So Much Labor, So Little Skills

It's a common refrain from those locating backroom offices in the Philippines. Lots of college graduates, not enough qualified. WNS , whose clients include T-Mobile, Intercontinental Hotels and SITA, complains that its hit rate in hiring is 10%.
That "skills gap" will disappear. The BPO industry is growing at such a rate and to such a critical mass that its gravitational pull will bring more and more of Philippines into its orbit; schools and society will respond. But maybe not as fast as employers wish.

Keshav R. Murugesh, group chief executive officer of BPO firm WNS Philippines Inc., told reporters in a briefing on Friday the employability rate in the country needs to be improved.

"In our case, we get only one out of 10 applicants," he said.

Mr. Murugesh said his office has been closely coordinating with the Business Processing Association of the Philippines (BPAP) to conduct training and special courses.

"However, the challenge is to produce skilled graduates who are employable once they apply for the job. It should be that when there are 10 applicants, all 10 get accepted," he said.

Dispersing to the Periphery

One thousand new jobs in a city of 12 million may not be too exciting. One thousand jobs in a city of half a million is something to write home about. In the Philippines' Visayas region, Iloilo is fast becoming a favored destination. It's no surprise that a city with six universities and thousands of fresh graduates a year would become a viable location for outsourcing companies. Other wannabee cities looking to boost development need remember that besides the available labor pool, another ingredient is necessary -- reliable telecommunication links to the rest of the world -- before they prepare the powerpoint presentations to lure companies to their neck of the woods.

Transcom, touted to be Europe's largest business process outsourcing (BPO) firm, will open a call center in Iloilo in 2009, and will hire from 1,000 to 2,000 employees.

The investment is expected to cement the city's place among the top new wave international BPO sites.

Iloilo City Mayor Jerry Treñas said Transcom has set the hiring of around 1,060 employees in October. It is planning to double its work force after it starts its operations, according to Treñas.

Transcom has 75 sites in 29 countries worldwide and has expertise in various industries including telecommunications, the financial industry, travel and leisure, utilities and retail/consumer goods. It has around 20,000 employees serving over 120 major clients in more than 30 languages.

The investment has also affirmed the city as among the top new BPO investment sites in the world.

The city already hosts nine BPOs with more than 4,000 workers. These include Teletech, ePLDT Ventus, Callbox Customer Contact Center, Global Mega Communications Inc., Techno Call Corp., Interactive Voice Call Center, Medlink Trans Services, Eversun Software Philippines Corp., and Savant Technologies.

BPO Slowdown

The red-hot BPO industry is declaring that 2009 will be a slower growth year after the torrid expansion in the past few years. The blame is put not just on the global recession but the rising protectionist sentiment in the U.S., the Philippines' largest market.

Half-full-glass analysts will tell you this is the welcome pause that refreshes. No industry can sustain big jumps in production without bumping up against constraints. And for the longest time, the constraint has not been external demand. The problem has been mostly internal: the country's ability to provide labor. Or rather, we should say labor is not a problem, as any recruiting agency will tell you; it's the limited supply of labor with the right skills that has limited growth.

Now that external demand is slackening, the industry can turn more attention to those internal problems, those what managers will call "variables we can control." There's nothing we can do to influence the U.S. recession; there's everything we can do to make sure Philippine schools are turning out qualified graduates, training seminars are truly training employees, and programs to upgrade technical skills are implemented.

CICT Commissioner Monchito Ibrahim said that despite the setback, the industry is still expecting 30-percent growth this year to some $8 billion, and plans to increase the number of new jobs by a fifth or 75,000 jobs. He said the BPO industry ended 2008 with 372,000 jobs.

The revenue projection was taken from the Business Processing Association of the Philippines (Bpap) Roadmap 2010, a three-year plan that aims to double the country’s worldwide market share and achieve $13 billion in revenues, as well as provide direct employment to 1 million people.

