Cyprus Mail

Georgiades attempts to persuade MPs over CyTA changes (Updated)

Finance Minister at the House finance committee meeting on Monday

Discussion of a government-sponsored bill to create a private-law company, CyTA Ltd, slated to take over the telecommunications operations and assets of public Cyprus Telecommunications Authority, as part of the organisation’s denationalisation process, was underway at the House finance committee on Monday.
Approval of the bill constitutes the final prior action required by international creditors before the final tranche of bailout money – €275 million – is released to Cyprus. The bill, Finance Minister Harris Georgiades said, needs to be approved by March 7 at the latest – the date of the last Eurogroup session before Cyprus’ adjustment programme expires.
According to Georgiades, if the bill were to be rejected, negative messages would be conveyed to foreign ratings agencies and international markets.
“If this bill is not approved, an opportunity for both the economy and CyTA itself will have been missed,” the finance minister said.
“It will be as if we have closed our eyes to technology.”
He noted that the telecoms company’s market share dropped from 85 to 67 per cent since 2010, while operating cost dropped by €100 million – from €484 million in 2010.
Georgiades added that the payroll comprises almost a third of total operating cost, whereas the average in European Union countries is 18 per cent.
Only Cyprus and Luxembourg maintain state-run telecoms organisations, he said, noting that the global trend is toward denationalisation, with the exception of three countries – Venezuela, Bolivia, and Belize.
In addition to the bill, legislative proposals and regulatory amendments governing the employment status of CyTA employees post-privatisation were also up for discussion in Monday’s session.
Although the government has faced only minor problems in passing bailout-deal reform legislation over the last three years, it appears that bills relating to CyTA’s privatisation are at great risk of not being passed, as a parliamentary majority has publicly declared being opposed to it in principle.
In parliament, Georgiades asked that the bill be passed, arguing that selling off a stake in CyTA to a private investor will help reduce public debt.
He expressed hope that the state telecoms company will not miss the opportunity to modernise and become a flexible organisation, so that it can cope with international competition.
Georgiades assured deputies that the new private-law company will retain all employees, who will be asked to make a decision on their future one year after a strategic investor acquires a stake in the company.
Once a private investor takes over the management of the new company, the staff will have four options: agreeing to an employment contract with the new owner; secondment to the new company without pay, without loss of any benefits; accepting a voluntary exit scheme within one year of the new investor’s entry; and transfer to another department of the public service.
The finance minister explained that the new company will only receive CyTA’s commercial operations, and only assets relating to commercial operations will be offered for sale to private interests.
CyTA’s immovable property and cash reserves will remain with the state, he added, and noted that new employees will not be civil servants.
CyTA’s acting CEO Michalis Achilleos said revenues in telecommunications companies are dropping internationally, owing to competition by alternative communication media like Skype, Viber, and Whatsapp, meaning the organisation will need to seek alternative revenue sources.
A representative from the Legal Service allayed the concerns of some deputies, who raised constitutionality issues, saying the bill is not contrary to any clause in the Constitution.
Speaking on behalf of CyTA’s employee unions, Ilias Demetriou welcomed the fact that the employees’ status post-privatisation has been defined.
However, he asked parliamentary parties to reject the bills, arguing that the employees’ side has tabled a proposal to modernise CyTA without privatisation.
Semi-state organisations’ single biggest problem, he said, is their board members, since most boards are appointed by political parties.
Echoing the unions’ views, opposition parties AKEL, DIKO, EDEK, and the Greens opposed the company’s denationalisation.
“We agree that semi-state organisations need to be modernised, especially in the case of CyTA, where market conditions require faster modernisation,” House finance committee chairman Nicolas Papadopoulos said.
“We are ready to discuss options, even including outsourcing the organisation’s management by private investors, but we don’t agree with the government’s proposal.”
AKEL deputy Yiorgos Loukaides said the discussion confirmed that the best way to safeguard the interests of consumers, taxpayers, employees, and the economy in general, is through the retention of CyTA’s public character.
He added that during the discussion, the leader of ruling DISY said his party will oppose the bills relating to the protection of employees’ status.
EDEK deputy Nicos Nicolaides said parliament cannot be asked to legislate under threat of losing the last bailout-loan tranche.
He added that it is not advisable to sell a company that, even under intense competition, continues to contribute to the state’s coffers.
“Voting these bills into law will pave the way for the selling off of the whole of CyTA,” he said.
The Greens’ deputy Yiorgos Perdikis said that the government’s arguments are “bizarre and contradictory”.
He invoked the reaction of DISY’s leader, and argued that the influence of political parties in CyTA must be eradicated.

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