ANNUAL REPORT 2008

Notes to the Financial Statements
For the year ended  31 December 2008

1. Incorporation and Principal Activities
CYPRUS TELECOMMUNICATIONS AUTHORITY (''Cyta'') is a Semi Governmental Organisation established by Law 67 of 1954 (Cap. 302), as amended by Laws 20/1960, 34/1962, 25/1963, 54/1977, 98/1988, 21/1989, 39(I)/1995, 20(I)1998, 159(I)/2000, 149(I)2001, 13(I)2002, 7(I)/2004, 164(I)2004, 51(I)/2006 and 117(I)/2006.

The principal activity of Cyta, which is unchanged from last year, is the provision of electronic communication services.

2. Basis of Preparation
(a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU).

(b) Basis of measurement
The financial statements have been prepared under the historical cost convention, except in the case of land, buildings and equipment, leases, and investments, which are shown at their fair value.

(c) Adoption of new and revised International Financial Reporting Standards
As from 1 January 2008, Cyta adopted all the International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS), which became effective and also were endorsed by the European Union (EU) and are relevant to its operations. The adoption of these Standards did not have a material effect on Cyta's financial statements.

All IFRSs issued by the International Standards Board (IASB) which are effective for the year ended 31 December 2008, have been adopted by the EU (through the endorsement procedure established by the European Commission), with the exception of IFRIC 12: "Service Concession Arrangements" and certain provisions of IAS 39: "Financial Instruments: Recognition and Measurement" relating to portfolio hedge accounting.

The following Standards, Amendments to Standards and Interpretations had been issued but are not yet effective for the year ended 31 December 2008:

Standards and Interpretations adopted by the EU
• Improvements to IFRSs – 2008 (effective for annual periods beginning on or after 1 January 2009).

• IFRS 1: "First Time Adoption of International Financial Reporting Standards" and IAS 27: "Consolidated and Separate Financial Statements" (Amendment): "Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate" (effective for annual periods beginning on or after 1 July 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IFRS 2 (Amendment): "Share Based Payment Vesting Conditions and Cancellations" (effective for annual periods beginning on or after 1 January 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IFRS 8: "Operating Segments" (effective for annual periods beginning on or after 1 January 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IAS 1 (Revised): "Presentation of Financial Statements" (effective for annual periods beginning on or after 1 January 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IAS 23 (Revised): "Borrowing Costs" (effective for annual periods beginning on or after 1 January 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IAS 32: "Financial Instruments: Presentation" and IAS 1: "Presentation of Financial Statements" (Amendment): "Puttable financial instruments and obligations arising on liquidation" (effective for annual periods beginning on or after 1 January 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IFRIC 13: "Customer Loyalty Programmes" (effective for annual periods beginning on or after 1 July 2008). The application of the interpretation is not expected to have an impact on the financial statements of Cyta.

Standards and Interpretations not adopted by the EU
• IFRS 1 (Revised): "First Time Adoption of International Financial Reporting Standards" (effective for annual periods beginning on or after 1 January 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IFRS 3 (Revised): "Business Combinations" (effective for annual periods beginning on or after 1 July 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IAS 27 (Revised): "Consolidated and Separate Financial Statements" (effective for annual periods beginning on or after 1 July 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IAS 39: "Financial Instruments: Recognition and Measurement" (Amendment): "Eligible Hedged Items" (effective for annual periods beginning on or after 1 July 2009). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IAS 39 (Amendment): "Financial Instruments: Recognition and Measurement": Reclassification of Financial Assets: Effective date and Transition (effective from 1 July 2008). The application of the standard is not expected to have an impact on the financial statements of Cyta.

• IFRIC 15: "Agreements for the construction of real estate" (effective for annual periods on or after 1 January 2009). The application of the interpretation is not expected to have an impact on the financial statements of Cyta.

• IFRIC 16: "Hedges of a net investment in a foreign operation" (effective for annual periods on or after 1 October 2008). The application of the interpretation is not expected to have an impact on the financial statements of Cyta.

• IFRIC 17: "Distributions of Non cash Assets to Owners" (effective for annual periods on or after 1 July 2009). The application of the interpretation is not expected to have an impact on the financial statements of Cyta.