Ibrahim said the slowdown was due to a number of factors, including the global financial crisis which has hurt the US, the country’s only major partner in the BPO industry. The lack of workers with necessary skills was also a key constraint.

Truth and Xinhua

Every so often, the show falters. An assistant presses the wrong button, and we get a glimpse of the reality behind the curtain.

BEIJING, Sept. 25 (UPI) -- China's state-run news agency made a gaffe Thursday when it published an "in space" conversation among the Chinese astronauts even before they left Earth.

Xinhua news agency posted the story on its Web site well before the launch of the Shenzhou VII space craft, The Times of London reported.

The story, which was headlined "Sleepless Night on the Pacific, Sidelights on the Observation and Control of the 30th Lap of the Shenzhou 7 Spaceship," was removed from the Xinhua Web site and was described as a technical error.

Medical Fallout

There's always a downside. Here's one view of the human cost not carried on the balance sheets of India's mighty BPO industry.

There's mounting medical evidence that if people are forced to stay up night after night their biorhythms are disrupted and they are liable to pay a cost in terms of both physical and psychological health. Elevated pay isn't sufficient compensation for a heart attack brought on at 30. We can't drive young people into the BPO industry by painting a superficially alluring image of its rewards, then shrug and turn away when they face serious health issues. Experts are concerned that the brewing crisis could undermine India's economic boom, which has been driven to a large extent by the services sector. A study by the Indian Council for Research on International Economic Relations estimated that heart diseases, strokes and diabetes cost India $9 billion in lost productivity in 2005. They forecast this figure to grow to a whopping $200 billion in the next decade, with the IT sector predicted to be among the hardest-hit.

I won't be a pied piper singing the praises of the capitalism system, but the long-term view argues for us to have faith. When an industry's health woes become a big enough problem, the solutions will come. If entrepreneurs have set up bars catering to the graveyard shift workers -- blackened windows to simulate night even though it's noontime -- why can't a whole city be transformed? Interiors of buildings are now made to follow the daylight hours of countries halfway around the globe; why can't the district where the building belongs also follow those same hours? If the human body can't evolve to cope with altered circadian rhythms, why the environment will have to be reshaped. If we all live on borrowed time, why can't we advance that clock +12 hours?

Half a Million Jobs

The Contact Center Association of the Philippines (CCAP) has a target: 500,000 gainfully employed in the industry by 2010. If this target is achieved, what will it do to the ecosystem that serves this industry? More Manila bars, open at noon, with dark curtains to shield the sun, so that graveyard shift workers can still feel like they're going out at night? More 7-11 and Ministop convenience stores with dine in facilities? More "We will give your accent an American twang" ESL (English as second language) centers? More healthcare workers trained to diagnose and treat "graveyard disease"?

Raffy David, CCAP director, said in a phone interview that industry estimates peg the total current industry workforce at around 200,000 workers.

Since call centers began setting up around the early part of the decade, the industry has been doubling its workforce annually but has tapered off in recent years due to concerns in the supply of skilled labor.

This is one of the perennial issues CCAP wants to address in an industry roadmap currently in development. CCAP plans to unveil this roadmap, basically detailing a strategy for the industry until 2010, in its annual conference this July.

"Since 2001, we've been trying to address perennial issues like HR, including poaching of agents, and promoting the Philippines abroad," said David, who also serves as CCAP director for membership.

New Growth Areas

Say you have a corporate lawyer friend, who is so successful at what he does that he is the go-to guy whenever some corporation needs his services. He is featured on the cover of business magazines. His law firm is the top in the field, charging the highest rates per hour -- with no shortage of clients.

What if one day he says he is looking for "new areas of growth" and that he will begin practicing medicine. Your head will snap from shock.

It's the same shock that comes with the announcement of San Miguel Corp., the Philippines' largest food and beverage company, that it will get into power generation.

