Cyta pri­vati­sa­tion on hold, for now

Financial Mirror (Cyprus) - - FRONT PAGE -

Af­ter nearly two years of ne­go­ti­a­tions with the Troika of in­ter­na­tional lenders, the gov­ern­ment has fi­nally formulated its pri­vati­sa­tion frame­work for state-owned telco Cyta, re­as­sur­ing its 2,000 work­ers that their jobs and salaries were se­cured.

The plan is to even­tu­ally pri­va­tise the semi-gov­ern­ment or­gan­i­sa­tion into a com­pany with the gov­ern­ment as its sole share­holder, which will later of­fer its stake to lo­cal or in­ter­na­tional in­vestors. Athe same tiome, the com­pany will rpobaly be split into two – the com­mer­cial op­er­a­tor of tele­phony and the owner-op­er­a­tor of the in­fra­struc­ture, that will prob­a­bly re­main in gov­ern­ment hands, but will sell ser­vices to the new Cyta, as it would to all other tel­cos on the is­land.

The gov­ern­ment has had an obli­ga­tion to at least launch the pri­vati­sa­tioon process for Cyta, as well as power com­pany EAC and the port author­ity by the end of 2015, as part of the EUR 10 bln bailout plan from the EU, the ECB and the IMF.

But af­ter protests staged by the Cyta work­ers’ unions in front of par­lia­ment and at the Pres­i­den­tial Palace as the Cab­i­net was meet­ing on Mon­day, the gov­ern­ment seems to have backed down from i mme­di­ate pri­vati­sa­tion, pre­fer­ring to leave the de­ci­sion till af­ter the par­lia­men­tary elec­tions in May.

The only sup­port that the rul­ing DISY party would have had was ex­pected from the cen­tre-right DIKO, that has a sig­nif­i­cant mem­ber­ship among the trade unions, as it ap­pointed many staff dur­ing the hey-day of party favouritism in the 1980s and late 1990s. DIKO’s main op­po­si­tion to pri­vati­sa­tion was the clause for na­tional se­cu­rity, which seems to have been ap­peased with a sep­a­rate bill tabled on Tues­day that al­lows for state in­ter­ven­tion in the case of a na­tional emer­gency. Op­po­si­tion par­ties also said that the pri­vati­sa­tion process could open the doors to Turk­ish en­ti­ties buy­ing up the Cyprus telco.

How­ever, back in Septem­ber, com­mu­nit AKEL’s mouth­piece Har­avghi re­ported on leaked first half re­sults for Cyta, suggest­ing that prof­its were higher, in an at­tempt to fend off rea­sons to sell of the telco. It said that the early re­tire­ment and vol­un­tary re­dun­dancy schemes helped re­duce op­er­at­ing costs from EUR 156.5 mln in the first half of 2014 to EUR 138.8 mln this year.

Prof­its, the news­pa­per re­ports, reached EUR 40.1 mln, up from 25.1 mln from the year ear­lier, not re­al­is­ing that such an ar­gu­ment would make it even more at­trac­tive to po­ten­tial buy­ers.

Fi­nance Min­is­ter Har­ris Ge­orghi­ades re­as­sured work­ers on Mon­day that their salaries and jobs were se­cure, with four al­ter­na­tives ex­pected to be dis­cussed which will de­ter­mine the em­ploy­ment sta­tus and ben­e­fits of the work­ers who will move on to the pri­va­tised com­pany.

Warn­ing that Cyta should not have the same fate as for­mer na­tional car­rier Cyprus Air­ways, Ge­orghi­ades said that the fi­nal EUR 400 mln tranche from the Troika would be jeop­ar­dised if the pri­vati­sa­tion bill is not passed any time soon.

He said that the telco has im­proved its im­age by be­com­ing more ef­fi­cient and prof­itable, wit the iam of making it at­trac­tive to strate­gic in­vestors, un­like Cyprus Air­ways that had be­come a black hole with rigid unions fail­ing to fore­see its demise due to un­sus­tain­ably high op­er­at­ing costs and pay­roll.

He said that the fi­nal EUR 400 mln was aimed for the Co-op­er­a­tive sec­tor, as Cyprus is ex­pected to exit from the three-year mora­to­rium some time in March 2016 and will not have fully utilised the 10 bln ini­tially planned.

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