IDT loses AOL, may cut 200 jobs

Client decides to discontinue project as part of corporate decision to close as many as 14 call centers worldwide.

December 14, 2006 22:22
2 minute read.


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US telecommunications company IDT Global may have to cut as many as 200 jobs in Israel after losing its largest outsourcing client AOL, due to a restructuring at the Internet service provider. Sources within the company confirmed that workers were informed last week that AOL had decided to discontinue the project as part of a corporate decision to close as many as 14 call centers worldwide. IDT employs approximately 200 people for the AOL project at its Jerusalem call center after embarking on a massive recruitment campaign at the beginning of the year to service AOL's customer retention program. While the project initially was scheduled to close at the end of the month, one source said it has been extended to the end of February as AOL wraps up its activities her. IDT Israel CEO Eli Nino declined to comment to The Jerusalem Post. "This is a major blow for IDT because AOL is its biggest client," one source said. "While other projects have closed and its workers shifted to other sections, it doesn't seem they will be able to do that this time because it's too big." Analyst Andrew Baker, of New York-based Cathay Financial, said, however, the loss would be minimal to IDT's global operation. The company's outsourcing activities, Baker explained, are part of its incubator business, IDT Capital, which, excluding its media, energy and grocery units of IDT Capital, had revenues of $9m. in the three-month period ended October 31, and ran at a loss of $3.5m. for the quarter. "Somewhere within those figures are the call center operations which also include one in London and Puerto Rico, so the Jerusalem business is minimal and AOL will not affect profits overall," Baker said. The loss may be a blow to the company's ideals, however, as it has been a major employer for the English speaking community in Jerusalem since setting up its call center in 2002, driven largely by CEO Howard Jonas's pro-Israel beliefs. The local operation later broke out to providing outsourcing services for other companies and its work force has grown to an estimated 800 employees. IDT also has been the prime example in Jerusalem's drive to market itself as a center for providing a highly educated outsourcing work force as a cheaper alternative to the US and thus competing with locations such as India which also are strong in the market. AOL has reportedly kept open its Indian and Pakistan call centers, closing 14 others around the world. A spokesperson for AOL did not respond to this report by press time. The move, however, did not surprise AOL analysts. "AOL has been moving from being a subscriber-based company to focus more on content delivery generating revenues from advertising," said James Goss, media and entertainment analyst at Chicago-based brokerage Barrington Research Associates. "That is what's bringing customers back and it, therefore, doesn't need customer retention programs or even call centers to win new customers [on the new model]."

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