Strategic Management

MBA-550
Name: Dripta Chakma
ID: 2010688
Citycell: A Failure Story
Date: 4th April 2022
Introduction:
Teletalk was the first ever telephone operator and leading telecommunication companies in
Bangladesh which started its journey in 1989. Citycell (Pacific Bangladesh Telecom Limited) is
Bangladesh’s and South Asia’s pioneering mobile communications company and the only CDMA mobile
operator in the country. Citycell once had the highest market share in Bangladesh mobile market. It
was the only telecommunication operator that dominated the local-mobile market using the
CDMA and EVDO technology. In the year 2011 Citycell had 1900000 subscribers. However,
Citycell’s subscriber base gradually kept declining and at one point they were forced to shut
down. But what was the actual reason for the failure of one of the pioneers of the mobile
operator sector in Bangladesh? And why were they forced to stop their services?

History of Citycell:
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. The owners of HBTL decided to sell their stakes in the company
due to the legal war. HBTL’s shares were divided into two parts: Type A, which was held by
BTL and Type B, held by Hutchison. Each type of share represented 50% title of HBTL. Pacific
Motors Limited bought the type A shares while Hong Kong based financial investors Far East
Telecom Limited bought the Type B shares.

On 12th February 1996, HBTL was renamed Pacific Bangladesh Telecom Limited. PBTL uses
the brand name CityCell to market its cellular products. In order to boost the financial and also
the managerial strength of PBTL, the shareholders of PBTL have completed the transaction
under the agreements in which Fujitsu Limited, Japan and Asian Infrastructure Development
Company (AIDEC), established in Cayman Islands, would acquire 10% and 20% equity shares
in PBTL, respectively on June 2000.
With this acquisition of 10% shares in PBTL by Fujitsu Limited, a Global Fortune 500 company,
they have further strengthened their presence in Bangladesh and also have demonstrated
confidence as well as their commitment to the Bangladesh market. Fujitsu has long been
supplying Microwave links and telecommunications equipment to BTTB and is clearly a leading
market player in providing telecommunication solutions in Bangladesh. Being 10% equity
shareholder of the company Fujitsu is in a position to nominate 1 (one) Director to the Board of
PBTL.

Why Citycell failed?

Citycell was dominating the telecom market in Bangladesh that time. But later, they couldn’t
survive in the market. Their subscribers gradually kept declining citycell and shifted to other
operators. So, they had to shut down their company. There are many major reasons behind their
failure.

 Failed to adopt new technology: The big reason behind their failure is not adopting the
new trending technology at right time. Before entering GSM technology, Citycell was the
dominating service provider in the market that time until Gramenphone and Aktel entered
the market. They came with new technology which was able to handle music, video,
images and other media formats, and provide a wide range of services including web
browsing, conference calls, and e-commerce. However,citycell didn't introduce 3G
network service at that time while other operator had already entered into 3G network.
CDMA allows wider coverage than GSM. And even they had the technology for rolling
out 3G, long before the licenses were awarded, but they did nothing with that. It created
customer dissatisfaction & persuaded them to switch to another telecom operator Citycell
had many network issues due to the poor bandwidth of CDMA technology. Another issue
is CDMA has a fixed number for a fixed phone, but GSM has sim card slots where
 consumers can use different sim cards in a phone. As GSM Technology gained more and
more popularity around the world as the standard, it had been too late for Citycell to
change their technology. Due to these issues, peoples started to switch other operators.
Citycell failed to adopt GSM technology which is the biggest reason behind their failure.

 Weak Leadership: Citycell was running by wrong leadership. They failed to attract their
investors. Failed to take effective decisions, which lead the company on the wrong road.
They were focused on short term goals rather than long term goals. Even a former top-level
Citycell executive said 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 told bdnews24.com on condition of anonymity.
 Mismanagement: Their management was not stable. Telecom market was becoming a
large market in Bangladesh. After Grameenphone and Aktel entry, the market became
more aggressive. They had chance to switch from CDMA to GSM. But they failed due to
their mismanagement which left the company in a miserable situation.

 Failed to Understand customers’ demand: After GSM entry with 3G technology,

customers started to prefer adopting GSM technology. GSM has many advantages in
telecom industry. CDMA was not able to provide that kind of services to their customers.
And Citycell failed to reach every type of customers. They were focused on some
particular luxury customers. So that, customers were shifting to new technology for a
better performance.

