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BPOs face slowing growth this year

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MANY business process outsourcing (BPO) companies expect flat growth or a contraction this year, while some big businesses still hope to grow by single-digits amid the pandemic, according to an informal poll conducted by the Information Technology and Business Process Association of the Philippines (IBPAP).

The IBPAP polled more than 70 member companies earlier this month, wherein 18% of the respondents said they expect revenues to contract and 36% see business to remain flat this year.

The companies that expect contraction represent four percent of the total employee headcount of the polled companies.

On the other hand, 46% of the companies polled anticipate about 3-7% growth this year.

IBPAP Chief Executive Officer and President Rey C. Untal in an online interview on Wednesday said they conducted this “pulse” survey, which does not serve as an official projection in the absence of a formal study.

“The smaller companies are the ones that are having a difficult time,” he said. It’s understandable. When you are small and you have a few contracts, when you get hit in one contract, it’s very difficult to get them covered by other contracts,” he added.

Smaller companies, have struggled as the lockdown caused disruptions in their operations.

Mr. Untal noted bigger companies can better cope with the challenges, because they can shift their workforce to other projects after they lose contracts.

“‘Travel, hospitality and tourism have been really hit hard,” he said. “But healthcare companies continue to hire, while telecommunication companies thrive because of collaboration tools, he added. “People are hungry for internet capacity.”

The growth in the logistics, financial services and e-commerce industries are also contributing to outsourcing growth.

Micro-, small-, and medium-sized enterprises represent 42% of the industry’s 1,300 companies, Mr. Untal said. The industry employs more than a million Filipinos.

The healthcare outsourcing sector, as signaled by industry group Healthcare Information Management Association of the Philippines in May, is growing and boosting its automation capabilities.

IBPAP in November tempered its targets to a 3.5-7.5% compounded annual growth rate for revenue for 2020 to 2022, revisiting its projections after geopolitical changes, automation, protectionist policies, and rapid transformation of business models. The goal was originally set at nine percent in 2016.

With the easing of lockdown restrictions, more employees are able to return to work at outsourcing companies.

The June survey found 81% of outsourcing employees are productive, with 59% under a work-from-home scheme while 22% work on site.

At the beginning of the lockdown in March, 40% of employees were working from home while 10% were working on site, increasing to 58% work from home and 15% on site by May.

Mr. Untal said companies are restricted from scaling to full capacity by limitations in internet and data protection.

“There’s a limit also to how much a company can do in a work-from-home setup, because of several considerations. One consideration obviously is the infrastructure whether the reliability and speed of the internet at the location of the employees are sufficient,” he said.

Outsourcing companies also face problems with data security, as some clients are reluctant to approve a shift to a work-from-home setup.

“Those are typically the kinds of work that continued in the on-site skeletal setup,” Mr. Untal said. — Jenina P. Ibañez



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Fannie-Freddie Profit Sweep Draws U.S. Supreme Court Review

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(Bloomberg) — The U.S. Supreme Court agreed to decide whether investors can challenge the 2012 agreements that let the federal government collect hundreds of billions of dollars of Fannie Mae and Freddie Mac’s profits.The justices said they will hear an appeal by President Donald Trump’s administration of a ruling that would force the government to defend against a shareholder lawsuit. The investors say the agreements exceed the authority of the Federal Housing Finance Agency, which regulates the two mortgage giants.Fannie jumped 5.7% to close at $2.22 in New York trading, while Freddie rose 6.7% to $2.23.A ruling in the investors’ favor would give them a chance to collect a massive settlement. Fannie and Freddie have paid more than $300 billion in dividends to the Treasury under the so-called net-worth sweep.The administration told the court the dispute “is of immense practical importance.” The justices will hear the case in the nine-month term that starts in October.The Supreme Court on Thursday also agreed to hear an appeal from shareholders challenging the profit sweep under a different legal theory.Fannie Mae and Freddie Mac keep the U.S. housing market humming by buying mortgages from lenders and packaging them into bonds that are sold to investors with guarantees of interest and principal.‘Cloud of Uncertainty’After the housing market cratered in 2008, the companies were put into federal conservatorship and sustained by taxpayer aid. They have since returned to profitability and paid $115 billion more in dividends to the Treasury than they received in bailout funds. Since 2013, most of their profits have been sent to the Treasury under the net-worth sweep.The administration contends the 2008 law that set up the FHFA precludes lawsuits that challenge the profit sweep. The law bars courts from doing anything to “restrain or affect the exercise of powers or functions of the agency as a conservator.”A splintered New Orleans-based federal appeals court let the lawsuit go forward, saying the FHFA wasn’t acting as a conservator when it agreed to the net-worth sweep.The suing shareholders said the appeals court reached the right conclusion. But they nonetheless urged the Supreme Court to hear the Trump administration appeal, saying all sides would benefit from clarity.“So long as there is a credible threat that litigation will invalidate the net-worth sweep, a cloud of uncertainty will hang over the companies’ capital structure,” the shareholders told the Supreme Court. “Investors will not be willing to supply the tens of billions of dollars in new capital that are essential to Treasury’s reform plan.”Shareholders in the New Orleans court said that the FHFA, which has a single director who can’t be fired without cause, has an unconstitutional structure, making its decision to enter the profit sweep invalid. While the divided New Orleans court agreed with shareholders that the FHFA’s structure is unconstitutional, it said that fact alone could not invalidate the sweep, leading to the shareholder appeal.“FHFA looks forward to the U.S. Supreme Court taking up” the case and clarifying the issues involved, the agency said in a statement.Trump administration officials, including Treasury Secretary Steven Mnuchin, have long stated that they want to end federal control by releasing Fannie and Freddie from conservatorship. Wall Street analysts have said they are skeptical of that happening before the November election, meaning the administration’s goal largely depends on Trump winning a second term.The government’s appeal is Mnuchin v. Collins, 19-563, and the shareholders’ appeal is Collins v. Mnuchin, 19-422.(Closes shares, adds FHFA statement starting in 3rd paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.



