 staff redundant at the end of last year in what Al Bannai describes as "less cost cutting, more of a staff optimisation" exercise. The cuts mainly affected store staff, and Al Bannai says that total headcount is now back to previous levels as the losses have been offset by hiring that has take place in other departments.

Diversification drive

Diversification has helped to keep the business on a sound footing, and over the last four years Axiom has been increasing its revenue streams, which are spread across retail, distribution, operator income from airtime sales and value added services. Last month, Al Bannai signaled that another stream could soon be added when he announced that the retailer was "60%" of the way towards being ready to launch a virtual mobile network.

Rival mobile phone retailer i2, which is present in many of the same markets in the Middle East as Axiom, has been banging the MVNO drum for as long as Axiom. It had announced plans to launch in Jordan, but it recently pulled back from the virtual operator space.

According to i2's vice president of marketing, Jihad El Eit, the 3G licence auction in Jordan (that took place last week) changed the situation.

"What we are doing now is revising our overall strategy to see if it make sense to be part of this market or not," he says. "Our consultants are in the process of studying the impact of this new operator ."

An analyst at an MVNO conference in Dubai last month suggested the shrinking handset market had caused i2 to turn its back on the MVNO arena in order to focus its efforts on its core business.

Axiom CEO Al Bannai says pulling back from the additional endeavour of launching a virtual network is not something Axiom needs to consider.

He says that existing Axiom staff are working on Axiom's MVNO business, with some input from consultants. "A lot of the value addition that we do comes from leveraging the existing base, such as how we leverage our after sales service. I'm really drawing on the heads of teams that we already have in the company," Al Bannai says.

Essential assets

For an MVNO to succeed it must leverage its assets, and Al Bannai says that Axiom's assets provide a good idea of what form the retailer's own virtual network will take. As well as established relationships and ready access to handsets and mobile devices, Axiom sells ring- tones, games, wallpaper, data backup and mobile wireless applications via a spin-off web site. Extending the offering of content seems a likely route for the retailer to head down, particularly as Al Bannai sees such promise in the demand for data.

He points to the recent landmark of one billion iPhone downloads that was reached at the end of April as evidence of a growing desire to use mobiles for more than just calls. And he says the rising use of BlackBerry devices among consumers suggests that convenience is the key to driving data usage.

"In the last six months there has been a tremendous shift towards consumers. Locally, if you look at the tables of a coffee shop, 50% of the phones being used by local ladies are BlackBerry. They are using it for one reason - chatting between friends. Other phones have messaging, but with BlackBerry it was done in a simple way."

Simplifying the dissemination of content is where he sees Axiom fitting in. "I'm not Apple, I can't create iTunes store and I'm not a manufacturer. But we have a presence in the region and we understand the demands of the region - more than some of our competitors do...that's where we see ourselves, trying to be faster than everyone else and reacting with the trends," he says.

Brand presence

Axiom was established in 1997 and with a presence in the UAE, KSA, Bahrain, Qatar, Oman, Kuwait, London and India it is already synonymous with the telecoms field, which in terms of brand recognition gives it an advantage over companies that have been formed specifically for the purpose of launching a virtual network.

But operators in different markets will want their wholesale partners to target varying sectors of the market depending on their own positioning. Al Bannai says that Axiom has its main brand and and it also has sub-brands ‘Fono' and value focused ‘One Mobile' sub-brands which can be used depending on the area they need to target.

Another of Axiom's assets that appears to be the driving force behind the MVNO plans is its retail presence. Axiom has 78 stores in Saudi Arabia and 140 in the UAE and it is these two countries that Al Bannai wants to launch Axiom as a virtual operator.

However, despite appearing to be open to the idea of virtual networks, so far neither country's regulator has issued licences that would allow MVNOs.

Al Bannai is attracted by the fact there are only two networks in the UAE and three in KSA. And he does not want to wait for licences to be issued before he can launch. Instead, he plans to circumvent the issue by entering the market as a branded reseller. It is the least complicated way to launch a virtual network, with billing, VAS and back office functions looked after by the MNO.

"It is fine, as long as, from a legal point of view we do not say we are an operator, and as long as there is some text that says the service is hosted by ‘X' - which I feel is a reasonable compromise rather than waiting for permission," he says.

The tactic of adopting the reseller model instead of a full MVNO is one that Virgin Mobile has used in India, where it has teamed up with Tata Teleservices. There are currently no licencing provisions for MVNOS in India, so Virgin Mobile launched as a branded reseller instead.

"From the regulatory point of view it looked as if Tata had licensed the brand from Virgin, but actually Virgin has launched the brand," Al Bannai says.

The number of mobile subscribers in India is growing at a ferocious pace, with 15.6 million customers signed up in April. It has attracted Batelco which recently invested $225 million in a 49% stake in S Tel, while Etisalat shelled out $900 million for a 45% stake in Swan Telecom.

Axiom also has designs on India, where it has 14 stores. Al Bannai hopes to have 30 stores by the end of the year and 500 concessions by end of the year, up from 350.

Because the regulators in the UAE and KSA can be bypassed by launching a lesser service, Axiom is concentrating its efforts on agreeing a deal with a host operator. Al Bannai says there are "specific offers on the table" and that the retailer and distributor is 60% of the way towards being ready to launch in UAE, KSA and Kuwait, maybe within three months, or maybe in a year.

But he is not in a hurry to get to market. Back in 2006, a launch date of 2007 was suggested. The problem then was that operators did not want to lose margin to resellers when they felt they could sign up the customers themselves. Although they are starting to come around to the idea of someone else signing up their customers for them, Al Bannai thinks they are "still hesitant" to enter into deals.

The first set of quarterly results for 2009 showed that in the UAE subscribers are no longer being added at the furious rates of 2007 and 2008. If growth has plateaued, then now could be the time to farm out segments of the market to resellers who can target sections of the community that have been neglected.

Al Bannai says that the "win-win" deal he is looking for will come as operators feel more and more their resources are running out. "Then, they are more interested," he says. He is reluctant to give a precise date, but Al Bannai says that customers could be using Axiom branded Sims in three months, or it may take another year to conclude the remaining 40% of the process.

"These deals are not a one-off, and once you sign it is extremely tortuous to change. Hence our view is, let's talk, let's discuss. We know the assets we have, so we have to reach a win-win approach," he says. "I guess most of the deals that are happening now are because a deal has to happen. Not because it is a good deal".

London calling

Axiom CEO Faisal Al Bannai is extremely proud of the location of Axiom's only UK store: right opposite the world's most famous corner shop and luxury retailer to the wealthy, Harrods.

"A lot of our customers from Saudi Arabia and UAE travel to the UK, especially in the summer, so it's another familiar face in a familiar neighbourhood where a lot of them go, where they can come for their phone and they can come for the services. It's more of a services and brand extension.

"And at the same time we get to keep our ear to the ground and keep an eye on the market. We were looking at the market, surveying the market."

2911 days ago
raj

Having been in Dubai for several years now, I have seen the growth of this organisation and am confident that Axiom can grow to be a global player in the next 5 - 7 years. Faisal Al Bannai is a man who can seen into the future and can make the future happen today.

3095 days ago
geeta

Excellent reading material, a very honest and informative article. Good luck to Mr. Faisal and Axiom Telecom. Thanks to CommsMEA for covering such articles and personalities of this level.

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