In a preliminary information statement filed with the Securities and Exchange Commission, SMC said its board of directors has approved a plan authorizing the company to invest in new businesses such as power generation or transmission, water and other utilities, mining and infrastructure.
The recommendation to venture into new businesses was made by SMC's financial adviser, Goldman Sachs.
SMC's board said it was timely to "actively consider developing new engines of growth" to further augment the gains realized from nurturing its current core businesses. SMC is the market leader in the Philippine food, beverage and packaging sectors. Philippine Daily Inquirer sources estimated that SMC would need about $2 billion to be a formidable player in the power industry, which includes generation, distribution and transmission. The sources said SMC could raise this amount by reviving a hybrid debt issue that it earlier shelved, or by other capital-raising options it was currently studying.

Power generation may offer more lucrative returns than making snacks and drinks. And you may argue that a conglomerate such as San Miguel is already in far more businesses than just making good beer and tasty meats. There's the logistics side -- a trucking fleet to bring produce to the country's 7,101 islands; there's the information technology side to track its sprawling assets; there's property development to house its offices and suppliers; and there's even some connection to the power industry. Those sprawling plants consumer a lot of electricity, right, so why not get into the act?

Yet there's no escaping the whiplash when someone strays far from his competency.

BPOing the HMOs

We've all heard about medical tourism -- rich country citizens traveling to poorer nations to have surgery, either critical or cosmetic, that they can't afford back home.
Here's the thought. If a consulting firm like Accenture can hire doctors in poor countries to shephard drugs through clinical trials, why can't it hire those same doctors to shephard rich-country patients to recovery?
In the U.S., HMOs were set up to deal with runaway health costs. Is the next stage in the battle against ever-rising medical costs offshoring the HMOs' work? As this online article suggests, the cost savings available to U.S. corporations with mounting health bills are just too huge to ignore:

In what could be the next big step in the outsourcing saga, big corporates in the US are planning to offshore their employee healthcare to India.
Wal-Mart hires over a million employees in the US – spending $8,000 on each employee's healthcare every year takes its total expenditure to a staggering $8 billion. What if Wal-Mart could save 90 per cent of that amount with help from us?
As health insurance gets painfully expensive in the US, huge cost advantages of medical procedures in countries like India are proving to be irresistible for companies there including those on the Fortune 500 list.
Mercer Health & Benefits Dr Arnold Milstein said, “We estimate that the price advantage for the most efficient Indian hospitals would be around 85 per cent to 90 per cent."
American companies are obviously feeling the heat. Many believe that unless they control the spiraling health expenditure their profits could start taking a serious hit by 2008.
A study suggests that outsourcing of health care can easily reduce the showroom price of a GM car by a thousand dollars – it's all very simple logic so what's the problem?

The First Gram is Always Free

There's a study out by Compact Management Consulting on how IT and BPO outsourcers deliver cost savings in the first year, and then ratchet up their prices in successive years, making them the costlier option for a company than if it kept the service in-house.

The research, based on an analysis of 240 deals worth more than £20m, found that outsourcing providers were pricing contracts to produce savings of up 18% compared with in-house costs in the first year. But costs then began to escalate, reaching 36% above comparable top quartile internal operations by year three. . . .

Simon Scarrott, head of business development and marketing at Compass, said: “With those figures, it is easy to see why the claim that all outsourcing will save money is a myth. There can be sound strategic reasons for outsourcing but saving money over the long term is not one of them.”

He added: “Outsourcing providers are not that different from an in-house operation. Indeed, they often use the same people as the in-house operation after the deal is signed and outsourcers cannot perform alchemy on a business process and turn an operation into gold.”

Hold on. There are significant savings involved if the business model is to arbitrage the labor costs between an expensive developed country's workers and the cheaper rates available in a developing country. So even if you are still using the same number of IT programmers, clerks, project managers, and customer representatives, there's no doubt the correct outsourcer can do it, cheaper.

