Citycell- A Failure Story

Course Code: BUS535, Section-1

Submitted to
Dr. Md. Nazmul Hossain
Associate Professor
North South University

Submitted by
Ashikur Rahman
ID-2025219660

Submission date
12TH August, 2021

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 Citycell- A Failure Story
Introduction
Citycell was the first ever telephone operator and leading telecommunication companies in
Bangladesh which started its journey in the year 1989. During its operation of over 27 years
in Bangladesh they became one of the biggest mobile operators in Bangladesh. At that time
Citycell was the only telecommunication operator in Bangladesh that controlled the local
mobile market using the CDMA and EVDO technology. But within a short time Citycell
faced brutal competition from other operators who offered better technology and customer
services. Fast technology changes or advances put Citycell under constant pressure to
upgrade their network and infrastructure at a significant cost. And these changes put them to
the risk of losing their market share. Lessening user subscription, falling revenue, poor
network performances and institutional corruptions all made the company suffer more in
terms of revenue and operations. There are lots of internal and external factors which were
not working well for Citycell and for that reason Citycell had to stop its operation in
Bangladesh on the 20th of October 2016. The reasons that affected Citycell and lead them in
failure will discuss in the following discussion.

A brief history of Citycell

Citycell was pioneering mobile operator company of Bangladesh’s and South Asia and they
are the only user of CDMA and EVDO technology in Bangladesh. At that time Citycell was
the customer-oriented organization whose main mission is to deliver the appropriate
telecommunication services to Bangladeshi people.

In the year 1989 Bangladesh Telecommunication Limited was issued the license for operating
cellular, paging and all other wireless communication networks. In October 1990 Bangladesh
Telecom Limited and Hutchison Whampoa Limited of Hong Kong formed a joint venture
Hutchison Bangladesh Telecom Limited. In 1993 HBTL inaugurated their commercial
operation by using the Advanced Mobile Phone Service technology. After Sri Lanka’s
“Celltel” this was the second biggest cellular operator of South Asia. At the end of that year
Pacific Motors procured 50% share of BTL. They are the concern of Pacific Group which is
involved in the business of banking, pharmaceuticals, fisheries, automobiles, healthcare, and

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tea. In the year 1996 HBTL changed their name to Pacific Bangladesh Telecom Limited and
later that year “Citycell”- the digital brand name was launched. This rebranding boostup their
business in the market in order to trade their cellular service. And this is how Citycell had an
emergence in the telecom industry of Bangladesh. In terms of adopting CDMA technology in
the subcontinent and establishing the first private wireless network, Citycell was the first ever
Telecom Company until Grammenphone and Aktel enter in the market.

In the beginning of the Citycell they used to target a small market of the society who might
use the mobile phone as a luxury product. Citycell introduced some postpaid packages for
those customers. And later they bring some packages also but the call rate was too high. Each
min 10taka outgoing and 7.50 taka in incoming call rate. They had created a monopoly
market as there was no other mobile company in Bangladesh at that time. In the year 2005
PBTL created a milestone through strategic partnership with SingTel which was Asia’s
leading communications solution provider. With the financial and technical expertise from
SingTel citycell bring lots of innovative products and services for the customers at affordable
prices such as “Alap call me plan”, “Alap super plan”, “Hello 123” and “Voice data”.

At that time other mobile operators like grammenphone and airtel also started to enter in that
arket. In 2005 when others had started using GSM technology, Citycell was still in the
CDMA technology. Citycell introduced some CDMA handset like; huawei, Samsung, alcatel,
zte etc The main difference between CDMA and GSM is that, there is a SIM card slot in
GSM. But for CDMA there was a fixed SIM card number for each handset. For that reason
consumers were unable to use different SIM card in a singel phone. They also launched
Citycell zoom ultra-plan in the market, by which customers can connect with the internet
through various prepaid and postpaid plans. And their download speed was 512kb/sec.

In 2010 citycell get new CEO Mehbub Chowdhury. He had an experience of 10 years in
telecom industry. And in 2011 citycell was at its highest peak with a revenue of 347.02 crore
taka. But at that time citycell were still limited with the old CDMA technology. To convert
into GSM technology they were needed 5MHZ spectrum of 1800 MHZ band. BTRC offered
them to convert into GSM by spending USD 200 million. But they didn’t take this seriously.
And as a result their numbers of consumers felled consecutively. And for that reason there
revenue also decresed in 2012 which is 267.64 crore. From 1996 till 2011 everything was
perfect for citycell but for their very misfortune, technology, competition, poor sales and
admin they started to fall after that.

