Some banks are in trouble with Citycell as the heavily indebted mobile phone operator has been incurring losses constantly for last several years that it could not pay back the loans.
The company owes a total amount of Tk1,040 crore to 12 banks as of June, and Bangladesh Bank fears the loans would have to be classified as sub-standard. In fact, the loans are up for consideration as classified after the end of September quarter, a central bank executive said.
The company also owes around Tk250 crore to the national exchequer, According to Bangladesh Telecommunication Regulatory Commission sources. The BTRC served a show-cause notice to the company and threatened cancelling the licence.
The net loss of the company was Tk196 crore in 2011, Tk226 crore in 2012, Tk320 crore in 2013 and Tk480 crore in 2014, according to a central bank report.
“We are holding negotiations with the banks to regularise the loans through instalment payment,” Citycell CEO Mehboob Chowdhury told the Dhaka Tribune yesterday.
He hoped to get back in business amid expansion after rescheduling the loans by next quarter.
According to Bangladesh Bank, the cellphone company has already been considered defaulter by four banks – The City, Dutch-Bangla, Eastern and Exim.
The operator recently became defaulter of IFIC Bank as Bangladesh Bank did not extend the loan repayment schedule.
A forced loan of around Tk39 crore was created due to the company’s failure in LC payment, according to a central bank source. The total period of credit against LC should not exceed 180 days as per Bangladesh Bank foreign exchange rule.
Following a request by the company, IFIC Bank sent a letter to the central bank seeking an extension till December, but refused for being an already defaulter company to other banks.
“The central bank usually allows such extension request, but we did not consider the case of Citycell,” said a senior executive of Bangladesh Bank, because the company continues to incur losses and already became defaulter to other banks.
“We requested the central bank to extend the payment time, considering the company’s business situation,” said an IFIC Bank senior executive, expecting the company would be able to pay the loan instalment by December this year.
The total loan of Citycell from the bank stood at Tk177 crore as of June, according to central bank data. The company has total liabilities of about Tk2,325 crore, including the bank loans as of the year 2013.
National Bank also ran into trouble with Citycell as it did not get back a loan of Tk167 crore. The bank, however, obtained collateral considered to be adequate to recover the loan amount.
According to a central bank investigation report, National Bank issued four guarantees against Citycell in the year 2012 for the operator’s taking loan from Eastern Bank, AB Bank and Trust Bank. The total value of the bank guarantees was Tk100 crore.
National Bank also issued short-term loan of Tk100 crore as well as bank guarantees. The loan account and bank guarantees renewed in the year 2013, mortgaging a space of 24,250 square feet worth Tk497 crore.
In accordance with a credit condition, Citycell was supposed to invest Tk210 crore in two phases within June 2012 to get back on business again, but failed.
Meanwhile, the bank topped up the amount of loan Tk150 crore at the end of 2013 from existing Tk100 crore and the bank guarantees to Tk150 crore.
The bank took space mortgage worth Tk1,341 crore from Citycell, plus personal guarantee of Citycell Chairman Morshed Khan and his son Faisal Morshed Khan for the second time.
National Bank expected the company would recover the losses through investing new capital, according to a review report on the loan proposal.
The review report stated, Citycell is overburdened with loans. The company could not recover its losses and gradually being loser facing market competition.
National Bank itself ran a risk by issuing loans and guarantees against such loser company which is against the interest of the depositors, stated the central bank investigation report.
The Citycell has sought time till December from almost all lenders to pay loans as the company is in the process of selling its major stakes, said a senior executive of a private bank.
He said the banks are not, however, so much worried as they hope Citycell would pay their money back after venturing into new business.
Citycell came into operation in 1993 and currently has a subscriber base of 13.49 lakh as of September, lowest among the operators in Bangladesh. It currently holds 1.23% market share.
Back in July 2010, the operator had around 20 lakh subscribers and enjoyed 3.23% market share.