Then again, even if you, the chief information officer of a fast-growing company, take the Compass study as gospel truth, you can always choose what Aviva has done -- get an outsourcer to build it for you so you can enjoy the first and second-year savings, and then take over the facility.

The previous month, Aviva transferred 1,600 employees in Bangalore from an outsourcing vendor, 24/7 Customer, to Aviva Global Services. It was the first move of its kind and size in the Indian business processing outsourcing industry, NASSCOM said.

When a vendor creates a call center for a company, runs it for a certain period of time, then hands the operation over to the company, it's called the build-operate-transfer (BOT) model. Typically, a company moving operations to India would build the operation from scratch, or subcontract the operation to an outsourcing vendor, or some combination of the two.

The BOT approach lets a company get going in India faster, Aviva executives said at the ceremony in Mumbai. That helps Aviva, and its Norwich Union insurance subsidiary, adapt to change, [Executive Director Patrick] Snowball said when he accepted the award.

"Our excellent operations in India are critical for us to ensure we maintain a competitive advantage," he said. Aviva has worked with three vendors under the BOT model: EXL, WNS and 24/7 Customer. Over the course of the year, 5,000 employees will be transferred from those vendors to Aviva's own offshore division. The Bangalore facility was just the first to be transferred. Later this year, the company will transfer facilities in Sri Lanka to its control, and in Pune.

Shortage

Is there a global labor shortage? Some think so. But mention that at any of the recruitment agencies in Manila, where men and women line up in the hopes of landing that overseas job, and you would be laughed at. Perhaps the shortage has to do with qualified skilled workers. You may know how to balance a balance sheet or troubleshoot a troubled network, but if you can't speak English, you can't join the BPO workforce.

At first, the flood of three billion new workers into the global marketplace for labor was a boon to employers across the globe. But cost cutting strategies, like offshoring and outsourcing work to low-wage countries, are running out of gas far sooner than many expected.
The salaries of IT workers from Central Europe to India are rising by double-digits every year. In the past five years, Hewlett-Packard (HPQ), SAP (SAP), and even Morgan Stanley (MS) have set up shop in former Communist countries of Eastern Europe. There, a deep pool of highly qualified math and science graduates were supposed to be willing to work for a third of that paid their Western counterparts.
Yet today, IT directors in Poland can cost companies more than $100,000 a year. That approaches Silicon Valley levels. And the number of highly qualified workers is surprisingly low. Multinationals have reacted swiftly, moving operations to ever lower-cost centers. Nokia, which already employs nearly 5,000 people in Hungary, recently announced that it is building a new handset factory in Romania.
This is all rather unexpected. Five years ago companies never thought they would have to worry about human resources. China and India were supposed to have seemingly inexhaustible pools of cheap labor. Yet today, the #1 challenge for multinationals setting up operations abroad is finding and keeping good workers.

The Global Labor Shortage: "The Saudi Arabia of Outsourcing"
India accounts for 65% of all IT work performed offshore. This is largely thanks to its seemingly limitless supply of low-cost engineers and other professionals. Yet, not all is as it seems. India produces 400,000 engineering graduates a year (five times as many as the United States) and a stunning 2.5 million university graduates overall. Yet only about a quarter of India's college graduates are up to snuff. The odds at top Indian companies are even worse. Some 1.3 million people applied to tech-services giant Infosys last year. Fewer than 2% of those were employable.
Graduates of non-elite schools suffer from weak English skills. The quality of faculty and courses is sub-par. In-house training programs for new recruits at top Indian IT services firms such as Infosys (INFY), Genpact, and Tata Consultancy Services fill some of the gaps. But by 2010, India will have a shortfall of 150,000 IT engineers and 350,000 business-process staff.

C'mon, Aussie, C'mon

It's somewhat hilarious what some people will say as they face stiff competition for business. Some resort to FUD (fear, uncertainty, doubt) attacks. Australia's Sunday Telegraph writes about medical records for transcription being sent to India, Pakistan and the Philippines, where costs are half those in Aussie Land.