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TikTok teens target the Trump campaign, again

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The TikTok-tivists are at it again.

Thousands of users of the popular video app flocked to the Apple App Store in the last few days to flood President Donald Trump’s 2020 campaign app with negative reviews. On Wednesday alone 700 negative reviews were left on the Official Trump 2020 app and 26 positive ones, according to tracking firm Sensor Tower.

TikTok fans are retaliating for Trump’s threats of banning the app, which is owned by China’s Bytedance Ltd. and is hugely popular in the U.S., especially among teens. The thought of taking away a key social and entertainment hub in the midst of the Covid-19 pandemic has led to outrage.

“For Gen Z and Millennials, TikTok is our clubhouse and Trump threatened it,” said Yori Blacc, a 19-year-old TikTok user in California who joined in the app protest. “If you’re going to mess with us, we will mess with you.”

Blacc said the movement gained steam Wednesday when a popular TikTok user, DeJuan Booker, called on his 750,000 followers to seek revenge. He posted a step-by-step primer on how to degrade the app’s rating, notching 5.6 million views. “Gen Z don’t go down without a fight,” said Booker, who goes by @unusualbeing on TikTok. “Let’s go to war.”

The efforts to push the app low enough so that Apple will remove it from the app store may be misguided. Apple doesn’t delete apps based on their popularity. The App Store may review those that violate its guidelines or are outdated, but not if their ratings sink. A similar tactic was tried in April to protest Google Classroom by kids frustrated with quarantine home-schooling.

But young people are looking for ways to make their voices heard, even if some of them can’t yet vote. Last month, many young people organized through TikTok to sign up to attend Trump’s first post-shutdown campaign rally in Tulsa, Oklahoma, but then didn’t show up. The Trump campaign denied the online organizing effort contributed to lower-than-expected attendance.

The Trump campaign and Apple didn’t immediately respond to a request for comment. TikTok was experiencing connectivity issues on Thursday, according to Downdector, which measures web traffic.

Trump’s re-election smartphone app is a big part of the president’s unrivaled digital operation and was meant to circumvent tech companies like Facebook Inc. and Twitter Inc. and give the campaign a direct line to supporters. The app has helped the campaign engage Trump’s die-hard supporters, especially in the midst of the coronavirus pandemic, by feeding them his latest tweets and promoting virtual events. Supporters can donate to the president’s campaign or earn rewards for recruiting friends like VIP seats to rallies or photos with the president.

The Official Trump 2020 app has been downloaded more than 500,000 times on Google’s Android store as of June 15. Apple doesn’t publish information on downloads.

Reviews with titles such as “Terrible App” or “Do Not Download!” have been flooding the App Store since late June. Official Trump 2020 now has more than 103,000 one-star reviews for an overall rating of 1.2.

But the uptick of activity has also caused the app to rise in rankings. Users have to download the app to review it, vaulting it to second place on the Apple store from No. 486 on Tuesday, according to Sensor Tower.

“Do I think that this is going to fundamentally change the election? No,” said Tim Lim, a veteran Democratic digital strategist. “But it goes to show that they are just as susceptible to these mass actions as anyone else. Trump is starting to see what it feels like to have a massive online army committed to defeating him.”