Failed to pay due: Due to their weak leadership and mismanagement, they were not able
to pay their dues. They were injured in debt. Citycell sought time until December 31 to
clear its outstanding charges as the telecom regulator has decided to cancel its spectrum
for the failure to pay Tk 477.51 crore in dues despite several reminders. But BTRC
Chairman Shahjahan Mahmood said to Daily Star "Citycell came up with the same kind
of request eleven times in the past, and every time we considered their appeal, but they
didn't pay the dues," Due to failure of paying dues as ordered by the BTRC in 2016 it was
shut down.

What could have been done to prevent:

 The 1st thing they should have been done to prevent their failure is adopting the new
technology at right time. Because that time, the telecommunication market became
 very competitive. To survive in the market, they should have been taken right
decision at right time.
 In 2012, when the regulator renewed its license, the company should have switched
from CDMA to GSM for only a Tk 2 billion fee.
 They should have converted from fixed phone to changeable sim slots phone.
 Attracting investors could be a good option to prevent this failure.
 They should have provided attractive services to their customers by creating unique,
innovative and cost-effective products.

Lesson learned:
 Understand customer’s demand: Due to fast growing technology, customer’s
demand is changing fast. Understanding their demand is the main key for
organizations.
 Always stay updated with technology: Staying updated helps the company to run
with the flow smoothly.
 Adopt new technology and trends at right time: Taking right steps at right time is
a big advantage for companies. Adopting new technologies at right time helps
companies to stay ahead in the race.
 Need strong leadership: Directly or indirectly, a company’s output depends on
leadership. Strong leadership can lead a company in a proper way.
 Need effective and structured management: A well structured management can
build internal and external relationships strong.
 Stay focused on long term goals: A company’s success depends on their short
term and long-term goals. So, companies should also focus on their long-term
goals.
 Understand the competitors in the market: To stay alive in the market, it is very
important to be able to understand market competitors. This helps companies to
find out their own weakness and helps them to improve which can lead them to
compete the competitors in effective ways.
 Attracting Investors: Investors are the important parts of any business. With the
help of investors, companies can boost their performance. So, being able to attract
the investors is a competitive advantage for the companies.
And these lessons can be utilized in Tele Talk Bangladesh. Teletalk is also a telecom
operator which is owned by Government. But this company is facing similar type of
problems due to corruption, mismanagement and weak leadership. They are losing their
customers due to their poor connection and services. If they continue like this, it would
be hard to survive in the market. But they still have chance to change their strategies by
applying these learnings from citycell. The telecommunication market became more
competitive nowadays with new trending technologies. Competitors bringing more and
more attractive services, facilities to the market with their own effective strategies.
Conclusion: Technology has changed our lives and has made the world smaller with
faster communication, instant information access, and online interactions. Technological
advancements have brought everything to our fingertips, making life more enjoyable and
convenient. So, for telecommunication operators, this is very tough to survive in the
market. To survive in the market, operators must have to follow different effective
strategies.

Reference:
https://youtu.be/3koFSAw6s-4
https://www.educarnival.com/report-on-city-cell/
http://banglagolpo9.blogspot.com/2018/07/the-reasons-behind-citycells-failure.html
https://bdnews24.com/business/2016/08/03/bangladeshs-oldest-mobile-phone-
operator-citycell-in-doldrums-for-strategic-mistakes-say-experts

If anyone ever tries to recall a Bangladeshi originated Telephone operator, the first name
that should be mentioned is none other than the Citycell. Citycell was owned by SingTel
(44.54%), Pacific Motors (37.95%) and Far East Telecom (17.51%). It was the smallest
mobile operator of Bangladesh in terms of subscribers. It was the first ever telephone
operator and leading telecommunication companies in Bangladesh which started its
journey in1989. Being the pioneer and oldest mobile operator of Bangladesh Citycell
once had the highest market share in Bangladesh mobile market. It was the only
telecommunication operator that dominated the local-mobile market using the CDMA
and EVDO technology. It was one of the 3 earliest networks in-south-Asia in accompany
with ETISALAT in Sri Lanka and PAKTEL in Pakistan.In the year 2011 Citycell had
1900000 subscribers but eventually they ended up being bankrupted in 2016 solely
because of the company’s inadequate providence and reluctance to adopt new
technologies over time. The reasons that effected Citycell and It was shut down due to
failure of paying dues as ordered by the BTRC in 2016.