It has been interesting to watch events since the closing of call centers that service phone company Airtel last week. Initial reports said that call center agents were sacked, but this turned out to be inaccurate. Their contracts had merely expired.
When Airtel entered 15 African countries about 18 months ago, they implemented their business model: they are the only phone company in the world to outsource all their operations except marketing, sales and finance in order to cut tariffs and increase call volume. The call centers in Nigeria were outsourced to Tech Mahindra and Spanco, who started talks on new contracts before the expiration of the old contracts on September 30. Failing to reach an agreement with labour unions and the agents, operations were suspended, which led to the picketing of Airtel offices by the NLC and network disruptions up and down the country.
Any one who has an idea about the telecommunications industry in Nigeria knows the kind of challenges that accompany it. There is zero infrastructure, and the cost of doing business is prohibitive. Every single base station in this country runs on generator 24 hours a day, 7 days a week, but the 17,000 base stations are far from adequate to cater for 90 million subscribers. That accounts for the poor network quality we experience on a daily basis, and it is also why the batteries of Blackberries do not last a full day, because of the power they use to maintain a signal. In Britain, a far smaller country, 66,000 base stations service 62 million people. If the number of stations were to be equivalent, that would leave a shortfall of 49,000, and one base station is erected at a cost of $250,000. It would bring the total investment necessary by phone companies on base stations alone to over $12 billion dollars. In a bid to improve network quality, Airtel have invested N75 billion in 2000 base stations, which will be completed by March next year.
In addition, there is vandalism of installations, the difficulty of meeting regulations to erect base stations as well as multiple taxation.
All the above make Nigeria a very difficult environment. The country ranks 137th out of 183 countries in the ‘ease of doing business’, and 129th out of 139 in Global Competitiveness. We make the mistake of thinking that thinking foreign companies will not have to look for ways to cut labour costs when they invest here. Even call centers have to be run on 24/7 electricity, which Nigeria cannot provide.
There is a big picture: In today’s hyperconnected world, it is easier than ever for money to go wherever the factors of production are cheapest. The booming call center industry in the Phillipines is just one example of this. This fact is something that African governments can use to employ their people and lift them out of poverty. There is an abundance of cheap labour here that makes Nigeria a potentially huge beneficiary of outsourcing, which can get our youths off the streets so that they won’t become armed robbers, suicide bombers, or election thugs. All that is needed is predictable government policy and an efficient port system — Apapa, i’m looking at you — and Nigeria could play host to the production line of every major electronics company in the world. As China becomes more prosperous, tens of millions of manufacturing jobs will be up for grabs in this decade. Only a combination of entrepreneurship at home, and inflow of foreign capital can mitigate the dangers posed by huge numbers of unemployed youth.
What the NLC should be focusing on, is understanding current global realities with regard to jobs and positioning Nigerian workers to take advantage, as well as engaging the government to hold up its own end of the bargain by providing power, security, and so on. Tax incentives can be given by the government, so that foreign companies can hire more Nigerians. Shutting down a company’s operations is not the way to go. Reports say Mahindra and Spanco have reinstated the agents, and they will resume on the 16th of this month. I just hope the battle has not been won, only for the war to be lost.
The Kaleidoscope 
Hmmmn, the battle has been won, the war has long been lost unfortunately! The problem with Nigeria is we do everything with our emotions doing the reasoning for us. We voted GEJ based purely on emotions, for example. We need to open our eyes and sharpen our minds to the reality of the days in which we live.
Being an industry insider, I greatly appreciate this piece.
A lot of people were quick and eager to crucify and stereotype simply because it’s an Indian owned company.
We easily forget that the ultimate benefactor of AIRTEL’s business strategy is the subscriber because operational cost savings are passed on as lower call tarriffs.
@Omooba, I am trying to see the correlation between this post and GEJ’s government though….
@Ejiro_, GEJ’s election (not govt) was stated as an example of our emotional reaction to issues. Nigeria voted GEJ for very emotional reasons, not for his track record, not for his promised policies, not on any reasonable premise, just as Nigerians blamed Airtel for ‘sacking’ her call center workers, without the benefit of the facts as well laid out by the author of this post.
Either you like it or not, the common man, as represented by the NLC, is concerned by what comes to his pocket, about what keeps bread on his table, what keeps him going. The points you have raised here is too high-level for the man or woman who has been reduced from someone earning 74K per annum to someone earning 29K. The responsibility of holding government accountable for power, security, and tax incentives are not short term and belong to other people…not to the man who has lost his job. Realistically he wants to bite the man he thinks has taken his bread from him…it is easier for us to philosophize because we are not the ones taht are feeling the pinch.
@Henry, Thank you for this. Others should take note of this comment.
Good insight. These agents totally played a quick one on the media and nation bought it. Nobody’s salary was slashed! Maybe there were speculations but the actual slash did not happen. Salaries for call center agents across the telecom industry have experienced salary reduction. I dont get the pity party we celebrate with the statement Indians are enslaving us, modern day slavery bla, bla, bal. That’s just plain silly. Did the banks not cut down on their staff strength a year back? Are some staff in the banks and other industries not outsourced staff? Where bankers salaries not slashed during the Tsunami? Why did nobody carry placards saying ‘Nigerians are enslaving Nigerians’? Call center jobs are not career jobs. You cannot settle and make yourself comfortable in that call center universe for 3-4 years and or more as a graduate. It takes you no where so to say. Our graduates need to learn to value themselves and know their worth!
thanks for your comment. you are actually quite correct. it sounds more like xenophobia than anything else…
Good piece, but one sided. Yes Airtel is not a charity, but the workers aren’t serfs too. You can’t propose a 50% cut in wages and expect people to smile and get back to work. Your macro economic view is nice but we have to consider the micro too -from the workers perspective.
An over 50% cut in wages is essentially the same as cutting people’s standard of living by half, probably more if you consider the value of that decrease in Real Wages (income after taking inflation and purchasing power into consideration).
For example, the goods these workers used to buy cheap on wholesale will probably become more expensive if reduced wages force them to pay retail price.
Also, Inflation has definitely increased from the first time they received 75k/month. So the value of this new 29k/month is definitely lesser now in October 2011.
Another factor to consider in the implication for future wages. We know new employers consider your past wages when evaluation your value. All these factors are worth considering too.
I agree, Airtel is here to make money, but so are the workers. Both sides will have to fight for their borderline ,with as much tact as they can muster while keeping the risks firmly in focus.
As you alluded to, Nigeria has the potential, we can easily build a formidable service economy on the back of cheap labor due to our large population. But, we cannot afford to sacrifice fairness on the altar of corporate greed.
At the end of the day, investors will go where they can make money. Airtel is here because it’s making money.
@le_misegra
Edit: Evaluating not *evaluation*
Da libra
Insightful and informative article. However, I think you should have reflected the wage cuts to make it more balanced. A 155% salary ‘devaluation’ is totally unacceptable and provocative to say the least. It will be interesting to see Airtel’s financial statements to ascertain the extent to which Nigeria’s harsh business environment has had an impact on its P&L. I doubt that it is material.
thanks for your comment. i couldn’t find any reference to it anywhere online, hence its absence (referring to the wage cuts). i noticed a bit of media manipulation against Airtel, which i thought was unfortunate. thanks again.