A Case Study Describing the Causes and

Outcomes of Citycell’s License Cancellation

Course Code: MKT 430

Course Title: Strategic Marketing

Semester: Fall’ 2016

Section: 01

To:

Ms. Shahpar Shams

Department of Business Administration

East West University

Dhaka, Bangladesh

Submitted By:

Farhan Tanvir, ID: 2013-3-10-139

Shakil Ahmed, ID: 2013-3-10-217

Maidul Islam, ID: 2012-3-10-117

Tanvirul Islam, ID: 2011-3-13-030

Fahmida Yasmin Bristy, ID: 2013-3-10-080

Synopsis
The main objective of this case study is describing the license cancellation issue of Bangladesh’s
first mobile phone operator Citycell and to evaluate the possible outcomes of this issue. The
shutdown process has been started as Bangladesh Telecommunications Regulatory Commission
sought permission from the government to cancel Citycell's license and asked its customers to
switch to other operators, as the company did not clear its dues worth Tk. 477.69 Crores.

Citycell which is offering service using Code Division Multiple Accesses (CDMA) has now
150,000 to 200,000 subscribers after completion of ownership verification through biometric
method.

According to BTRC, Citycell didn't pay the second and third installments, in combine Tk. 2.29
billion, for 8.82 megahertz spectrum since spectrum renewal in 2012, which has breached the
licensing terms. Besides, it has dues of annual spectrum fees (from the year 2013 to 2016) Tk.
271.4 million, revenue sharing (2014 to 2016) Tk. 278.4 million, social obligatory fund (2011 to
2016) Tk. 89.2 million, VAT Tk. 399.2 million and late fee of Tk. 1.35 billion.

Pacific Bangladesh Telecom Limited under the brand name “Citycell” obtained license in 1989
where SingTel Asia Pacific Investment Limited has 45 per cent share whereas Far East Telecom
Limited owns 23.57 per cent share and remaining 31.43 per cent shares are held by Pacific
Motors Limited. Citycell started its operations in 1993, with its subscription reaching a peak of
19 lakh in 2011. For at least 10 years now it has been a minor player in the market.

Nine banks and three financial institutions are in deep trouble as shutdown of financially
strapped Citycell, the country’s oldest mobile phone operator, hangs in the balance, said sources
in the central bank.

Lack of visionary leadership, institutional corruption and failure to bring investment have got 
Bangladesh’ first mobile-operator in huge trouble says former Citycell top-level executives
agreed, current CEO Mehboob Chowdhury acknowledged of strategic mistakes. “Not going for
GSM was a major mistake.

Shareholders had been trying to sell the operator's license for the last few years but could not
find any interested party. 

In this case study we will provide a short history of Citycell, describe the reasons for cancellation
in detail and give a brief analysis of the impact this is going to have in the Telecommunication
sector of Bangladesh.
Findings:

 Company Background:
Citycell (Pacific Bangladesh Telecom Limited) was Bangladesh’s and South Asia’s
pioneering mobile communications company and the only CDMA mobile operator in the
country. Citycell, a customer-driven organization whose mission is to deliver the latest in
advanced telecommunication services to Bangladesh.

In October 1990, Hutchison Bangladesh Telecom Limited (HBTL) was formed as a joint
venture between Bangladesh Telecom Limited (BTL) and Hutchison Whampoa Limited of
Hong Kong. In March of that year BTL had been issued a license by Bangladesh Telegraph
and Telephone Board (BTTB) for operating cellular, paging and other wireless
communication networks. However, soon there was legal dispute between BTTB and BTL
regarding the refusal of BTTB to provide Public Switch Telecommunication Network
(PSTN) channels for connectivity to the BTTB network. The Supreme Court then ruled in
April 1993 that BTTB would have to provide PSTN connections to HBTL, and that BTL
would have to transfer the cellular portion to the license of HBTL. BTTB gave HBTL the
PSTN connections in August 1993 and HBTL began commercial operation of the first
cellular telephone service in Bangladesh in the same month. This is a concern of Pacific
Group, which is involved in the business of banking, automobiles, pharmaceuticals, fisheries,
healthcare, and tea.