Lyndie Arkell, chief executive of the wholly Australian transcription service OzeScribe, described the quality of overseas transcriptions as "absolutely terrible".

"There is a large industry sending work to India because there are doctors who want cheaper transcriptions," she said.

"But they are violating privacy laws and disrespecting their patients' privacy. I don't think patients go to their doctors thinking their records are going to end up in India."

Mistakes and mix-ups in medical terminology are common among overseas transcribers who cannot understand Australian accents, she warned.

Examples included confusion between "hypo" and "hyper" and "perineum" and "peritoneum".

And so mate, only Aussies can understand bloody Aussie accents. No Sanjit or Rajiv or Jose could ever hope to understand the inscrutable Down Under Droll. Crikey.

Using Your Accent With Accenture

Accenture is opening its seventh office in the Philippines in a massive expansion that will see capacity jump by about 50%, and employment by 36%, according to Philippine press reports. It's all good for those with the proper accents to man the call centers or the skills to do global accounting and programming, not to mention the ability to be productive in a time zone not of your own.

Note to managers: if your lease on office space with excellent telecommunications facilities is expiring soon, make sure you renew and lock in your rates. Landlords are seeing strong demand for prime space.

All Headline News gives us the Accenture capacity figure:

Accenture currently operates seven facilities in the Philippines, with a total of more than 10,000 contact center seats. Its latest and biggest facility is housed at the Robinsons Cybergate Tower II in Mandaluyong City, which has 5,000 contact center seats. Accenture is looking to end its fiscal year with a total of 15,000 seats, including the planned Cebu center, which will initially house 500 seats but will be ramped gradually.

While Inquirer says this about its headcount:

The company expects to have a total of around 15,000 employees in the country by the end of its current fiscal year in August.

Basilio Rueda, senior managing director of Accenture's Global Delivery Network, said that in the Philippines, call center operations exhibit the biggest growth in terms of employee count. In terms of revenue, application development contributes the highest at about 40 percent.

Here's the rub. If you assume a generous yield of one successful hire for every 10 applicants interviewed, that means Accenture has to churn through 40,000 people to get its workforce up from the current 11,000 -- by August.

Singapore vs Philippines

Sometimes, you can compare the housing markets and the level of sophistication of the banking industry by the products they offer.

If you are a Singapore office worker, you can borrow for a home loan, and you'll know what the interest rate will be for two years. Beyond that, you wouldn't know for certain, because the loan becomes variable. If you are an office worker in the Philippines, you could fix the interest rates that you will pay on your home loan for the next 25 years.

In Singapore, OCBC offers the following package fixed-rate loan:

Year 1 3.75% p.a. (fixed)
Year 2 4.00% p.a. (fixed)
Thereafter VALUE RATE Less 0.75% (variable)


In Philippines, BDO offers these rates:

9.00% fixed for 1 year
9.25% fixed for 2 years
9.75% fixed for 3 years
9.95% fixed for 4 to 5 years
11.00% fixed for 10 years
11.50% fixed for 15 and 25 years

Of course, anyone would rather borrow at 3.75% than at 11%. But having a First World economy does not always mean you are ahead of everyone.

More Choices for Punters

Like a supermarket shelf that seems to proliferate with more and more brands to choose from, the financial market will soon offer us a surfeit of BPO companies in which to invest our retirement money.

Sutherland and Genpact, both from India, are among those queuing to sell shares to the public for the first time. They will join the battle for investors' capital, a fight already being fought by publicly traded companies PeopleSupport and eTelecare. As some in the Philippines like to quip, "the more, the many-er."

After the bumper debut by EXLService Holdings and WNS on Nasdaq and NYSE, respectively, Rochester, New York-headquartered third party BPO service provider Sutherland Global Services, is eyeing a US listing to raise close to $250 million. At the same time, it is also learnt that Genpact, one of the country’s largest BPO firms, is mulling a US listing through an IPO to raise over $600 million for the company and its promoters.

