Billionaire Zobel to Expand Ayala's Philippine Call Centers
2006-08-14 20:06 (New York)
By Haslinda Amin and Ian C. Sayson

August 15 (Bloomberg)—Philippine billionaire Jaime Augusto Zobel de Ayala II said he plans to open more call centers in the country, where revenue from business outsourcing services is forecast to surge more than sixfold by 2012.

Ayala Corp. bought an 11 percent stake in call-center operator ETelecare Global Solutions Inc. in June, and is looking for more investments, Zobel, the company's chief executive officer, said in an interview. ETelecare's 7,000 employees make sales calls and answer customer queries for companies in the financial, telecommunications, electronics and travel industries.

“This is the start of a series of investments that we will make in this area,” Zobel said last week in the resort city of Cebu . Most of Ayala's profit comes from its four publicly traded units—Globe Telecom, Ayala Land, Bank of the Philippine Islands and Manila Water Co.—which together with Ayala account for 33 percent of the benchmark stock index's value.

Ayala, Convergys Corp. and India 's Hinduja TMT Ltd. have expanded their outsourcing operations in the Philippines to take advantage of the country's English-speaking population and low wages. Revenue at Philippine call centers may reach $5.6 billion by 2012, from $853 million last year, according to researcher Frost & Sullivan, as companies including Telecom Corp. of New Zealand move operations to the country to cut costs.

“Ayala has a very good chance of succeeding in this space,” said Gilbert Lopez, an analyst at Macquarie Securities in Manila . “There are synergies to explore because Ayala is in to telecommunications and property development,” giving the company access to the land and technology needed to expand its call center business, he said.

Energy Assets

Ayala, which owns the banking, property and other businesses of the Philippines ' third-richest family, had also planned to expand into the energy industry.

“The picture has changed because energy prices have moved up significantly,” Zobel, 47, said. “That has made all the assets that are available for sale a little more expensive, so the value proposition might not be there for us.”

The shelving of that plan will free up funds for the expansion of the company's outsourcing business, Zobel said. Ayala had cash reserves of 22 billion pesos ($428 million) as of the end June, according to its six-month financial statements.

Outsourcing “is going to become a significant component” of Ayala's AC Capital division, which manages the group's emerging ventures, in the next five to 10 years, Zobel said.

Arroyo's Vision

The number of call-center seats in the Philippines will increase by 40,000 to 110,000 this year, according to property consultant Richard Ellis. Telecom Corp. of New Zealand , the nation's biggest phone company, last week cited lower costs as the reason for moving some call center work to the Philippines .

Even with that pace of growth, the outsourcing business in the Philippines will be dwarfed by rival India , where the number of people working at call centers and transaction processing units rose 31 percent to 415,000 as of March 31, according to the National Association of Software and Service Companies.

Still, in a separate interview also in Cebu , Philippine President Gloria Arroyo said the business process outsourcing, or BPO, industry will be a major driver of jobs growth.

”We are making technology the basis of our future growth,” Arroyo said. “The rapid growth of the BPO industry, the spectacular growth, is another manifestation of that.”

Ayala bought the stake in ETelecare for 800 million pesos and may invest more in the six-year-old Manila-based company, Zobel said.

ETelecare, which has 12 call centers in the Philippines and the U.S. , posted operating income of $3.3 million in the first quarter on sales of $41 million.

Ayala plans to invest in companies that provide “backroom operations” and “higher value-added services” in areas including health-care, accounting and legal services, Zobel said.

”We really have a great skilled human workforce, so we are looking not only at traditional call centers,” he said. “We are actually looking also at getting into the whole knowledge-based outsourcing business, where we will really be using the high grades of skill from individuals in the Philippines .”

--Editor: T.Jordan (snc).