Future Axiom in sale talks

MUMBAI: Kishore Biyani’s Future Group and its UAE-based partner Axiom Telecom are on the verge of selling their mobile handset retail joint venture Future Axiom to the Essar Group’s The MobileStore in exchange for a minority stake in the combined entity, persons close to the negotiations said.

A deal, which will give the Essar group management and operational control of the combined entity, is expected to be finalised by the end of March. More details about the proposed transaction were not available.

Mr Biyani and an Essar group representative declined to comment on what they called “market speculation.”
The development is seen as further evidence of consolidation in business of selling cellphone handsets, where competition and fierce and margins are thin.

In December 2008, the RP Goenka Group sold its 50% stake in mobile and laptop retailer RPG Cellucom to joint venture partner Arun Nagar of Cellucom. Subsequently, the Spice group’s HotSpot Retail acquired the Indian arm of Cellucom.

MobileNXT, a Bangalore-based phone retailer, was bought by jewellery maker Gitanjali Gems last year while bankrupt Subhiksha shut its outlets selling mobile phones.

The Future Axiom joint venture started operations in October 2008 but it has struggled in the face of competition from stores owned by handset makers such as Nokia and Samsung as well as chains like The MobileStore, Univercell and HotSpot Retail of B K Modi’s Spice group.

Future Axiom has around 340 stores across India, including 290 ‘shop-in-shops’ located inside the Food Bazaar and Big Bazaar outlets of the Future group. The MobileStore has over 1300 outlets in 200 cities.

India’s mobile handset market is estimated to be worth over Rs 50,000 crore annually and according to IDC data, about 100 million phones were sold in the country in the 12 months to June 2009.

Future Axiom sells some 35,000 handsets a month and its annual sales are about Rs 200 crore. Harminder Sahni, MD and founder of management and retail consultancy firm Wazir Advisors said average realisation per handset has dropped significantly in recent months as new players such as Micromax are extremely aggressive and operating on thin margins.

"As a result, existing retailers with huge number of stores and staff are bleeding. Most retailers had thought of launching private labels but had to drop their plans due to the entry of new players." he said.