While the UN sanctions against Iran may have met with some interference, Dubai's trade in mobile handset re-exports continues to send out strong signals to its feeder markets. Of late, this dominance has even been extended to used handsets.
"Most of the exports are happening through small traders — many are Iranians who are sending a lot of stock to Africa," Hamza Salim, IDC's senior research analyst for handsets, Middle East and Africa, said.
During 2009, a whopping Dh16.3 billion worth of mobile phones passed through the UAE's ports, with September alone recording 2,000 tonnes of these devices, valued at Dh180 million.
New handsets reaching local ports have a dual purpose — finding buyers in the local market as well as across the region and adjoining territories.
Most of these are shipped to Iran, which, with its population of 73 million, is a huge end-user market, but owing to UN sanctions, cannot buy directly from handset manufacturers.
An estimate from the IDC suggests a UAE demand for 3.5 million handsets annually, of which around 25 per cent end up as re-exports to Africa, Iran and some of the Levant markets. Meanwhile, substantial volumes that never leave the port are shipped out directly to the rest of the Gulf and the Middle East.
"The UAE, and Dubai in particular, is a major — and perhaps the leading — transit point for mobile handsets coming into the region and beyond, including sub-Saharan Africa," Matthew Reed, editor for the Middle East and Africa at Informa Telecoms and Media, said.
While the UN sanctions have been felt on other re-export categories, the Iranian market continues to feed its mobile handsets demand through trade over the Arabian Gulf. However, the models are not shipped out in their standard assembled forms.
Salim said that most are sent as spare parts, thereby avoiding exponential customs charges or embargoes on imports.
"Official dealers obtain their stock from the makers but the handsets coming into Dubai might come directly from manufacturers, often in China, or from wholesalers in other regions that have excess stock," Reed said.
Most iPhone and other Apple devices, as well as HTC phones, are brought in from China where they are manufactured, Islam Siraj, the iPhone manager at 050, a handset retailer in Naif, said.
Apart from new phones being sold in Dubai and then shipped out, there are plenty of used phones that could easily be mistaken for new. In fact this is the basis for the lucrative secondary market in refurbished phones.
These may come from the local market or be brought in from Europe to be refurbished locally, replacing parts like batteries, scratched screens and damaged keypads. When finished, these are picked up from buyers looking for a deal.
Alternatively, African buyers — which represent the bulk of the low-end market for mobile phones — also pick up these refurbished phones. The concept is similar to the UAE's used-car trade relying on buyers from Africa to make profits on mass volume sales.
Strategic relations
"Africa is a big market for refurbished phones from Dubai," Salim said. "They [African traders] have tie-ups with retailers here."
The main importing markets are represented by Nigeria, Egypt and Kenya.
Another re-export market rising to prominence is Jordan.
"We have many traders here from Jordan but shipments [get] smuggled into the country because of high taxation," Salim said.
The best deals on handsets are found in downtown Deira — or Naif as the souq close to the northern side of Dubai Creek is called.
From shoes and bags to electronics and industrial goods, handset stores see steady business selling to locals and foreigners alike.
Walid Radwan, purchasing supervisor at Hiphone Telecom, which has nine stores in Dubai, said he keeps stocks low to ensure the quick turnover of newer models.
"The business now is better in malls, not many people come here," he said.
Currently buying from local suppliers due to the relatively small quantities, he said the management is discussing buying directly from manufacturers.
"If we do that, we will be able to make more profits," he said.
Another local buyer, a retailer called 050 says sales average 15 handsets a day.
"There are too many suppliers here, so we just buy from retailers like Axiom and from the official Nokia store," Aiman Atif, branch manager for 050, said.
Abdullah Mohammad Amir — a sales person at Busan Oasis, primarily into import-export and wholesale of ‘all kinds of mobile phones' — said the shop buys its stock from a local wholesale supplier and manages to sell about 50 units a day.
"It's good, but not the same as during 2008 and 2009," he said, when the shop would sell up to 100 units a day.
While a lot of its sales are new phones, people from all income levels come to buy used phones as well. The stock is generally bought from customers looking to offload their older phones or exchange them for new ones.
If parts on the used phone need to be replaced or faults fixed, it is done in a small workshop based above the retail floor. What goes on inside the hidden rooms is no less that what one might see inside a factory, albeit on a much smaller scale.
"Only 5 per cent of customers are from the UAE," Amir said. "The rest are from outside, from everywhere."
Another store that sells used and new phones sourced from large retailers is Marzban Mobile Phones. Sales agent Hamid Abdul Aziz said the shop sells 35 units in a day, most of them used.
"We have technicians who fix used phones, they change the body," he said.
"For parts, we buy from outside. In a day, we repair anywhere between 10 to 20 phones."
Aziz said most customers are Arabs.
Faisal Saidu at City Shell Mobile Phones sells refurbished phones bought from the local market.
"A lot of them are from the United Kingdom and Europe in general with Vodafone's logo still on them. We also get locked iPhones," he said.
Constituting a large part of the store's business, Saidu said it repairs used phones if need be, taking daily sales of refurbished phones up to 30 units.
Top of the supply chain
The UAE's large retailers and suppliers for mobile handsets are spread across the country, a life source for hundreds of small outlets, stalls and the souqs.
At the head of the chain are suppliers, just below the manufacturers themselves. Signed up for exclusive dealerships, they are companies that have one or more brands under their belts.
The Eros Group, suppliers of Samsung products, last year sold 1.5 million units in the country to the "organised retail sector and the independent retail channel," according to Deepak Babani, the chief executive.
"Our estimate is that a sizeable portion of the handsets are exported to other countries by traders as well."
Meanwhile, electronics retailers such as Sharaf DG carry stocks of all available brands. Sharaf DG gets its supply from authorised local dealers, as well as from manufacturers directly, when certain products are not available locally.
"Overall, the market is slow compared to 2009, but in the mobile market segment smartphone sales have gone up by at least 30 to 40 per cent, because everyone wants access to the internet," said Suheil Kapadia, senior category manager for mobile phones at Sharaf DG.
He said the basic mobile phone models still have a market. However, the segment recorded a general decline because of more affordable smart phones hitting the shelves. The retailer ships out stock to its outlets across the UAE as well as to Bahrain.
"The future of the mobile market in the UAE will slowly transcend to the smartphone arena," Banani said.
"The mobile technology is all about convergence, where customers demand more from their phones and don't just use [them[ for making and receiving calls."
How often do you buy a new mobile phone? Does Dubai being a hub for mobile phones help you get more variety when making a purchase?
