Cyprus Mail

Our View: State’s plan for ‘a little privatisation’ of Cyta is doomed to fail

A FEW WEEKS ago, we wrote that the takeover of the MTN operations in Cyprus by Monaco Telecom SA should sound alarm bells at state-controlled Cyta and for all the politicians and union bosses that were fighting against its privatisation. Announcing the buyout of MTN, Monaco Telecom said it “carefully selected it because of its potential and prospects,” the implication being that it considered there was significant scope for growth. This growth would most probably be at Cyta’s expense.

Fears of greater competition was the reason finance minister Harris Georgiades raised the spectre of privatisation of Cyta again on Tuesday. The government plan for “partial privatisation” was shelved for the last year, so it would not harm the president’s re-election drive, but it appears Georgiades is trying to put it back on the agenda. He said: “I consider that Cyta still has prospects and value, but  nobody, especially its workers, can fail to see the negative change of the figures in a more competitive environment.”

Cyta has seen its surpluses steadily decline with MTN having a taken 35 per cent share of the mobile telephony market, a share that the new owners will want to increase. Its experience from operations in bigger markets, such as Ireland and Switzerland, will pose a threat to the local market leader that will have difficulty coping if it remains a cumbersome and over-staffed state-owned organisation, handicapped by slow procedures and under the influence of unions and politicians.

The bills for Cyta’s privatisation have been gathering dust at the legislature for some time now, but it is questionable whether the government would secure majority backing its half-baked plans; apart from Disy, all other parties are opposed to any change to its status. The government plan, designed to be acceptable to the parties and unions, envisages only partial privatisation – Cyta would be turned into a public company in which the majority of the shares would be held by the state and the remainder sold to a so-called strategic investor, who will have the responsibility of running the company.

Are there any investors out there that would be prepared to sink hundreds of millions into a company in which the state would be the majority shareholders and powerful unions were accustomed to calling the shots? If there was a major dispute between the strategic investor and the unions, whose side would the government take, especially as the parties would back the workers? The plan is doomed to fail, even in the unlikely event that the bills were approved by the legislature and a strategic investor found.

There cannot be “a little” privatisation. If the government wants to safeguard Cyta’s future it must sell it now, rather than wait for party and union approval for the arrival of a strategic investor that might never appear.

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