• IFRIC 18: "Transfers of Assets from Customers" (effective from 1 July 2009). The application of the interpretation is not expected to have an impact on the financial statements of Cyta.

The Board of Directors expects that the adoption of these standards or interpretations in future periods will not have a material effect on the financial statements of Cyta except from the application of IAS 1 (Revised): "Presentation of Financial Statements" which is expected to have a significant impact on the presentation of the financial statements.

(d) Use of estimates and judgements
The preparation of financial statements in accordance with IFRSs requires from Management the exercise of judgment, to make estimates and assumptions that influence the application of accounting principles and the related amounts of assets and liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are deemed to be reasonable based on knowledge available at that time. Actual results may deviate from such estimates.

The estimates and underlying assumptions are revised on a continuous basis. Revisions in accounting estimates are recognised in the period during which the estimate is revised, if the estimate affects only that period, or in the period of the revision and future periods, if the revision affects the present as well as future periods.

In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described below:

Provision for bad and doubtful debts
Cyta reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the customer’s payment record and the customer’s overall financial position. If indications of irrecoverability exist, the recoverable amount is estimated and a respective provision for bad and doubtful debts is made. The amount of the provision is charged through the income statement. The review of credit risk is continuous and the methodology and assumptions used for estimating the provision are reviewed regularly and adjusted accordingly.

Provision for obsolete and slow moving inventory
Cyta reviews its inventory records for evidence regarding the saleability of inventory and its net realizable value on disposal. The provision for obsolete and slow moving inventory is based on management’s past experience, taking into consideration the value of inventory as well as the movement and the level of stock of each category of inventory.

The amount of provision is recognized in the income statement. The review of the net realisable value of the inventory is continuous and the methodology and assumptions used for estimating the provision for obsolete and slow moving inventory are reviewed regularly and adjusted accordingly.

Income taxes
Significant judgement is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Cyta recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Impairment of available for sale financial assets other than temporarily impaired
This determination requires significant judgement. Cyta follows the guidance of IAS 39 in determining when an investment is making this judgement, Cyta evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health and near term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

Impairment of intangible asset
Intangible assets are initially recorded at acquisition cost and are amortized on a straight line basis over their useful economic life. Intangible assets that are acquired through a business combination are initially recorded at fair value at the date of acquisition. Intangible assets with indefinite useful life are reviewed for impairment at least once per year. The impairment test is performed using the discounted cash flows expected to be generated through the use of the intangible assets, using a discount rate that reflects the current market estimations and the risks associated with the asset. When it is impractical to estimate the recoverable amount of an asset, Cyta estimates the recoverable amount of the cash generating unit in which the asset belongs to.

Valuation of non listed investments
Cyta uses various valuation methods to value non listed investments. These methods are based on assumptions made by the Board of Directors which are based on market information at the balance sheet date.

Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units of Cyta on which the goodwill has been allocated. The value in use calculation requires Cyta to estimate the future cash flows expected to arise from the cash generating units using a suitable discount rate in order to calculate present value.

(e) Functional and presentation currency
The financial statements are presented in Euro (€΄000) which is the functional currency of Cyta.

3. Significant Accounting Policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all periods presented in these financial statements unless otherwise stated.

Subsidiary companies
Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognised as an expense in the period in which the impairment is identified.

Associates
Associates are those entities in which the Company has significant influence, but no control over the financial and operating policies. Investments in associates are initially recognised at cost and are accounted for by the equity method. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Company's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Revenue recognition
Revenue comprises the invoiced amount for the sale of goods and services net of Value Added Tax, rebates and discounts. Revenues earned by Cyta are recognised on the following bases:

Permanent employee retirement benefit scheme
Cyta operates a defined benefit scheme for its permanent employees. A lump sum amount is specified and is payable at the termination of employees’ services based on such factors as the length of the employees’ services, their age and salary as well as the investment return.

The cost of the defined benefit scheme is charged in the income statement over the period of the expected service lives of the employees and is estimated annually by independent actuaries, using the projected unit method, in order to create sufficient reserves.