The company, previously part of US-based General Electric, is planning to offload about 15% equity through a public float on either Nasdaq or New York Stock Exchange later this year, sources said. The company’s major shareholders — GE and US-based private equity giants Oakhill Capital and General Atlantic — are likely to sell part of their holding through this IPO, which could value the company at around $4 billion.

Genpact has appointed three US-based investment banks — Morgan Stanley, JPMorgan and Citigroup — for the IPO and it may file the regulatory prospectus in the next few weeks, the sources said.

When BPO Demands, The Ecosystem Responds

Office workers working in the expanding BPO industry need offices to work, right? The beneficiaries of the BPO boom include property developers busy adding supply to meet demand. Manila's skyline is changing, as surely as Bangalore's. Maybe the pace is not as fast as Shanghai's, but the change is illustrative of how one industry can be the economic engine for the rest of the country.

Real estate developer Megaworld Corporation is riding mightily on the fast-growing business process outsourcing (BPO) sector and is investing P1.5 billion ($31.2 million) in a new office building exclusively aimed at BPO operators.
Megaworld expects to finish the construction of the 27-storey Global One Center, which will house BPO players, by early 2009. The new building, which will offer 42,000 square meters of office space, follows in the heels of other Megaworld properties catering mostly to IT and BPO companies.
The country's BPO sector - which includes call centers, outsourced accounting, and transcription firms, among others - is expected to grow 20 to 30 pecent annually, putting pressure on property developers, like Megaworld, to keep up.
Jericho Go, Megaworld's first vice president for business development and leasing, said they are set to build at least 500,000 square meters of office space aimed at the IT and BPO markets in the next five years, when demand is expected to peak.
Megaworld owns the Eastwood City Cyberpark, the country's first information and communications technology (ICT) park accredited by the Philippine Economic Zone Authority (PEZA), where IBM Philippines is the developer's biggest tenant. The Cyberpark is currently home to about 60 firms, half of which belong to the IT and BPO sectors.

As The Blue Marble Turns

If you want to view the history of the world for the past 50 years, in a way that combines hard statistical data with pleasing graphics, see this from the TED conference. You'll think twice about using "Third World" and "Developed World" after viewing it. And it will reinforce a theme that NYTimes columnist Thomas Friedman has been writing about: the world is flat.

Welcome Perot

Few businesses in the Philippines can create hundreds of jobs in a single year. But when it's a business serving a global marketplace, it becomes commonplace.

Perot Systems(stock symbol: PER), which had $2.3 billion of revenue in 2006, recently opened shop in the Philippines. The story from Manila Bulletin forecasts their end-2007 headcount at 400.

Perot Systems, a US-based major player in business process outsourcing (BPO) and Information Technology (IT) services has started operations in the Philippines.

The company, which serves half of the global business in healthcare, over 250 hospitals in the US alone, has set up a BPO operation in Makati for the requirements of one client, Tenet Healthcare, the second biggest healthcare firm in America.

Tenet hauls in $ 8.5 billion annual revenues, covers 66 hospitals in California, Texas, Florida and Southeast US, averaging 564,000 hospital surgical patient admissions per year and 4.2 million annual outpatient visitors.

By the end of 2007, we will be employing 400 workers in Manila, 350 of them in business process operations and healthcare functions and 50 in infrastructure solutions," announced Perot Systems Global Director for Corporate Communications Joe McNamara.

Text CC Engine, Take 2

Economists at the Asian Development Bank nuanced their view on the Philippines.

"The Philippines has to learn how to walk on two legs," ADB economist Jesus Felipe told a briefing to release the bank's Asian Development Outlook 2007, referring to the need for the country to build a strong industrial base to support the economy.