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Why did Citycell fail?
In the beginning citycell have a strong brand image but due to some mismanagement and
wrong decision they could not survive for a long time in the competitive telecom market. The
factors which caused the fall of Citycell are described below-

1. When a company wants to survive in the market they needs to understand customer's
actual need & demand. In the year 2005 when GSM technology was beginning to get
popular in Bangladesh at that time Citycell was not worried about losing its customer
base because citycell was well established with its CDMA technology in the market. But
CDMA technology restricts the users to use different types of mobile operators in a same
cell phone. GSM technology based customers can use one phone to use different types of
operator. And for that reason customer can get different types of offers from different
operators and GSM technology have good network stability then CDMA Technology. For
that reason GSM based operators like Grammenphone and Aktel get well accepted by the
people of Bangladesh. Even many researchers, consultant and news media suggests
Citycell to convert into GSM but Citycell didn’t pay attention to that. And after that they
losses their market share day by day.

2. Citycell did not maintain good political relationship with government at that time. For
that reason with the help of strong lobbying with the past government when
Grameenphone was able to use the optical fiber networks of Bangladesh Railway for the
next twenty five years where Citycell could covered roughly only 58 districts all over the
country with a poor infrastructure. And for that reason Citycell gradually was losing their
mass subscribers due to failure to meet the demand of the customer and also started
lagging far behind than any other operator in Bangladesh available then.

3. In the year 2008 citycell not only suffer from company performance but the competition
from the competitors also increased. And for that they do some illegal activities like
illegal Voice over Internet Protocol-VOIP activities which were not allowed in
Bangladesh as par the government’s regulation. For this institutional scandal Citycell
suffered much at that moment. Citycell was the fourth mobile operator to be penalized for
their involvement in the VoIP scandal. Grameenphone the country's largest operator was
fined 168.40 crore Tk, Aktel-145crore Tk, Banglalink-125crore Tk and Citycell-150 crore
Tk. In total 588.4 crore Tk will be deposited to the government fund as compensation.

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 But for the investment and customer satisfaction problem they face more reputational
problem than other operators.

4. In 2013 government asked Citycell to bid for the 3G network license. At that time
Citycell failed to leverage that opportunity too and they are not realize that the 3g
networks were going to escort a revolution in the telecom industry. Failing to upgrade the
infrastructure, the performance of the company degraded even more which created
frustrations among users. While other telecom operators giving diffrent services and
entered into 3G network service at that time citycell did not introduce 3G network service
yet that time. And the CDMA handset weren’t even accomplish with smart features. And
it create customer dissatisfaction and high range of customer induce themselves to switch
to other telecom operator.

5. From the year 2011 citycell started to loss there reputation and for that reason the revenue
also decresed day by day like in 2011 citycell had 347 crore revenue but in 2014 they had
only 134 crore tk revenue. And with that citycells debt started rising rapidly and day to
day expenses such as advertising expenses, salaries etc. Were delayed and defaulted. And
also the government loans were increasing over time and along with that liability of
electricity bills, advertisement bills and overdrafts of more than Tk.100 Crore from
multiple banks started pulling the company to an end. In 2016, the company’s debt to
BTRC reached BDT 477.51 crore. At that time Appellate Division of Supreme Court
issued an order for Citycell to clear its dues to continue its operation. Citycell failed to
comply even with multiple hearings.

6. Major blow for the company was when the investors and customer both started to lose
interest on Citycell. For their bad reputations and other failures they lost their investors.
And that time investors stopped investing in Citycell. At that time SingTel owned 44.5%,
pacific Motors owned 37.95% and the Far East Telecom owned a 17.51% share of
Citycell. According to Bangladesh Bank Citycell was under a debt of Tk.1500 crore and
among the amount various commercial banks and financial sectors of Bangladesh were
guarantors of Tk.1200 crore. But for their investor and revenue problem they unable to
pay the loans on time. And in the year 2016 Citycell had to fall in huge risk and their
license got cancel.

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7.  Lack of visionary leadership is one of the major reasons to stop a company like Citycell.
A quality leader is always adopting new technology for the improvement of the company.
Being the nation’s first and biggest telecom company their management’s faces problem
to bring investment. Their poor management does not know that where the company
needs to invest and how the company will react properly in the changes of trends and
technology. The top management failed to identify the changes in consumer preference to
new technology like GSM or 3G. Their Research and development team also do not work
properly here to manipulate the hire management to adopt new technology. For poor
management the customer service and compliance in the workplace did not maintained
properly. With visionary leadership and proper strategies all the above factors could have
been taken care.

What could have been done to prevent this failure?

1. The main reasons behind Citycell collapsing was not acknowledging the customer’s
needs and demands, Unwillingness to adopt modern technologies. If Citycell decided to
move to GSM earlier than their competitors then this would have boosted the brand
equity of Citycell. When GSM and 3G technologies were give users media, web browsing
and high Internet speed but Citycell CDMA handsets weren’t even accomplished with
Smart features. If they covert them in to GSM or 3G technology then consumers who
were using Citycell as a carrier might have decided to remain with Citycell.

