A N N U a L R E P O R T 2 0
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ANNUAL REPORT 2007 Contents Address by CYTA Chairman 2 Message from the Deputy Chief Executive Officer 8 Chairman and Members of the Board 12 Management Team 14 Corporate Governance at CYTA 16 Corporate Social Responsibility at CYTA 20 Management 30 Products and Customer Service 38 Subsidiary Companies 50 Network 56 Financial Report 62 Auditors’ Report and Financial Statements 65 Offices and cytashops 100 Address by CYTA Chairman Stavros Kremmos on the occasion of the presentation of the Organisation’s 2007 results 2 Ladies and Gentlemen, Throughout its long existence, CYTA’s main strategic aim has been governing our operations, we have succeeded in maintaining our to make progress in tandem with technological developments. In position as market leader and in providing integrated electronic recent years this has been a particularly demanding task since, on communication solutions with multiple benefits for our customers. the one hand, technology is changing by the day and, on the Today, the Organisation stands as a benchmark for comparison, not other, the complexity and multiplicity of its applications have only within the Cypriot telecommunications and business grown enormously. environment but on a truly international scale. CYTA has been at a crucial juncture for the past few years, having Our strategic aim remains that of providing the best that technology been forced to adapt directly to the changes imposed by technology has to offer so that every citizen and organisation may have access and, at the same time, to the new realities of the market, brought to the opportunities afforded by this new digital age. about by liberalisation. Broadband services are the first and central pillar of our strategy Thanks to the concord and cooperation of all those involved - the which aims to ensure that every home and every business in Cyprus Board of Directors, Management and Personnel - we have can access them and thus participate in the modern information achieved our aim. society on an equal basis with their counterparts in advanced countries. We are in a position to contribute to making our country In spite of the restrictions imposed by our regulatory obligations and one of those which adapts to the demands of the new era in a timely the continuing delay over changes to the legal framework manner and plays a leading role. 3 2007 Financial Results proposed legislation, mainly on the grounds that rather than 2007 was a year of very positive financial results which reflect the giving us greater flexibility, it actually removes our ability to be excellent work undertaken by the Organisation. These results are flexible. I hope that the final text of the new law on which the particularly significant since 2007 was a year in which our House will be asked to vote will respond to the demands of competitors expanded their operations and intensified their today’s competitive market. efforts in the Cyprus telecommunications market. Location Policy Operating revenue amounted to í265 million compared Another pending issue that is causing problems and preventing to í249 million in 2006, representing an increase of 7%, while the development of the mobile telephony network concerns the operating expenses remained at around í210 million. location policy for the installation of masts. We have responded to people’s objections by holding seminars with experts on the Earnings before interest, tax, depreciation and amortization subject and meetings in those areas where residents are amounted to í103 million, (an EBITDA margin of 39%, compared particularly sensitive to the issue. with í93 million or 37% in 2006), representing an increase of 10%. We have even published a booklet entitled “Mobile Telephony in The profit margin rose from í40 million or 16% of revenues in our Lives” containing information on exposure levels of 2006 to í55 million or 21% in 2007. The surplus after tax electromagnetic fields, which are vastly lower than internationally increased from í34 million in 2006 to í47 million in 2007. acceptable levels, and on the proper use of mobile phones. The robust finances of the Organisation are evident from the Although mobile telephony is not one of the main sources balance sheet: Reserves rose from í455 million to í503 million while of non-ionising radiation, CYTA’s aim is to ensure that Liquid Funds in the form of government bonds and bank deposits electromagnetic field exposure levels are as low as possible and increased from í208 million in 2006 to í219 million in 2007. much lower than those permitted under European and international specifications. Nevertheless, we regret to note that, We continued our development policy with capital expenditure due to ignorance in many cases, precisely the opposite is being in excess of í49 million. This was financed entirely by our own achieved. As an example, let me mention the removal of masts funds and constituted 18% of operating revenue. from certain locations and the prevention of new masts from being installed. Such action results in the incorrect networking of Competition the mobile phone system which, in turn, leads to users being Healthy competition helps us to renew ourselves, to develop and exposed to higher electromagnetic field levels from their mobile become better at what we do. The main focus of our strategy phones. Let me take this opportunity to state that we operate and tactics is not on neutralising our competitors but on serving and will always operate responsibly and in accordance with strict our customers. guidelines for the protection of the population. Legal and Regulatory Framework Our Customers On the issue of the legal and regulatory framework and the Our customers are extremely valuable to us since they are the relevant Bill that is currently pending in the House of benchmark for our Organisation’s broader strategy. Our activities Representatives, we have objections to certain provisions of the focus on satisfying their requirements and proposing the 4 modern solutions that will give them the freedom to discover, The most important project that we have undertaken has been communicate and mix with the rest of the world. in Greece via our subsidiary CYTA Hellas. Everything is going according to plan and the project is expected to bring Our relationship with our customers is based first and foremost considerable benefits to the Organisation. We are due to start on our reliability and the people-oriented approach of our offering services in 2008. philosophy. We are committed to ensuring that our name remains a synonym for quality, consistency and timely service. The project concerns the implementation of the region 5 sub-project which forms part of the “Broadband Access Our Services Development in the Provinces of Greece” project and applies From being a simple, traditional provider of telecommunications to areas in eastern Crete, the Argosaronic Gulf and western services, CYTA has developed into the leading business Macedonia as designated in the tender published on behalf enterprise in Cyprus providing integrated electronic of the Greek government by Information Society SA. communication solutions. Our Organisation’s expansion is not restricted to these areas, Our strategy is being implemented gradually, transforming the however. Our targets are firmly set on the rest of Greece, Organisation into a TIMES (Telecommunications, Informatics, particularly the large urban centres. In parallel with the current Multimedia, Entertainment, Security) provider with the aim of project which concerns specific areas, CYTA is drawing up a plan offering integrated solutions to customers. Of great importance for expansion throughout Greece because we believe that only to this strategy is the so-called “quadruple play” application in this way will we secure the viability of our presence there. which brings together voice, fast Internet, video/TV and converged mobile and fixed telephony services. We closely monitor all our investments and, in cases where our aims are not being achieved, take corrective action. We have enhanced our portfolio in all services: ñ Internet Protocol Television (IPTV), It is true that we have expressed an interest – and are moving ñ Mobile telephony, in the direction of seriously examining the possibility of ñ Fixed telephony, investing – in the Cyprus energy sector, particularly in renewable ñ The Internet and energy sources. This falls within the framework of our strategy ñ Convergence products. of continuous development which will secure the Organisation’s long-term future. Expansion Abroad and in Cyprus We believe that every organisation needs to be constantly Continuous Improvement improving and developing, otherwise it will fall into what I would We may be making excellent progress but this does not mean call an inevitable decline. that we do not face problems, some caused by external factors and others depending entirely on ourselves. We are always looking for ways of expanding. The Cyprus telecommunications market is limited due to its small size but, As an example, let me say that we need to develop our through our subsidiary companies, we have expanded beyond processes even further so as to reduce the time required to take Cyprus to other countries including the UK, Hungary and Greece. and to implement decisions at middle management and senior 5 management level. Unfortunately we still face problems in this specifically, on the fixed network all Internet speeds will be area, caused by the current legal and regulatory framework that doubled and charges