By Stelios Orphanides
State telecom Cyprus Telecommunications Authority (Cyta) is in a disadvantaged position to cope with increasing competition as the European environment becomes more challenging and its market share shrinks, Cyprus’s fiscal watchdog said.
“Turnover which serves as a major indicator to a probable strategic investor is decreasing significantly,” and fell by €116.4m in 2015, or 24 per cent, to €373.8m compared to 2008, the fiscal council said in its autumn report on Wednesday.
In the past four years, accumulated losses from the semi-governmental organisation reached €65.7m, the council said. It added that Cyta, which was earmarked for privatisation in Cyprus’s 2013 bailout terms and was spared thanks to the decision of opposition parties to block the government’s plan, that the company paid on two occasions a total of €46.4m in early retirement compensations.
“As its market share shrinks, Cyta becomes particularly vulnerable to competition, technology and changes in the European Union’s regulatory framework,” such as the reduction of roaming fees and the lifting of obstacles to preventing telecoms from trans-border operations without a licence of an affected member state’s regulator, the council said. This would especially apply in the case that the company goes ahead with unwise investment decisions in the future, the council said.
Cyta generated a €59m profit last year compared to €88.3m the year before. Over 2008 to 2015, it posted an accumulated profit of €584.7m. Cyta’s mobile telephony market share fell in December to below 62 per cent compared with over 81 per cent in June 2009, according to the telecom regulator’s website. Similar, its market share in broadband connections fell in the fourth quarter of 2008 to below 62 per cent from over 82 per cent in the respective quarter of 2008.
On September 19, Finance Minister Harris Georgiades said that the government is preparing a new proposal to privatise the telecom company founded on the philosophy of the commercialisation of the port of Limassol, which allowed the government to maintain ownership of the port’s assets while transferring responsibility of its operations to private investors. Opposition parties rejected the initial government proposal to set up a company that would have taken over Cyta’s operations and assets because it would equal to the sell-off of national wealth.
In 2015, the government decided to exclude power producer Electricity Authority of Cyprus from its privatisation programme, which aimed at generating €1.4bn in revenue to reduce public debt.