ACCORDING to the latest financial results released by Cyta, annual revenue and profits continue on a downward path as market share is contracting. Revenue has been steadily declining, with figures released last week showing that this had fallen from €473m in 2011 to €362m in 2016, while the forecast for this year is €350m. Profits fell by close to 50 per cent in 2016, compared to 2015, while its market share for mobile telephony has fallen from 73.3 per cent in 2011 to 54.33 per cent at the end of last year.
The chairperson of the authority, Rena Rouvitha-Panou, admitted that alternative sources of revenue were needed to stop the decline. The top priority was the commercial exploitation of digital technology in which Cyta was ahead of its competitors, she said. Everyone understood she meant that Cyta had to pursue strategic cooperation with foreign companies so it can acquire technical expertise and she spoke of the need to rationalise operational costs, which was a diplomatic language for cost cutting.
It is one thing to identify what needs to be done and quite another to actually implement it. Cyta, because of its size, its state sector-type procedures, political party interference and powerful unions is a slow-moving and inflexible organisation that may not be suited for the fast-changing digital era. In this respect its competitors have a big advantage, which is reflected in their growing market share. Monolithic, inefficient state organisations are profitable for as long as they have monopolistic powers, but once the market opens up they have difficulty coping.
This is why the EAC, which has been seeing its surpluses steadily decrease – even as a monopoly – is doing everything in its power to delay the liberalisation of power production. Cyprus Airways was also making a profit for as long as its main routes were closed to competition and it had control of the old airport’s duty-free shops. Once the market was opened up and the state prevented from subsidising it, it was only a matter of time before it closed down.
One of the terms of the memorandum of understanding, during the assistance programme, was the privatisation of Cyta, EAC and Limassol port. Only the latter was privatised and it has become a better-run port, offering a much-improved service. The Troika believed Cyta and EAC would have become much more efficient, leaner organisations if they were privatised, but the unions and political parties blocked the government’s privatisation plans. It is the familiar short-sighted approach, which never has a happy end. Cyprus Airways began looking for a strategic investor only once it was in financial meltdown. By then nobody would invest in the company.