As it seeks a dividend policy
CYTA, the state-owned telecom operator, reported a sharp decline in net profits for 2005 to CYP 18.31 mln compared to CYP 30.8 mln in 2004 following a massive rise in costs and as the Authority increased its contributions to the staff provident fund to cover the shortfall.
Total revenue was mildly lower at CYP 230.45 mln in 2005 compared to CYP 231.60 mln in 2004. Revenue from fixed telephony was down slightly at CYP 81.8 mln from CYP 83.3 mln in 2004, revenue from mobile telephony dropped from CYP 113.5 mln to CYP 108.7 mln while revenue from other services was up at CYP 39.8 mln from CYP 34.6 mln in 2004.
While total revenue was steady, operating expenses surged 8.4% year-on-year to CYP 194.54 mln from CYP 179.42 mln a year ago.
The bulk of expenses referred to staff costs, up 8% to CYP 63.6 mln, while other costs surged 29% to CYP 31.07 mln.
The surplus from provision of services fell 32% to CYP 35.9 mln from CYP 52.1 mln, for which the Authority did not provide any explanations.
CYTA also charged CYP 17.7 mln to its P&L account to fund its staff pension fund liability compared to CYP 9.6 mln charged in 2004.
Dividend
Net profit amounted to CYP 18.31 mln from CYP 30.8 mln a year earlier, with CYTA Chairman Stavros Kremmos adamant that a concrete, yet clearly defined policy must be introduced whereby the Authority should pay a dividend to its sole owner, the government.
“We are not against the payment of a dividend, but we want this to be done by the rule of the book and have the government raid our coffers seeking cash whenever it pleases.”
Kremmos told the Financial Mirror that there are at least six preconditions before a semi-governmental agency such as CYTA may pay a dividend.
A company first needs to make a profit. It then needs to have the liquidity or cash flow to pay such a dividend. CYTA does not have any cash flow problems, considering that at the end of 2005, its cash and bank balances amounted to CYP 130 mln.
Any dividend policy should be made in line with and after taking into consideration its investment needs. Other needs include its contractual obligations, its pension fund obligations and the need for the board to decide on the level of dividend.
“The Cyprus Company Law specifically states that the board decides on the level of the dividend, while shareholders (in this case the government) approve or reduce the level at the AGM, but with no power to increase the amount,” said Kremmos.
The outgoing Chairman of CYTA, whose term of office ends this month, admitted that one of his major shortcomings was the fact that he did not manage to change the status of CYTA from a semi-governmental agency into a state-owned corporation.
“We tried, but forces beyond our control did not allow this to happen.”
Overseas operations
Kremmos said the overseas operations are doing well, with CYTA Hungary, in which CYTA has a 80% stake, needing another EUR 2 mln on top of the EUR 3 mln already invested in order to provide Internet, telephony and data services.
CYTA UK, which acts as an alternate telecom provider by leasing capacity from UK telcos, has received a total of CYP 600.000 in investments, while there are no specific plans as to when CYTA Hellas may commence operations.
