Spice Global, a major mobile phone maker and retailer in India, is in talks to buy the Dubai-based Cellucom and other distressed regional mobile retailers as part of a major push into the Gulf. Bhupendra Kumar Modi, the chief executive of the Singapore-based conglomerate, which has more than 700 Spice HotSpot mobile retail stores in India, said he was in discussions with Cellucom's liquidators to buy up its assets.
"They had to take a lot of loans, so the banks closed the shops," Mr Modi said yesterday during a visit to Dubai. "The banks have taken over so, in fact, we are hoping to buy it from the banks." If Spice's acquisition of Cellucom - which was one of the largest mobile phone retailers in the UAE - goes through, it would be part of the company's plan to open 300 to 400 stores in the GCC by the end of next year, with an investment of about US$150 million (Dh550.9m), Mr Modi said.
With many retailers in the region under pressure from strained sales and high debt, there are many retail chains available to be converted to the Spice HotSpot brand, Mr Modi said. He expects the first few to come online over the next three months. "A lot of retailers and companies here have high debt," he said. "They've had troubles because they were funded through banks. So I hope to get them at the right price."
The UAE's retail sales have been hit hard as the economic downturn prompts shoppers to cut back on non-essential spending. In turn, consumer electronics manufacturers and retailers have cut their prices. Although the quantity of consumer electronic goods sold in the Emirates last year rose 1.5 per cent, the total value fell 33.8 per cent to Dh2.19bn as makers and retailers discounted heavily, according to the consultancy GfK Retail and Technology.
Al Rostamani Group, which entered an alliance with Cellucom in 2007 and holds a 51 per cent share in the electronics chain, filed for liquidation of Cellucom Fzco and Cellucom LLC last June. Late last year, the chain shut down all its stores across the UAE. The Cellucom chief executive officer, Arun Nagar, has since left the UAE and is now working in Tanzania. Mr Modi has already bought the Indian subsidiary of Cellucom. The deal announced in February last year gave the Spice Group a 100 per cent stake in Cellucom India - a separate company from Cellucom - and gave promoters of Cellucom India a 26 per cent stake in Spice Group's HotSpot retail venture.
After HotSpot's recent expansion, the stake has been reduced to 10 per cent, Mr Modi said. At the time of the deal, Spice also offered to buy the main branch of Cellucom, as difficulties had already begun to surface for the Dubai-based chain, Mr Modi said. But Cellucom's shareholders were not ready at the time, he added. Despite Cellucom's issues, Mr Modi says it still has something to offer as an acquisition.
"We look at it as a low-cost starting point. There is still some branding which is there," he said. "Some people [will recognise it] if you say we have bought Cellucom and now we are converting it to Spice." The company also continues to work with Mr Nagar to develop value-added services, he said, such as mobile applications. "We have been in touch," Mr Modi said. Other potential acquisition options include four Gulf-based retail chains and a company that sells value-added services, and a small device maker, he said, but declined to name them.
The move into the Gulf is part of Spice Global's long-term plan to expand into what Mr Modi calls the "i2i region", ranging from the Ivory Coast to Indonesia. The company is in the process of establishing its regional headquarters in Dubai. "We just appointed two, three people, so they are looking for the space and we have just bought a couple of flats. It's a nice time to be buying property." It is in emerging markets such as Dubai that the future of his business lies, he said.
"The tallest building now is here," he said. "It's not in Europe, its not in America, it's not in those countries. There is a shift of wealth taking place, and this will continue." aligaya@thenational.ae