O2 enjoys solid GCC gains

Smartphone vendor O2 Asia Pacific has achieved considerable success in its first six months of operation in the GCC region. Aaron Greenwood speaks to the company’s CEO, Mark Billington, about its plans for 2007.

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By  Aaron Greenwood Published  December 31, 2006

From inauspicious beginnings, O2 Asia Pacific has expanded its presence rapidly in its core GCC markets of the UAE, Saudi Arabia, Kuwait and Bahrain, since launching its first handset in Dubai last May.

The company’s six-month report card, which it boasted of at November’s GITEX exhibition in Dubai, revealed impressive growth during the period.

In addition to launching four smartphone handsets, O2 claims to have achieved 85% retail coverage in the four markets in conjunction with each of its country-based distribution partners.

The company aims to build on this initial success with the launch of eight new handsets over the next 12 months, in addition to a range of accessories including bluetooth headsets and a stereo speaker stand for its MP3-enabled models.

The first batch of these handsets will be launched this quarter. Comprising the Xda Zinc, O2 Graphite and Xda Flame, the new 3G-enabled range will feature a fully-Arabised application feature-set developed in conjunction with Microsoft and local company Informobility.

O2 Asia Pacific chief executive officer Mark Billington is understandably upbeat about the company’s initial success in the region.

“The Middle East has really lived up to our expectations,” he says. “The GCC is characterised by a high net-worth consumer base, which is very technology savvy and brand aware.

It bears most of the traits of Asia Pacific markets where we have achieved considerable success.

“We have adopted an aggressive strategy for growth in the four years we’ve been operating in the Asia Pacific.

“We’ve launched 11 devices and sold more than 650,000 units, and we currently have agreements with 45 operators and 17 distributors across the region. We plan to implement a similarly aggressive strategy in the Middle East, albeit with local consumer demands in mind.”

Billington says that competition in the Middle East smartphone market is some of the fiercest he has encountered in the Asia Pacific region, particularly given the presence of local hero i-mate, with its global headquarters based in Dubai.

While he remains unwilling to be drawn on i-mate’s success in the region, he does concede that maintaining a local presence in the Middle East is key to increasing the penetration of the O2 product range and raising brand awareness among local consumers.

As a result, he says O2 will open an office in Dubai servicing the local market this month, headed by a regional sales manager whose identity was still to be confirmed at the time of press.

“We’re guided by our brand vision. We put customer experience at the heart of what we do and we aim to differentiate ourselves by providing our customers with quality service,” says Billington.

“As a result, its hugely important that we establish a local presence that is headed by someone who knows the region and who is fluent in Arabic.”

The new regional manager is ultimately expected to oversee a local workforce of up to 15 staff employed in various capacities, from business development, logistics and customer service, to sales and marketing.

A product manager will continue to be based in Singapore, while the company’s research and development division will remain in Hong Kong.

Billington also says the company hasn’t ruled out establishing a warehouse and distribution facility in Dubai to support its regional growth ambitions.

“We aren’t ruling it out, but at the moment we’re achieving great success with our country-based distribution partners,” he says.

“This strategy has paid dividends for us in the greater Asia Pacific region, so we’re not about to abandon it in the Middle East.”

Billington says the company’s immediate priority in 2007 is to increase consumer awareness of the O2 brand in its core GCC markets.

“According to our surveys, we’ve achieved 15% brand awareness among consumers in the UAE, so we still have work to do,” he says.

“It is vital we promote the ‘right’ message to consumers particularly in the UAE and Saudi Arabia, which we have identified as the GCC’s two most important markets.

“In Asia Pacific, we are recognised as the leading Windows Mobile handset vendor and we boast 80% brand awareness in our key markets across the region.

“However, it requires a very different mindset to come into a market where your brand is a relatively unknown quantity. While Western expats recognise the O2 brand in the Middle East, local consumers are less familiar with it.

“We are working very hard to stress to this latter demographic that we are a very big company with 35 million customers worldwide.

“In terms of further regional expansion, we are happy to consider any country in the Middle East and North Africa.

“There is a relative geographic zone that can be managed, and if there is customer demand in any of these markets then we will consider establishing a local presence.

“Furthermore, if there isn’t customer demand in certain countries for our products we need to ascertain the reasons why,” he adds.

Billington says the new range of O2 3G handsets will initially be rolled out in the UAE followed closely by Saudi Arabia.

“Given the price premium our products command, you won’t find O2 handsets in every retail outlet in every country,” he explains. “However, we believe that 85% targeted retail coverage represents a commendable performance in the first six months of operation.”

Overall, Billington remains hugely optimistic about O2’s chances for success in the Middle East.

“Our first six months in the Middle East have been everything we’ve expected and a little bit more,” he says. “There’s always a risk in negotiating deals with new distributors, but all of our partners have come up trumps. We’ve had great support from Microsoft and Informobility in the development of Arabised applications, and we’ve achieved impressive depth in terms of retail coverage.

“These factors place us in a strong position to capitalise on growth opportunities over the next 12 months.”

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