Any surpluses or deficits that may arise from the difference between the expected and actual performance of actuarial assumptions are written off against revenue over a period of 20 years, from 2008 onwards, as opposed to previous years in which write off was over a period of 5 years.

The latest actuarial valuation was conducted on 31 December 2008, assuming annual average salary and pension increases of 3,5% and return on investment of 5,75%.
 

	31 December 2008 % per annum	31 December 2007 % per annum
Discount Rate Inflation Expected return on investments Pension increases General Salary Increases	5,75% 2,00% 5,75% 3,50% 3,50%	5,25% 2,00% 5,25% 3,50% 3,50%

Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Monetary assets and liabilities denominated in foreign currencies are translated into Euro using the rate of exchange ruling at the balance sheet date. The exchange differences that arise are transferred to the income statement, and are presented separately when considered material, except for exchange differences that arise from the exchange rate movement between foreign currencies and the Euro related to foreign currency loans made for the purpose of hedging the exchange risk in connection with revenues received in the same currency.

These exchange differences are recognised in accordance with IAS No. 39 "Financial Instruments: Recognition and Measurement" with the portion of exchange difference related to the effective hedging of foreign currency exchange risk being transferred to a special reserve, and the portion of exchange difference in relation to the ineffective hedging of foreign currency exchange risk being recognised in the income statement. The balance of the special reserve is adjusted in accordance with the foreign currency loan balances and the rates of exchange at the end of each year.

Tax
Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and laws that apply to Semi Governmental Organisations in Cyprus and have been enacted, or substantively enacted, by the balance sheet date. Current tax includes any adjustments to tax payable in respect of previous periods.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred tax.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority.

Property, plant and equipment
Property, plant and equipment are measured at historic cost less accumulated depreciation and impairment losses.

(a)	The cost comprises of the purchase price and any directly attributable costs incurred in bringing the asset to working condition for its intended use. Self constructed assets are valued individually and include material cost, direct labour and other appropriate costs. Borrowing costs relating to the acquisition of property, plant and equipment are written off in the year that they are incurred. Expenditure on repairs and renewals is written off in the year it is incurred.
(b)	Depreciation on leased property is calculated by equal annual instalments over the period of the lease with a maximum of 33 years.
(c)	Depreciation on prefabricated buildings, which are set on private or leased land, is calculated based on the period of their usage, which is 5 years.

For the remaining fixed assets, depreciation is charged by CYTA to write off the cost less the estimated residual value of the assets by equal annual instalments over their estimated useful lives as follows:

Depreciation methods, useful lives and residual values are reassessed at the reporting date.

Where the carrying amount of an asset is greater than its estimated recoverable amount, the asset is written down immediately to its recoverable amount.

Expenditure for repairs and maintenance of property, plant and equipment is charged to the income statement of the year in which it is incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to Cyta. Major renovations are depreciated over the remaining useful life of the related asset.

Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with carrying amount and are included in the income statement.

A full year’s depreciation is charged in the year of acquisition and no depreciation is charged in the year of disposal.

Deferred income from government grants
Government grants for capital expenditure are presented in the balance sheet and are recognised when they are received. They are amortised on a systematic basis using the straight line method over the expected useful life of the respective assets. Government grants that relate to expenses are recognised in the income statement as revenue when they are received.

Mobile Telephony Licence
Costs that are directly associated with mobile telephony licences that are controlled by Cyta and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently they are carried at cost less any accumulated amortisation and impairment losses.

The expected useful economic life of the mobile telephony licence is 20 years.

Computer software
Costs that are directly associated with identifiable and unique computer software products controlled by the Company and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses.

Costs that are directly associated with identifiable and unique computer software products controlled by the Company and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses. Expenditure which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital improvement and added to the original cost of the computer software. Costs associated with maintenance of computer software programmes are recognised as an expense when incurred. Computer software costs are amortised using the straight line method over their useful lives, not exceeding a period of five years. Amortisation commences when the computer software is available for use and is included within administrative expenses.

The expected useful economic life of computer software ranges from 3 to 5 years.

Financial instruments
Financial assets and financial liabilities are recognised when Cyta becomes a party to the contractual provisions of the instrument.

Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

Inventories
Inventories are stated at the lower of cost and net realisable value.

The principal methods for determining cost are as follows:
(i) Additions are valued at weighted average cost, which includes purchase cost and other attributable expenses.
(ii) Recoveries of equipment are valued at original cost less accumulated depreciation.

Net realisable value is the estimated selling price in the ordinary course of business, less the costs to completion and selling expenses.

Items of capital nature are capitalised as property, plant and equipment.

Non current liabilities
Non current liabilities represent amounts that are due in more than twelve months from the balance sheet date.

Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.

4. Operating Revenue

	2008 €’000		2007 €’000
Fixed telephony Mobile telephony Other services	122.942 226.921 134.466		126.317 219.108 108.174
	484.329		453.599

5. Operating Expenses

	2008 €’000		2007 €’000
Maintenance costs Leased circuits rentals Out payments to telecommunication organisations Staff costs Contributions to pension scheme Gratuities Other expenses Provision for doubtful debts Provision for obsolete materials Loss on disposal of property, plant and equipment Pension fund deficiencies (Note 7) Amortisation of intangible fixed assets Depreciation	27.285 2.624 56.816 113.306 19.490 1.344 79.824 1.176 706 96 2.821 17.010 58.890		26.225 2.671 62.579 106.647 18.841 2.117 64.432 674 1.153 - 6.793 14.994 63.366
Less: Costs that are capitalised or payable by third parties	381.388 (9.511)		370.492 (11.669)
	371.877		358.823

6. Other Income

	2008 €’000		2007 €’000
Sundry operating income Gain from sale of property, plant and equipment Income from investments Government grants	1.891 - 45 39		1.834 297 44 10
	1.975		2.185

 

7. Pension Scheme
(a) Superannuation fund deficiency

	2008 €’000		2007 €’000
Superannuation fund deficiency Pension Scheme deficiency	148 2.673		57 6.736
Charge fro the year	2.821		6.793

Cyta's total liability for retirement benefits is as follows:

	2008 €’000		2007 €’000
Short-term	36.800		4.101

Cyta operates two separate staff retirement benefit schemes, the Superannuation fund and the Pension scheme for permanent employees.

Superannuation Fund:
The Fund was set up in order to provide pensions to monthly employees and for this reason contributions were made by both Cyta and the employees. The Fund, which had no active members as at 31 December 2008, operates independently of the finances of Cyta. According to the regulations of the Fund, Cyta is liable to contribute to the fund for any deficits that might arise from periodic actuarial valuations. The last actuarial valuation which took place on 31 December 2001 by a professional actuary, showed an additional deficit of €738.502, and was written off in the income statement equally in the years 2001 and 2002.

Cyta is also liable to pay annual amounts, according to actuarial valuations, in order to finance the increases in pensions, after retirement. During 2008, the amount of €148.135 was paid.

Pension Scheme:
The Scheme offers retirement benefits to monthly employees and their dependants. The Scheme operates independently of the finances of Cyta. According to the regulations of the Scheme, CYTA is liable to make contributions to the Scheme which is determined by periodic actuarial valuations. The contributions represent a percentage of the pensionable salary of employees - members of the scheme. Additionally, Cyta is liable to contribute to the Scheme for any deficits which may be indicated by the actuarial valuation, relating to past service cost. During 2008, the amount of €4.100.643 was paid.

According to the last actuarial valuation on 31 December 2008 an additional deficit of €36.800.000 arose which will be written off in the income statement equally between the years 2008 and 2027. The balance of €2.460.386 of year 2006 deficit will be written off between the years 2008 and 2025 whilst the balance of €11.832.065 of year 2005 deficit, will be written off between the years 2008 and 2024. The unrecognised actuarial losses as at 31 December 2008, amounted to €48.419.499.