Trump earlier this week said his administration is considering banning TikTok as one way to retaliate against China over its handling of the coronavirus. Trump’s comments came after Secretary of State Michael Pompeo told Americans not to download the app unless they want to see their private information fall into “the hands of the Chinese Communist Party.” Bytedance is also facing a U.S. national security review for its acquisition of startup Musical.ly. It has denied allegations that it poses a threat to U.S. national security.

Trump didn’t offer specifics about a potential decision and Pompeo seemed to walk back the idea of a ban in a later statement, saying that the U.S. efforts to protect American consumers’ data don’t relate to any one particular company.

Many TikTok users say they care less about potential Chinese snooping and more about Trump taking away their digital hangout. In the U.S., TikTok has been downloaded more than 165 million times, according to Sensor Tower.

“I don’t believe Trump is trying to take TikTok away because of national security, but more to retaliate against activism on the app and all the videos about him that drag him through the mud,” said Darius Jackson, an 18-year-old TikTok user in Champagne, Illinois, who asked his followers Wednesday to give Trump’s app a one-star rating.

“This is the first year I’ll be able to vote and I think activism on TikTok is going to make a big difference,” Jackson said.

More must-read tech coverage from Fortune:



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Airport upgrade faces uncertainty

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By Arjay L. Balinbin, Reporter

THE government has revoked the original proponent status given to the consortium seeking to rehabilitate the Ninoy Aquino International Airport (NAIA), after rejecting the latter’s move to revise the project’s terms in light of the pandemic’s effect on the travel industry.

The consortium claimed it will have difficulty obtaining financing for the P102.12-billion NAIA rehabilitation project under the current approved terms and conditions, the Department of Transportation (DoTr) and the Manila International Airport Authority (MIAA) said in a statement late Wednesday, citing the group’s July 6 letter submitted to the National Economic and Development Authority (NEDA).

The DoTr and MIAA said the consortium expressed it could only proceed with the NAIA project if “such terms and conditions are revised in accordance with its proposal as contained in the letter.”

“In view of this, and upon the recommendation of the NAIA Government Negotiating Panel, the MIAA, on 7 July 2020, has terminated negotiations with the NAIA consortium and withdraws/revokes its original proponent status (OPS),” they said.

In a statement issued on July 7, the consortium said “far-reaching and long-lasting consequences of the coronavirus pandemic on airline travel, airline operations and airport passenger traffic necessitated a review of the assumptions and plans to ensure that the NAIA project will be viable in the new normal.”

The proposed changes to the project’s framework would ensure its bankability, the consortium said.

The NAIA consortium is composed of Aboitiz InfraCapital, Inc; AC Infrastructure Holdings Corp.; Alliance Global Group, Inc.; Asia’s Emerging Dragon Corp.; Filinvest Development Corp.; and JG Summit Holdings, Inc.

Antonio A. Ligon, law and business professor at De La Salle University, said the government should be willing to renegotiate the terms of the deal, considering how the pandemic wreaked havoc on the global tourism industry.

“The compelling reason must justify the discontinuance of the negotiations, because it will not be good for the image of the government,” Mr. Ligon said in a phone interview.

“Both parties should consider what’s going on right now. Negotiations should consider the challenges that the world is facing now. It should not be one-sided. The supervening event is global, so it should be easy for both parties to consider based on this supervening event.”

For UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion, the government should not be faulted for trying to get a “better” deal.

“At this juncture, the government has the right to whom it may choose to deal, and it should, of course, be within the set and fair rules. With the pandemic and its ill-impacts on government revenues and consequently its spending on infrastructure, the government will be on the lookout for smarter and better deals. This is now evidenced by new negotiations they are currently having,” he said in an e-mailed reply to a question on Thursday.

“With international travel saddled with many uncertainties, the government may also be thinking about other issues needing more attention at this point,” he added.

Despite the collapse of talks with the NAIA consortium, the government appears unfazed.

Finance Secretary Carlos G. Dominguez III on Wednesday said there are two other proponents interested in the project at the terms the government has indicated.

“We’re not worried about it… We have two other proponents who are very willing to step into the shoes of the consortium,” he said in a virtual briefing.

In September 2018, the NAIA consortium obtained the original proponent status from the DoTr to rehabilitate, upgrade, expand, operate and maintain the country’s main gateway for 15 years.

The original proposal submitted in February 2018 cost P350 billion and included the construction of an additional runway over a 35-year concession period, but this was reduced eventually per the DoTr’s request.

Metro Pacific Investments Corp. was originally part of the consortium, but withdrew from the project due in part to the unresolved issue of tax payments.

The rehabilitation of the NAIA, whose main terminal opened in 1981, is expected to increase its capacity to 47 million passengers a year in the first two years and further expand this to 65 million passengers after four years.

The NAIA, which has four terminals, has been operating beyond its 30.5 million annual passenger capacity. It recorded 45.3 million passengers in 2018.



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