Parliament’s decision to freeze significant parts of the Cyprus Telecommunications Authority (CyTA) budget for 2010 “shackles” the organisation and makes it a hostage within an extremely competitive market, CyTA said yesterday.
However, House Finance Committee chairman and DIKO vice-chairman Nicolas Papadopoulos was equally adamant saying as far as his party was concerned, the House should be able to closely scrutinise the proposed spending of a semi-governmental organisationon (SGO) on behalf of the Cypriot taxpayer.
Papadopoulos said CyTA’s chairman should apologise for the “allegations and insinuations” made against members of the House.
In a statement yesterday, CyTA said despite the fact that it had asked for 10 per cent less funding in its 2010 budget, “the House plenum’s decision shackles the organisation and makes it a hostage within an extremely competitive market. It is clear that the new circumstances place CyTA at a disadvantage in relation to its competitors.”
During Wednesday’s plenary, the budgets of the island’s four biggest SGOs – Cyprus Broadcasting Corporation (CyBC), Cyprus Tourism Organisation (CTO), Electricity Authority of Cyprus (EAC) and CyTA – were only passed after deputies “froze” substantial parts from them, making any future approval conditional upon separate detailed justification.
CyTA was by far the worst hit, having almost €50 million frozen. A unanimously-approved amendment by AKEL led to the deduction of €1.3 million for bonuses and incentives, as well as €2 million for payments under the early retirement scheme.
Deputies also refused to approve the €20.8 million that would allow CyTA’s TV network Cytavision to pay for the right to screen football matches. Other deductions included €11 million earmarked for advertising and promotion, and €10 million for investments in Greece by related company Digimed, CyTA Hellas’ main source of cashflow.
On Thursday, CyTA chairman Stathis Kittis suggested the reason why the House did what it did was that it had resisted pressure from deputies and others to withdraw its stand-alone bid for the second digital platform – set to be awarded in the near future – and instead join in the bid that has been made by owners of local TV stations. The only other bid is by Greek company LRG.
Speaking at a news conference at DISY headquarters yesterday, House Commerce Committee chairman and party vice-president Lefteris Christoforou vehemently condemned what he described as “the misinformation being peddled these days”, saying “the House had not cut a single cent” from CyTA’s proposed budget – rather, “the House simply asked to check” the budget’s details.
Regarding “ulterior motives” related to the digital platform, Christoforou said that after exhaustive discussions, the important issue for the House was that “in a document with supporting figures, CyTA’s management, technocrats and experts all called on its board not to get involved in the matter of the digital platform, because it is unprofitable.”
“Questions need to be asked when hundreds of millions are approved in CyTA’s budget, only €3 million are frozen relating to the platform, and yet a revolution breaks out over that €3 million. Why so much passion? Why so much tension?…Is something rotten in the state of Denmark called CyTA?”
AKEL deputy Yiannis Lamaris insisted digital licence issue lay behind the budget row. Yesterday he referred to the fact that a proposal had been made by opposition DISY, and DIKO’s Papadopoulos for legislation to prevent CyTA from bidding for the second digital licence, but a request to postpone the proposal was made once significant parts of CyTA’s budget were frozen.
“How can someone completely rule out that there are ulterior motives relating to the (licence for the) second digital platform?” he said.
THERE IS no question that CyTA is highly profitable overall, with its mobile telephony, static telephony and internet services all making healthy profits in 2008 (the most recently published figures). Ahead of last week’s plenum vote, CyTA representatives had told the House Finance Committee that in 2008 it had made around €27 million gross profit from its domestic and international static telephony, and some €113 million profit from mobile telephony.
The only loss-making part of its operation was Cytavision, which posted a loss of €11 million in 2008. However, CyTA argued that it only recently got involved in the provision of TV services, so the need for significant investment in new technological infrastructure on the one hand and competitive subscriber tariffs on the other would rule out any profit during the first few years.
Like the EAC, CyTA’s profits are subject to a “dividend” payable each year to the government, the amount of which is calculated according to a formula laid down by legislation relating to the SGOs.
CyTA CEO Photis Savvides told the Mail yesterday that “in the eight or so years since the Cyprus telecoms market was liberalised, CyTA has contributed €440 million to the state’s coffers in the form of ‘dividends’. If you add roughly the same amount we paid in income tax plus VAT for the same period, this means the government has received almost €1 billion from us in contributions, which is a lot more than it received when we were a state organisation.”
