News From Telecom World

CityCell loss almost doubles in 2008 because of ads, price war, handset subsidy

Posted on: February 8, 2009

Mobile telephone company CityCell, struggling to remain in business with high spending promotional activities, saw its operating losses escalating to almost double in the first quarter.

The country’s cell-phone pioneer recorded a whopping Tk 795 million in losses in July-September, up from Tk410 million at the same period a year earlier, according to its financial statement obtained by the FE.

The company, jointly owned by south-east Asia’s largest mobile phone operator SingTel and local Pacific group, declined to make any comment.

Chief executive officer Michael D. Seymour said his company does not make public comments on its financial statement.

Its gross income more than halved to Tk270 million from Tk580 million in the same quarter of 2008 fiscal year. The company incurred Tk2.27 billion losses in fiscal 2007-8.

According to the statement, the company’s losses from hardware revenues rose to Tk378 million as it had to subsidise prices of handsets.

The fifth largest mobile phone operator of the country with around two million subscribers spent Tk630 million as subsidy on selling handsets.

Analysts say although Bangladesh is served by six mobile phone operators only the largest Grameenphone churns out profits, with other players bleeding for years.

Zia Uddin, an analyst with New York-based asset management company LR Global, said an intense price war and exorbitant SIM tax are the main factors behind the massive losses.

“An intense competition has led to unhealthy price war in Bangladesh mobile phone market. Most of the companies have to subsidise handset prices to woo clients,” he said.

“In addition, the ARPU (average revenue per user) and tariff rate in Bangladesh are possibly the lowest in the world, draining revenues in almost every operator” he said.

A source said CityCell’s losses mounted in the past one year after its steady revenue dropped from “illicit” internet telephony.

The company earned between Tk1.5 billion and Tk2.0 billion a year, thanks to the illegal operation of voice over internet protocol or VoIP, he added.

In the first quarter, the company also splurged Tk164 million on advertisements alone in an effort to polish its image in the face of intense competition from younger opponents.

The country’s cellphone users reached 44.64 million at the end of December 2008.

With a 21 million-strong subscribers’ base, Telenor-owned Grameenphone leads the telecom battle followed by Banglalink and AKTEl.

Citycell enjoyed monopoly in the mobile telephony market until 1997 when GP, AKTel and Sheba, which later renamed as Banglalink, won licenses to operate in Bangladesh.

Source: Financial Express

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1 Response to "CityCell loss almost doubles in 2008 because of ads, price war, handset subsidy"

BTRC should concentrate on this issue. They seem reluctant on operators business.They have to understand the both side issue.

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