The amount which appears in the balance sheet regarding retirement benefits that arise from the Pension Scheme is as follows:

Changes to the present value of the retirement benefit obligation during the year

	2008 €’000		2007 €’000
Current retirement obligation at the beginning of the year Current service cost Interest cost Contributions by participants Actuarial (gains)/liabilities losses Net benefits paid out	708.185 20.005 36.665 595 (31.377) (23.220)		662.543 16.861 32.639 562 19.942 (24.362)
Retirement benefit obligation at the end of the year	710.853		708.185

Changes to the fair value of the scheme's assets during the year

	2008 €’000		2007 €’000
Fair value of assets at the beginning of the year Expected return on assets Actuarial gains/(losses)on assets Contributions by the employer Contributions by participants Net benefits paid out	708.185 37.180 (68.177) 19.490 595 (23.220)		615.898 30.659 66.587 18.841 562 (24.362)
Fair value of assets at the end of the year	674.053		708.185

Reconciliation of funded status to balance sheet

	2008 €’000		2007 €’000
Fair value of scheme's assets Present value of funded obligations	(674.053) 710.853		(708.185) 708.185
Current year actuarial loss Obligation for actuarial losses of previous years Past service costs not yet recognised in balance sheet	36.800 - (48.419)		- 4.101 (14.292)
Net assets/(liabilities) recognised on the balance sheet	(11.619)		(10.191)

Analysis of profit and loss charge:

	2008 €’000		2007 €’000
Current service cost Interest cost Expected return on assets Net actuarial loss recognised in year	20.005 36.665 (37.180) 2.673		16.861 32.639 (30.659) 6.736
Expense recognised in profit and loss	22.163		25.577

(ii) Provident Fund of Hourly paid employees
Τhe provident fund of Hourly paid employees was established on the 14th of October 2008. Participant is every hourly paid employee that has completed 18 years of life and has 18 months of consecutive employment as part time and/or permanent hourly paid employee. Employees’s contribution is at 5% of their monthly salaries and employer’s contribution is at 5%. Employer’s contribution in the year 2008 amounted to €4.603.

8. Operating Profit

	2008 €’000		2007 €’000
Operating profit before financing income/(expenses) is stated after charging the following items: Amortization of intangible fixed assets (Note 12) Depreciation of property, plant and equipment (Note 11)	17.009 58.889		14.680 63.681

9. Finance Income and Expenses

	2008 €’000		2007 €’000
Interest income Exchange profit	20.536 -		14.743 100
Finance income	20.536		14.843
Net foreign exchange transaction losses Bank charges and other interest	681 359		- 352
Finance expenses	1.040		352
Net finance income	19.496		14.491

10. Taxation

	2008 €’000		2007 €’000
Corporation tax - current year Corporation tax - prior years Defence contribution - current year Defence contribution - prior years Deferred tax - (credit) (Note 20)	32.202 (71) 5.521 67 (2.800)		25.954 - 4.254 - -
Charge for the year	34.919		30.208

Reconciliation of taxation based on the taxable income and taxation based on accounting profits:  

	2008 €’000		2007 €’000
Accounting profit before tax	137.883		111.452
Tax calculated at the applicable tax rates Tax effect of expenses not deductible for tax purposes Tax effect of allowances and income not subject to tax Tax effect of group tax relief Defence contribution current year Deferred tax Prior year taxes	34.471 19.951 (22.220) - 5.521 (2.800) (4)		27.863 20.789 (22.633) (65) 4.254 - -
Tax charge	34.919		30.208

From 2005 onwards, the entire taxable income of Cyta is subject to corporation tax at 25%. In addition, Cyta is subject to special contribution for defence on its taxable income at a fixed rate of 3%.

Under certain conditions interest may be subject to defence contribution at the rate of 10%. In such cases 50% of the same interest will be exempt from corporation tax, thus having an effective tax rate burden of 24%. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 15%.

