House turns the spotlight on CyTA-LTV deal

THE HOUSE Watchdog Committee convened extraordinarily yesterday to pore over a disputed deal between the Cyprus Telecommunications Authority (CyTA) and subscriber channel LTV.

Battle lines have been drawn over the agreement, which provides that LTV and Alfa will remain on Multichoice’s satellite platform until 2010, while at the same time LTV and Alfa will supply miVision, managed by CyTA, with four channels with entertainment content.

The crux revolves around the broadband service sector. CyTA intends to supply triple play – video, audio and data – via its copper cable network.

That means subscribers to miVision will in the future get Internet, telephony and digital television through a single set-top box. Private telecom operators are furious that CyTA’s access to television content – especially the lucrative football broadcasting rights – will wipe out the competition in the market.

CyTA currently has 94 per cent of the internet market and has a 100 per cent control of the broadband service market, while LTV boasts an estimated 30 per cent market penetration of all households in Cyprus. Critics say the deal between the two will create a super-monopoly.

But given CyTA is a semi-government organisation, its budget needs to get the green light from parliament.

More than that, CyTA was required to inform the House of any business agreements, but clearly it did not do so. In justifying its omission, CyTA said the deal with LTV would be made via an affiliate, Digimed, which is an autonomous company and therefore not bound by the same restrictions.

The House Watchdog Committee yesterday had a first look at the contract, with several deputies raising concerns that competition laws were being breached.

The European Democrats’ Prodromos Prodromou called the deal “a scandal,” wondering how it was possible for an SGO to pay a private corporation [LTV] some £165 million.

“Very strange things are going on,” Prodromou told the Mail.

“How could they have signed the deal without first getting approval for the funds? Also, according to the Auditor-general, CyTA should have mentioned in the contract that the implementation of the deal is subject to that approval. That way they would have covered all the bases. But they did not do that.”

There was something else that did not make sense, according to Prodromou. The preliminary agreement or MOU was signed on February 13. It stipulated that CyTA had reservations about certain clauses, but that if after 20 days there was no consensus with LTV on these points, the agreement would stand as is.

“In other words, they’re saying ‘we have some problems, but if you (LTV) don’t agree with us, it’s okay, we’ll go ahead with the deal’.

“What kind of logic is that?” mused Prodromou.

But the deputy raised a more serious issue. He said there was a clause in the contract pointing out that the monthly subscription fee for miVision would be fixed for any and all future television channels who might want to join the platform.

“This is clearly setting fixed prices, and as such is a monopolistic practice,” he said.

Tensions arose at the committee yesterday, when CyTA chairman Stavros Kremmos demanded that the session be conducted behind closed doors for reasons of confidentiality. He was referring to the presence of Anthony Voskarides, the CEO of rival telecom provider OTENet, who has accused CyTA of abusing its dominant market position.

After much debate, deputies eventually granted Kremmos his wish, and Voskarides was asked to leave the room.

Following the meeting, Kremmos told waiting reporters that CyTA would “collapse” if the deal with LTV did not go through.

He said the organisation had invested £130 million into its copper cable network, and could not afford to let the expensive system to fall into disuse.

But Voskarides had a different take on the statements.

“To my ears, that sounds a lot like an indirect admission that CyTA cannot function in a situation that is not a monopoly,” he told the Mail.

“I also heard that Kremmos told the committee CyTA was determined to maintain its 94 per cent share of the internet market. That comment alone shows what their mentality is. They want to hold on to their monopoly by hook or crook.
“All we want is a level playing field,” he added.

Voskarides, who last week predicted an “ugly fight” in the telecom industry, said he and others were pinning their hopes on the EU, backed up by the local Competition Commission (CC).

The CC has already launched an investigation into the deal, seizing documents and electronic data from LTV’s and CyTA’s offices.

Assuming CyTA is found to have breached competition laws, the CC has the authority to declare the deal null and void, a move that would open a whole new can of worms.