2. Citycells marketing or pricing policy also one of the main reason of their failure. Citycell
launched a few offers for the users, but in comparison to its competitors, the number of
offers were still less. And their high call rate with old CDMA system was another reason
to lose the customers. Citycell should reduce their call rate before other operators entered
into the market with attractive call range. And if they increase their service offerings by
creating innovative, unique and cost-effective various products then customer might have
decided to remain with Citycell.

3. Citycell should be more focused on their network structure. Because of their less
frequency and bandwidth their network always faced different tyeps of problems both in
rural and urban area. And for solve this problem at that time they should invested more

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 money to build adequate numbers of towers with more spectrum. And this could help the
people of the remote parts also comfortably use the Citycell handset. And this proper
maintenance and upgrades of the network in the rural and urban areas would help them to
retain their existing and attract new customers too.

4. For getting sustainability in a business it is necessary to ensure that the stakeholders of

the company are managed well. At that moment Citycell needed to ensure that the
investors were rightly updated and investors’ benefits were kept ensuring that the
investors kept investing in the business. That can help citycell to attract new investor
which was effective for their debt control which could help Citycell to overcome the
crisis.

5. One of the main reasons for their fall is lack of Institutional compliance. And this
Institutional compliance questions the integrity of a company. At that time Citycell
needed proper audits in a regular interval. The audit team should always be an
independent body and this was not under the direct supervision of any management of
Citycell. This can rectify the institutional scandal and can helps to find the problems even
before it could have happened.

6. SingTel was their partner so here citycell could have learnt more about the global trends
in different markets. SingTel had a vast knowledge due to their global presence. But
citycell could not use their opportunity and resulted failure. But this would have also
helped them to adapt new technologies much faster and earlier than any of the
competitors.

7. A quality leader is always adopting new technology for the improvement of the company.
An efficient leader who can take proper decisions is always needed for an organization.
When the management was suffering from different failures the board needed to hold the
leadership accountable and take instant measures to correct the mistakes company made.
If the top management was capable of adaptability and decision making in proper time
Citycell might be the one of the strongest leading telecom company right now.

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Lessons learned
 In this competitive world all the company should invest enough money in research and
development. Research and Development can helps a company to remain sustainable in
the competitive market.

 For sustaining the business it is important for a company to meet the needs and fulfill the
demand of the potential customers. Because business is all about customer satisfaction.
But Citycell followed strategy remaining as revenue driven, rather than subscriber driven.
So we get a learn that it’s always better to be follow Customer driven strategies.

 In our country all company should understand and research the customer preference
because with time and innovation it changes. And also based on this they need to have a
strong price setting competence to dominant the market. Companies should launch
product not only for some segmented customers, but for everyone.

 Companies should accept the new technology and the technology in trend within the
proper time. This adoption of technology is the major part of the businesses to gain the
competitive advantage.

 Companies should maintain government’s rules, regulation and indications. And for small
revenue they need not to do any kinds of illegal actions which can affect them in a long
run.

 To maintain a proper management and market advantages companies should cooperate

and utilize all the business partners. They also should focus on their employees and fulfill
their every need as they are the one who operates the business activities.

 All companies must have a qualified and experienced leader, who can take proper
decisions in time and make proper marketing strategy. And this leadership strategy along
with marketing strategy helps to operate its business efficiently and this will bring profit
which was missing in Citycell.

 Institutional compliance should be maintained properly. Proper audits in a regular interval

can help to maintain the compliance. And this can rectify institutional scandal and can
helps to find the problems even before it could have happened.

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Conclusion
Citycell was the first telecommunication company in Bangladesh. In the early life stage
citycell provides many innovative, reliable, excellent mobile service and internet services.
But one times market leader Citycell faced a decline in revenue and lower subscription from
2011. This failure story of citycell shows us how a market leader company can lose its
leadership and market in a sort time if the company gets too comfortable with its current
operation and technology without adapting the changes in technology and consumers choices.
The company might have been able to come back and dominated the market again if the
management could have taken the right decision at the right time with the right products and
technology. At the end we can say that citycell gave us a great lesson in how to sustain in the
business and how a company should take the right decision in right moment before it’s too
late. And it also helps to know how a company build a strong strategy to adopt the innovation
while maintain the all regulatory.

References
 https://bdnews24.com/business/2016/08/03/bangladeshs-oldest-mobile-phone-operator-
citycell-in-doldrums-for-strategic-mistakes-say-experts
 https://www.thedailystar.net/business/citycell-switched-1302028
 https://www.observerbd.com/details.php?id=26919
 https://www.dhakatribune.com/bangladesh/crime/2016/10/20/btrc-raids-citycell-supends-
spectrum/
 http://banglagolpo9.blogspot.com/2018/07/the-reasons-behind-citycells-failure.html
 https://www.youtube.com/watch?v=3koFSAw6s-4
 https://www.business-standard.com/article/pti-stories/b-desh-shuts-down-oldest-mobile-
phone-operator-citycell-116102100306_1.html
 https://gaznobay.net/the-rise-fall-of-the-telecom-trailblazer-company-citycell/

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