11. Property, Plant and Equipment

	Land and buildings €’000	Assets under construction €’000	Buildings on leasehold land €’000	Telecom-munication plant and equipment €’000	Motor vehicles and tools €’000	Furniture, fixtures and office equipment €’000	Computer hardware and systems €’000	Total €’000
Cost Balance at 1 January 2007 Additions Disposals Transfers	65.661 5.821 (548) -	54.252 6.590 - -	2.424 - - -	855.080 59.782 (15.555) (348)	14.020 585 (205) -	5.058 285 - -	36.453 2.278 (892) (120)	1.032.948 75.341 (17.200) (468)
Balance at 31 December 2007	70.934	60.842	2.424	898.959	14.400	5.343	37.719	1.090.621
Balance at 1 January 2008 Additions Disposals Transfers	70.934 195 - -	60.842 3.704 - -	2.424 - - -	898.959 46.095 (31.002) -	14.400 248 (374) -	5.343 187 - 1	37.719 1.409 (6.180) (4.572)	1.090.621 51.838 (37.556) (4.571)
Balance at 31 December 2008	71.129	65.546	2.424	914.052	14.274	5.531	28.376	1.100.332
Depreciation Balance at 1 January 2007 Depreciation year On disposals Transfers	21.790 1.875 (366) -	- - - -	1.281 78 - -	572.769 56.999 (9.973) (355)	11.485 1.009 (190) -	4.357 242 - -	30.863 3.478 (890) (24)	642.545 63.681 (11.419) (379)
Balance at 31 December 2007	23.299	-	1.359	619.440	12.304	4.599	33.427	694.428
Balance at 1 January 2008 Depreciation for the year On disposals Transfers	23.299 1.803 - -	- - - -	1.359 73 - -	619.440 53.976 (20.000) -	12.304 621 (374) -	4.599 217 - -	33.427 2.199 (6.155) (4.037)	694.428 58.889 (26.529) (4.037)
Balance at 31 December 2008	25.102	-	1.432	653.416	12.551	4.816	25.434	722.751
Carrying amounts
Balance at 31 December 2008	46.027	64.546	992	260.636	1.723	715	2.942	377.581
Balance at 31 December 2007	47.635	60.842	1.065	279.519	2.096	744	4.292	396.193

(a) Assets in occupied areas
Fixed assets include assets situated in areas currently occupied by the Turkish invasion forces which are not accessible by Cyta. Cyta is not in a position to ascertain the present state of these assets. Full provision has been made for assets and reserves situated in the occupied areas.

(b) Land
Certain plots of land amounting to €48.397 (2007: €236.938) included in the financial statements, were in the course of being registered in the name of Cyta at the year end.

12. Intangible Assets

	Mobile Telephony €’000		Computer Software €’000		Total ε’000
Cost Balance at 1 January 2007 Additions Disposals Transfers	22.388 - - -		149.780 8.205 (65) 468		172.168 8.205 (65) 468
Balance at 31 December 2007	22.388		158.388		180.776
Balance at 1 January 2008	22.388		158.388		180.776
Additions Transfers Disposals	- - -		23.998 4.571 (1.695)		23.998 4.571 (1.695)
Balance at 31 December 2008	22.388		185.262		207.650
Amortisation Balance at 1 January 2007 On disposals Amortisation for the year (Note 8) Transfers	3.871 - 1.089 -		130.317 (65) 13.591 379		134.188 (65) 14.680 379
Balance at 31 December 2007	4.960		144.222		149.182
Balance at 1 January 2008 On disposals Amortisation for the year (Note 8) Transfers	4.960 - 1.089 -		144.222 (1.695) 15.920 4.037		149.182 (1.695) 17.009 4.037
Balance at 31 December 2008	6.049		162.484		168.533
Carrying ammounts Balance at 31 December 2008	16.339		22.778		39.117
Balance at 31 December 2007	17.428		14.166		31.594

13. Investments in Subsidiaries

				2008 €’000		2007 €’000
Balance at 1 January and 31 December				55.049		55.049
The details of the subsidiaries are as follows:
Name	Country of incorporation	Holding (%)		2008 €’000		2007 €’000
Digimed Communications Ltd	Cyprus	100		55.049		55.049

Digimed Communications Ltd, a company registered in Cyprus, is a wholly owned subsidiary of CYTA. The principal activity of the company is the conduct of telecommunication projects.

The loans from foreign financial institutions are repayable between the years 2007 and 2015 and bear interest ranging from 2% to 11.62% per annum. The loans are secured with guarantees provided by the Cyprus Government.