On June 2, 2005, PBTL created a milestone through strategic partnership with SingTel,
Asia’s leading communications solution provider. This has opened up a whole lot of
opportunities for CityCell to make its position stronger in the market. With the financial and
technical expertise from SingTel, PBTL is in a position to bring a host of innovative products
and services for the customers at affordable prices. PBTL start its journey in 1993 as the
forerunner in the mobile telecom industry, introducing postpaid packages for the high-end-
users. It obtained its business license from BTTB on July 26, 1989 under the Bangladesh
Telegraph Act, 1885. The license grants PBTL all powers, authorizations, consents, and
permission to provide, operate and maintain cellular radio-telephones (fixed and
mobile)throughout Bangladesh. Thus it is the only telecom operator in Bangladesh, which
has the license for both fixed and mobile phone. CityCell began its operations with AMPS
(Advanced Mobile Phone Service), a sophisticated technology at the initial stage, which was
 upgraded into CDMA-1 (Code Division Multiple Access) in 1999. In 2005, CityCell further
upgraded CDMA-1 intoCDMA1X.
Ref: https://www.scribd.com/document/87995066/Background-Citycell [1]
http://www.thefinancialexpress-bd.com/2016/08/16/42324/Govt-starts-process-to-cancel-
Citycell [2]

 License Cancellation:

The government has started the shutdown process of Bangladesh's oldest mobile phone operator
Citycell as the operator has failed to pay dues around Tk. 477.5 Crores and the company is
dysfunctional from October 20, 2016.

The subscribers of the operator have got another seven days to switch to alternative network by
August 23, said Tarana Halim, state minister for post and telecommunication. Earlier Bangladesh
Telecommunication Regulatory Commission (BTRC), served notice to Citycell to explain why it
should not face legal action for not paying the outstanding dues of Tk. 477.5 Crores since long.

What really put CityCell in this situation is lack of visionary leadership, institutional corruption
and failure to bring investment have got Bangladesh’ first mobile-operator in huge trouble.
Former Citycell top-level executives agreed in this regard.

We have been able to gather some information and clear statements of the Top level
management, Former Employees, Industry Specialists and critics in this regard and are
presenting the statements below, the references to these statements are given in the reference
section later after the analysis.

CEO Mehboob Chowdhury acknowledged of strategic mistakes. “Not going for GSM was a
major mistake.”
He came out clean that despite the regulatory nod for switching to GSM, it is his company which
has failed to make it happen. “Frequency was not allotted as we could not complete formalities.”
Chowdhury, however, said that they will switch to GSM once the government’s dues are cleared.
“But the BTRC is not clearing the issue of frequency. We were supposed to be given 10 MHz,
but they want to give us 6.5 or 6.8.”
In 2012, when the regulator renewed its license, the company was allowed to switch from
CDMA to GSM for only a Tk 2 billion fee.
Citycell’s telecoms operations license—issued in 1989— cleared it for fixed phones as well, but
it never walked on that path and the CEO claims that the decision did not hurt its business.
The company also was qualified to bid for 3G services, but did not take part as it failed to come
up with the $20 million earnest money.
A former top-level Citycell executive says that the company never bothered to upgrade
technology. He also blamed inefficient leadership.
“It could not attract investment and institutional corruption is largely responsible for it,” he said.

Another former executive said that Citycell started plummeting after Mehboob Chowdhury took
over.

ICT think-tank LIRNE Asia’s Senior Policy Fellow Abu Saeed Khan says the company had
everything except for strategic visions.
“CDMA allows wider coverage than GSM. They had the technology for rolling out 3G, long
before the licenses were awarded, but did nothing with it.”

He also said that not going for fixed phone services, when the demand was there, had adversely
affected the company.
“The most unfortunate thing is they have a partner like SingTel, but could not use the
opportunity,” said Khan, the former secretary-general of the Association of Mobile Telecom
Operators of Bangladesh (AMTOB).
When Chowdhury joined in 2010 as the CEO, Citycell had a subscriber base of 2.3 million. The
latest BTRC figure says it has come down to 700,000 in June— less than one percent of total
subscribers in Bangladesh.
“It’s true that we have not been able to bring investment, but we are trying. An American
company is interested,” said Chowdhury, who declined to name the potential US investor.
There have been talk of new investments in Citycell since Chowdhury was appointed to lead the
company.
Asked when it might finally happen, he replied, “I hope we will be able to zero in on that by the
end of this month.”
Chowdhury seemed confident about bringing investment for a company, which the regulator
says will shut down any time.

“We might not have subscriber, but this is a good investment, because the 4G auctions are
coming up. The company can turn around with 4G services.”
But on the imminent need of clearing the almost Tk. 5 billion dues, CityCell has to wait for
investments.
“I hope we will be able to pay the arrears as soon as new investments come in,” said the CEO.
Chowdhury, however, said he can’t be held liable for the more than 1.7 million drop in
subscribers after he took charge of Citycell.
“My track record does not suggest I am inefficient. As the chief commercial officer of
Banglalink in 2004, how did I build a 1 million subscriber base within ten months?”
Chowdhury claimed the decision for not to go for GSM was not his.
He also brushed off allegations of institutional corruption.
“Those who are saying this do not know anything.
“Investments made in this company are approved by the government. Investors verify everything
before putting in their money.”

