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Risk & Reward: The Rise of the Turkish CMS Market

Webhelp recently entered the Turkish CMS outsourcing market with the acquisition of Callpex, a move that is set to bring an additional €20m (~$20m) in annual revenue against its global revenue of ~$648m (2014 NelsonHall estimate). Callpex has 2,000 employees and 40 clients, and will bring with it logos in the BFSI, telecom, travel and automotive sectors, primarily in the domestic market. These include Garanti Bank (Turkey’s second largest private bank), Avea (the newest Turkish mobile operator), Pegasus Airline (a Turkish low cost carrier), and Borusan (a Turkish industrial group). Established in 2008, the company has a 2,500 seat capacity in Istanbul, Bingöl and in three different locations in the city of Yozgat, and ranks among the larger players in Turkey’s contact center industry.

This acquisition is the latest international-backed entry in the Turkish CMS outsourcing market in the last few years. The most notable deals include the 2013 co-investment by Japan’s Mitsui in the 1,500-agent company, Tempo. In the same year, Italian Comdata acquired the 1,400-employee CallUs from KoçSistem. In 2011, Xerox entered the market with the acquisition of Benelux Unamic/HCN and 250 agents in Istanbul and Antalya. And in 2010, Teleperformance purchased a majority share in Metis, a 900-agent CMS provider. Other multinational players expanding into Turkey include Arvato with 1,900 agents, and Atos, who are running outbound campaigns for the banking sector with 1,000 FTEs.

Turkey has more than a thousand contact centers led by the likes of Turkcell Global Bilgi (~12k FTEs across 24 centers in Turkey, Russia and Ukraine), and Turk Telecom’s AssisTT (~10k FTEs). In addition, multinationals including Vodafone, Lufthansa, ING Bank and DHL run in-house customer care and technical support centers out of Istanbul, the Black Sea and Central Anatolian regions.

According to the Turkish Call Center Association, the CMS industry employed ~50,000 people in 2014. This is a significant increase from 8,000 in 2007, though still a relatively low number for a population of 79 million. With the ratio of people to contact center seats standing at just 1,100 to 1, Turkey is still way below the average for continental Europe (200-400 to 1) and far from the U.K.’s ratio of 100 to 1. Hence, the Turkish CMS industry has a lot of room to expand. NelsonHall estimates CMS revenues in Turkey at ~$638m for fiscal 2014, and forecasts 5.8% growth (CAAGR) for the period 2015 to 2019.

Companies like Webhelp and others venturing into the relatively unknown Turkish CMS outsourcing market face a high-risk/high-reward environment. On the risk side, Turkey presents a variety of challenges, including political and civil turbulence and regional instability. On the up-side, growth opportunities are certainly there, fueled by increased domestic demand and the emergence of the country as a nearshore destination. This is evidenced by Teleperformance who, after entering Turkey, has expanded organically to ~1,700 agents, claiming revenue growth of 120% CAGR in the five years to 2014.

The Turkish Call Center Association estimates a workforce potential of 350,000 agents by 2023. And with 73% of the current contact center population aged under 30, the possibility for labor arbitrage, proximity to Europe, and government incentives for the underdeveloped regions, the Turkish CMS outsourcing market looks set for continued growth.

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