CyTA’s loss-making Greek arm up for sale

CyTA Hellas, the state telecom’s wholly-owned subsidiary in Greece, has been put on the block for sale.

The decision, published in the government gazette, notes that the sale of CyTA Hellas is to be carried out independently of plans to privatise the national telco.

“Without prejudice to the clause relating to the method, scope and process of privatising the Cyprus Telecommunications Authority…the privatisation of CyTA Hellas shall be carried out via the sale of 100 per cent of the company’s shares to a natural or legal person through a competition inviting expressions of interest from investors.”

The company’s equity at end-2015 was €145.9 million.

In a statement this week, CyTA Hellas said the telecoms sector in Greece faces continued challenges due to the economic uncertainty and instability in that country.

“Given this, and taking into account international developments in the field, it has been decided to separate the procedures for CyTA Hellas from those regarding the rest of the CyTA Group, in order to open up the prospect for strategic choices with potential investment partners for CyTA Hellas,” the statement read.

CyTA Hellas has been a loss-making operation ever since it was established in 2007, requiring repeated cash injections from the parent company. To date, CyTA has funnelled an estimated €200 million into its subsidiary.

The company, which offers broadband and telephony services in Greece, currently employs 766 people, of whom 686 are full time workers.

Reports that CyTA was looking to divest of its Greek subsidiary had been floating around for some time.

Last May, CyTA was forced to issue an announcement repudiating reports that it had struck a deal to sell the subsidiary to Wind Hellas.

But periodic reports in the Greek media have suggested that both Wind Hellas and Vodafone have made overtures to acquire CyTA Hellas, in a bid to consolidate their own position in the Greek market.

The auditor-general’s 2015 report on semi-governmental organisations noted that CyTA Hellas continued to bleed, with the subsidiary failing to achieve its profit targets or to financially wean itself off the parent company.

In 2015, CyTA Hellas’ pre-tax loss amounted to €2.7 million, compared to €15.2 million in 2014. The 2015 loss was lower because during the same year the parent company generated €15.8 million from the sale of property.

At the end of 2015, CyTA Hellas posted a negative working capital – its current liabilities exceeded its current assets – of €50.1 million, indicating it was unable to meet its obligations without financial support from the parent company.

The company additionally missed its customer-base targets for 2014 and 2015. At end-2015, its customers accounted only for 51.8 per cent of the target set out in the business plan.

According to CyTA Hellas’ management, the objective for 2015 was to slash staff by 10 per cent and salaries by 5 per cent. The target was not met, as despite a reduction in staff the payroll was virtually unchanged – €16.1 million in 2015, compared to €16.5 million in 2014.

Meanwhile the privatisation of CyTA itself has been put on hold until January 2018, following legislation which opposition parties rammed through parliament in April of this year.

Under the terms of an international bailout, Cyprus has to raise €1.4 billion by selling off state-owned companies in sectors including telecoms, energy and ports.