He said while the services sector has been a major driver of economic growth in recent years, the Philippines cannot simply bypass industrialization. He noted that countries such as China and South Korea grew quickly because they increased industry's share of economic output and employment.

"It is highly unlikely that the advent of BPO services signals a paradigm shift that will put the Philippine economy on a higher trajectory," the ADB said.

Most revenue in the Philippine BPO sector comes from call center operations, with only 13% coming from information technology-related work, compared to 70% in India.

Text CC Engine

The Asian Development Bank released recently its annual opus on the region's economic outlook. For the Philippines, the ADB expects GDP growth to accelerate to 5.7% in 2008, from a forecast of 5.4% in 2007 and the actual 5.4% achieved in 2006.

One line to note. The ADB says that for 2006:

Transport and communications, finance, and private services, including business process outsourcing and other information technology-enabled services, led the way in the services sector, which grew by 6.3% and accounted for 3 percentage points of total GDP growth.

Let's translate that. What the economists are saying is that the engine of the current economic expansion is "Text-CC" combine: the vibrant domestic telecommunications industry that's made the Philippines the text capital of the world, and those call centers sprouting like mushrooms in every major city.

What's holding back the economy from doing "Eight in o-Eight?"

Inadequate investment is the main factor that has curtailed growth and employment. The medium-term targets, for example, were based on investment picking up at double-digit annual rates in 2006–2010 to reach 28% of GDP by 2010, almost twice the current level.

In agriculture, which accounts for 36% of employment, investment has been weak because of factors that include farmers’ poor access to credit and support services, expensive inputs, high costs of transport, and the incomplete land reform program.

In manufacturing, sampled firms in a 2003 survey of the investment climate cited as the major constraints: macroeconomic instability (at that time) and uncertainty in economic policies; inadequate infrastructure services, especially of power and transport; and corruption and the costs of complying with regulations, especially related to customs, trade, and labor markets.

A Phone for Every Filipino

Remember the early 1990s, when the country had less than 2 million telephone lines, and the then monopoly PLDT had to be kicked dragging and screaming into a competitive landscape?

Opening up the telecommunications industry was the best thing that could have happened to PLDT, and to the entire country. Today, thanks to explosive growth in cellular phone use, PLDT, with a market cap of 430 billion pesos, is the most valuable company in the Philippines. Today, businesses that could not operate are now thriving, thanks to communications made so much easier with one out of every two Filipinos owning a phone.

Think what would have happened if the industry was not liberalized. Think how much more expensive would bandwidth be today if competition was not introduced. Think how many other industries in the Philippines are ripe for competition.

We are reaping the benefits of decisions made more than a decade ago. The forecast is for 45 million cellular phone subscribers this year. Considering that half the population are minors, it may well be that we will reach saturation point this year.

The National Telecommunications Commission (NTC) said Sunday the May elections and the rosy Philippine economic outlook this year will help boost mobile phone subscriber growth.

Edgardo Cabarios, director NTC's Common Carriers Authorization Division said, the regulator projected an additional five million subscribers for a total of 45 million this year. He, however, said that the growth might not be faster than last year, which grew about 15 percent.

Data from Smart Communications Inc. and Globe Telecom showed that the number of subscribers reached about 40 million last year from 34.78 million in 2005. Smart and Pilipino Telephone Corp has a total of 24.2 million subscribers, while Globe and Touch Mobile subscribers stood at 15.7 million.

Note that the article doesn't even mention Sun Cellular, which has more than a million subscribers. It just shows that the telecommunications industry is a duopoly, but let's leave that to another discussion.

The telecom reforms did not just set the groundwork for the cellular phone industry. The bright star of the Philippine economy, the BPO industry, is dependent on good telecommunications. Here's the take of AT Kearney in its survey of 40 countries for off-shoring.

Nevertheless, the Philippines remains one of the lowest wage locations in the Index and now offers the lowest telecom costs of any country in the Index.