‘‘BBiigg FFoou­urr’’ ffi­ir­rmmss ggr­raabb ccr­reeaamm ooff pprri­iv­vaat­ti­is­saat­ti­ioonn ddeeaallss

Financial Mirror (Cyprus) - - FRONT PAGE -

Fi­nan­cial pow­er­house Cit­i­group Global Mar­kets has been cho­sen to ad­vise the Cyprus gov­ern­ment on the pri­vati­sa­tion of telco Cyta, the for­mer state mo­nop­oly that has seen its mar­ket share di­min­ish ever since pri­vate play­ers en­tered the scene.

The Cyprus Telecom­mu­ni­ca­tions Au­thor­ity, es­tab­lished as Cyprus Cable and Wire­less dur­ing Bri­tish Colo­nial rule, is a steady div­i­dend-pay­ing util­ity and one of a hand­ful of hens that lay the golden eggs of the state cof­fers.

How­ever, ever since Cyprus was forced into a EUR 10 bln bailout by the Troika of in­ter­na­tional lenders (EU, ECB, IMF), the gov­ern­ment is obliged to follow a path of pri­vati­sa­tion and delever­ag­ing that is aimed at sell­ing as­sets worth EUR 1.4 bln by the end of 2018.

Pri­vate in­vestors and in­ter­na­tional funds are keen to grab a share of the pri­vati­sa­tion process that saw gi­ants UBS, JP Mor­gan, Mer­ril Lynch, HSBC, No­mura and Bar­clays Cap­i­tal vy­ing for the Cyta ad­vi­sory.

Big Four au­dit firm PwC has also been hired as ac­count­ing ad­vi­sor to con­duct a due dili­gence of the telco, to­gether with joint ven­ture part­ners PwC Business So­lu­tions SA and Price­wa­ter­house­Coop­ers SA, with the aim of ad­vis­ing Cit­i­group that will be charged with find­ing a short-list of po­ten­tial buy­ers by the end of this year. The gov­ern­ment is also ex­pected to hire two more con­sul­tants, a le­gal ad­vi­sor and a tech­ni­cal ad­vi­sor.

Cit­i­group is re­garded as a leader in merg­ers and ac­qui­si­tions in the wider Europe, Mid­dle East and Africa (EMEA) re­gion, hav­ing con­cluded some $22 bln worth of M&As and pri­vati­sa­tions in 2012-2014, in­clud­ing the state telcos of Slo­vakia and Slove­nia, and sec­ond world­wide with deals worth another $25 bln.

PwC’s team is ex­pected to be en­hanced with con­sul­tants who worked on the pri­vati­sa­tion of Greek Telecom­mu­ni­ca­tions Or­gan­i­sa­tion (OTE), cur­rently majority-con­trolled by Deutsche Tele­com.

Cyta is a Voda­fone part­ner with its Cy­ta­mo­bile-Voda ser­vice, pro­vid­ing glob­ally-de­signed mo­bile and broad­band ser­vices. Their main ri­val in Cyprus is South Africa-owned MTN. Cyta has op­er­a­tions in Greece and the U.K., as well as in­ter­ests in Mediter­ranean cable op­er­a­tors and other sub­sidiaries.

Gov­ern­ment sources are quoted as say­ing that the se­lec­tion of the con­sul­tants was not based on the low­est bids, but rather had a 70% weight­ing on the qual­ity of ser­vices and 30% of the decision is based on the ad­vi­sor’s scale of fees. Also, the big­gest chunk of re­quire­ments is based on a suc­cess fee, sug­gest­ing that Cit­i­group may (or may not) opt for the high­est bid­der for Cyta.

The next step is for Cyta to be con­verted from a pub­lic in­ter­est semi-gov­ern­ment util­ity to a pri­vate company with a sin­gle share­holder (the state), fol­lowed by the bid­ding process for po­ten­tial buy­ers.

Other state as­sets slated for pri­vati­sa­tion in­clude the Elec­tric­ity Au­thor­ity of Cyprus (EAC), the Ports Au­thor­ity (CPA), the Cyprus Stock Ex­change, the Cyprus State Fairs Au­thor­ity and smaller stakes in Cyprus For­est In­dus­tries, the Pan­cyprian Company of Bak­ers and other hold­ings.

The gov­ern­ment failed to find a buyer for trou­bled na­tional car­rier Cyprus Air­ways that was shut down on Jan­uary 9 with a to­tal debt to tax­pay­ers of about EUR 100 mln after the Euro­pean Com­pe­ti­tion Com­mis­sion said that all state aid to the air­line was deemed il­le­gal and had to be re­turned. KPMG had ad­vised on the search for in­vestors, with only bud­get op­er­a­tor Ryanair and Greek car­rier Aegean Air­lines ex­press­ing some level of in­ter­est.

The gov­ern­ment is al­ready go­ing ahead with grant­ing a na­tional ‘su­per li­cense’ for an in­te­grated casino re­sort op­er­a­tor that is ex­pected to reap about EUR 120 mln over the next eight years. It is be­ing ad­vised by Deloitte Cyprus and Deloitte UK.

Deloitte Cyprus is a sub­con­trac­tor re­spon­si­ble for the fi­nan­cial due dili­gence for Li­mas­sol Port in the project led by Roth­schild.

Deloitte Cyprus is also draft­ing a pro­posal for the Min­istry of Health for the im­ple­men­ta­tion of the new sys­tem for state doc­tors’ over­time pay, as state hos­pi­tals also un­dergo a process of au­ton­omy and a Na­tional Health Scheme (NHS) is be­ing in­tro­duced.

KPMG has been ap­pointed by the CPA to con­sult on which ser­vices will be ten­dered to the pri­vate sec­tor and which will re­main with the state and it has also ad­vised the Cyprus Tourism Or­gan­i­sa­tion on a plan for a mass per­son­nel move­ment across de­part­ments, in or­der to best ex­ploit ex­ist­ing tal­ent.

The state lot­tery, earn­ing EUR 22.3 mln against ex­penses of EUR 1.05 mln in 2013, has also been slated for pri­vati­sa­tion, but the state seems to be hav­ing sec­ond thoughts.

PwC has been tasked by state broad­caster CyBC to com­pile a re­port on its sta­tus and look into the pos­si­bil­ity of turn­ing into into a pri­vate company, as it’s view­er­ship mar­ket share in non-World Cup years falls to an av­er­age 1012%.

Au­dit and ad­vi­sory firm EY (for­merly Ernst & Young) car­ried out a fair value as­sess­ment of the is­land’s Co­op­er­a­tive credit in­sti­tu­tions (Co-ops), a term of a EUR 1.5 bln state cap­i­tal in­jec­tion to cover a cap­i­tal short­fall and stream­line the Co­op­er­a­tive sav­ings banks un­der one um­brella en­tity, the Co­op­er­a­tive Cen­tral Bank that passed Euro­pean Bank­ing Au­thor­ity stress tests in Oc­to­ber.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.