 20. Deferred Tax

Deferred taxation liability arises as follows :
	2008 €’000		2007 €’000
Accelerated tax depreciation	16.049		18.849
	16.049		18.8492

Deferred tax is calculated in full on all temporary differences under the liability method using the applicable tax rates (Note 10).

21. Trade and Other Payables

	2008 €’000		2007 €’000
Trade payables Overseas telecommunication organisations Foreign suppliers Cheques for payment Prepayments from clients Pension scheme and superannuation fund Social insurance and other taxes VAT Carrier services Accruals Other creditors Deferred Income Amounts payable to subsidiaries and other group companies (Note 23)	10.256 13.499 11.471 29 1.095 36.800 5.251 19.007 3.341 5.972 11.276 14.750 1.106		4.804 21.609 14.314 66 1.366 4.101 4.010 16.546 - 15.071 13.042 14.179 2.671
	133.853		111.779

The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above. 

25. Contribution to the Cyprus Government
The amount of the contribution, as well as the timing of the payment, are determined by the Board of Ministers, following a relevant decision by the Minister of Finance, which is taken after a discussion with Cyta's Board of Directors. For the year ended 31 December 2008, the amount of contribution was €76.900.000.

The amount of €76.900.000 was contributed to the Cyprus Government Treasury, following the Council of Ministers ("the Cabinet") decision on 24 July 2008, according to the Telecommunication Services Law Amendment, Cap. 302, as amended with the Telecommunication Services Law of 2006 (section 117 (I)/2006).

The amount was set after taking into account the surplus for the financial year, the reserves at the end of the 2007 financial year, as well as the other provisions of the amended Telecommunications Services Law in relation to Cyta’s liquidity, its ability to pay the amount set, the safeguard of its future investments, its contractual and other commitments and the repayment of the pension scheme deficit.

26. Contractual Commitments  
Contractual Commitments in respect of capital expenditure as at 31 December 2008 not provided for in the financial statements, amounted to €27.660.617 (2007 : €30.139.760) of which €15.907.027 (2007: €14.060.874) is payable in foreign currencies. Foreign currency amounts have been converted into euros at the rates of exchange prevailing at the end of the year.

The entire amount of contractual commitments at 31 December 2008 will be repaid on completion of the relevant projects within 2009.

27. Financial Risk Management
Financial risk factors
Cyta is exposed to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market price risk
• Operational risk
• Compliance risk
• Litigation risk

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.

Cyta's risk management policies are established to identify and analyse the risks faced by Cyta, to set appropriate risk limits and controls, and monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and CYTA’s activities.

(i) Credit risk
Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date. CYTA has no significant concentration of credit risk. Cyta has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables. Cash balances are held with high credit quality financial institutions and CYTA has policies to limit the amount of credit exposure to any financial institution.

Trade and other receivables
Cyta’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.

Cyta establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.

Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

	2008 €’000		2007 €’000
Available for sale financial assets Held to maturity investments Trade and other receivables Receivables from related companies	1.404 68.975 136.266 2.239		1.867 102.907 101.040 1.374
	208.884		207.188

(i) Operational risk
Operational risk is the risk that derives from the deficiencies relating to Cyta’s information technology and control systems as well as the risk of human error and natural disasters. Cyta’s systems are evaluated, maintained and upgraded continuously.

(ii) Compliance risk
Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non compliance with laws and regulations of the state. The risk is limited to a significant extent due to the supervision applied by the Compliance Officer, as well as by the monitoring controls applied by Cyta.

(iii) Litigation risk
Litigation risk is the risk of financial loss, interruption of Cyta’s operations or any other undesirable situation that arises from the possibility of non execution or violation of legal contracts and consequentially of lawsuits. The risk is restricted through the contracts used by Cyta to execute its operations.

Capital management
Cyta manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. Cyta’s overall strategy remains unchanged from last year.

28.Fair Values
The fair values of Cyta's financial assets and liabilities approximate their carrying amounts at the balance sheet date.

The fair value of financial instruments traded in active markets, such as publicly traded trading and available for sale financial assets is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by Cyta is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price.

29. Post Balance Sheet Events
There were no material post balance sheet events, which have a bearing on the understanding of the financial statements.

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