Call center industry expects high operating costs to cause consolidation

HIGH operating costs would push call centers to consolidate, according to an industry-commissioned study.

In the survey commissioned by the Contact Center Association of the Philippines (CCAP), Pricewater-houseCoopers Financial Advisors Inc. (PwC) said “smaller companies’ weakening operating margins signal that they will have to confront the possibility of merging with other companies in order to take advantage of economies of scale.”

In a briefing on Monday night, Rose Javier of PwC said small call centers were hardest hit by increasing operating costs. “[To merge with other companies or to be acquired by bigger ones] could be a position that smaller players can potentially take if this trend [of high costs] continues,” she said.

“We are now in the consolidation stage. Will there be more upcoming mergers and acquisitions? Yes. Is it surprising? No. Is it good in general? Yes. It would make us more competitive,” said Bong Borja of Aegis PeopleSupport.

India’s Aegis and the Philippines’ PeopleSupport merged last year, while the Ayala group’s E-Telecare and US-based Stream Global combined this year.

Benedict Hernandez, CCAP president, said smaller players may have to go into joint ventures or partnerships with bigger firms so they can negotiate better deals with foreign clients.

Raffy David of Pilipinas Teleserv said some firms are merging or buying others to enhance their profile, as well as products and services line-up. “Mergers and acquisitions among organizations may not necessarily be because one is small or losing money; it could have [been] done to create synergy.”

Hernandez said some companies may opt to seek diversified sources of revenues to cope.

Borja said labor is the biggest cost—at about two-thirds—and remain the highest in terms of value for call centers. Costs for infrastructure, including real estate and connectivity, have been going down, he said.

Hernandez said CCAP has a “tempered” growth projection of between 15 percent and 20 percent for contact centers next year. Call centers—mostly voice service providers—would also grow at the same level this year, CCAP had said. –BEN ARNOLD O. DE VERA REPORTER, Manila Times