Even after the Government’s strict guidelines and commitment of shutting down Citycell CEO
Mehboob Chowdhury hopes that there will be help and assurance from the Government to rstore
its services and help in gathering investment for the restructuring process of Citycell.
“Some incentives are necessary to invest in this competitive market”, says Chowdhury. He came
down hard on the BTRC’s deadline for subscribers to switch from Citycell. “The BTRC
chairman told me that he has not instructed to shutdown Citycell. “The regulator assured us that
it will not be closed down. We have informed them of new investments and they have told us
they will consider it,” said Chowdhury.
REF: http://bdnews24.com/business/2016/08/03/bangladeshs-oldest-mobile-phone-operator-
citycell-in-doldrums-for-strategic-mistakes-say-experts [3]

 Impact of license cancellation:

There are some visible future impacts on the telecommunication industry for license cancellation
of Citycell.

Impact on Financial Institutions:

Nine banks and three financial institutions are in deep trouble as shutdown of financially
strapped Citycell, the country’s oldest mobile phone operator, hangs in the balance, said sources
in the central bank.

According to the Bangladesh Bank, Citycell has taken Tk1,500 crore loan from different
commercial banks and financial institutions. Of the amount, some banks and financial
institutions are the guarantors of Tk1,200 crore.
“Citycell failed to repay loan as it is mired into the financial crisis over the last one year,” said a
BB official. Even after the extension of loan agreement with some banks, the company failed to
continue to repay loan, he added.
BB recently wrote nine banks and three financial institutions not to release fresh loan to the
struggling Citycell unless meet earlier installments of loans.
According to the central bank, as the guarantor of the Citycell loan, AB Bank paid Tk600 Crores
to different banks, City Bank Tk.145 Crores to BRAC Bank and Prime Bank Tk. 25 Crores to a
bank.
NCCB was also the guarantor of the Citycell loan and Mutual Trust tried to realize Tk.40 Crores
from the company.
REF: http://www.dhakatribune.com/business/2016/09/01/citycell-shutdown-nine-banks-three-
fis-trouble/ [4]

Impact on Customers:

Customers of CityCell are facing a huge problem regarding the cancellation of Citycell’s license.
Most of them haven’t been able to switch operators due to facing trouble regarding Biometric
Registration complexities. Most Customers had have long term relationships with the company
and are having problems to realize funds, restructure contacts and specially changing accounts
and user profiles for Mobile pay solutions. Many customers have complained about trust issues
regarding the telecommunication industry and the service providers as such problems regarding
are deeply harassing their personal and social lives.

Impact on Employees:

Citycell employees are facing a huge dilemma regarding their future job security and payments
as most of the employees including top level ones have not been paid their due salaries even up
to as long as 14 months. During the closure, the company had a total of 430 permanent staff.
Most of them remained unpaid for the last four months while officials at the managerial and
executive level had not received bonuses on the last two Eid’s.
REF: http://www.dhakatribune.com/bangladesh/2016/10/22/citycell-employees-demand-
payment-dues/ [5]

Impact On Telecommunications Sector:

The entire telecommunication sector is facing a situation of risk crisis as customers are in a state
of insecurity regarding their service providers. The network providers do not only provide
communication services but rather are involved in many financial product offerings with their
customers and their security information’s.

 Conclusion:
Even though the customers of Citycell are in a state of insecurity an crisis the entire customer
base for receiving telecommunication will not face any large impact as Citycell holds less than
2% of the market share. The telecommunication industry will not face a huge hit as they have
been serving almost the remaining 98% customers efficiently all through this time. The financial
institutions who have given loans to CityCell will certainly have some problems regarding
realizing the loans back.
 References:

1. https://www.scribd.com/document/87995066/Background-Citycell

2. Govt starts process to cancel Citycell's license, http://www.thefinancialexpress-

bd.com/2016/08/16/42324/Govt-starts-process-to-cancel-Citycell

3. Bangladesh’s oldest mobile-phone operator Citycell in doldrums for ‘strategic

mistakes’, say experts http://bdnews24.com/business/2016/08/03/bangladeshs-
oldest-mobile-phone-operator-citycell-in-doldrums-for-strategic-mistakes-say-
experts

4. Citycell shutdown: Nine banks, three FIs in trouble

http://www.dhakatribune.com/business/2016/09/01/citycell-shutdown-nine-banks-
three-fis-trouble/

5. Citycell employees demand payment of dues

http://www.dhakatribune.com/bangladesh/2016/10/22/citycell-employees-demand-
payment-dues/