The Hungarian government has said that it will not begin the process of awarding third-generation (3G) mobile licences until the end of 2004. The announcement signals yet another change in opinion from the authorities, coming only a month after telecoms minister Kalman Kovacs told reporters that a tender for up to four 3G concessions might take place in the first half of 2004. However, it is now believed that the state, worried that phone companies and consumers alike are not ready for the cost involved with next-generation services, wants to wait until after Hungary’s accession to the EU in mid-2004 before beginning the lengthy procedure of auctioning the licences.
Whilst the Hungarian fixed line sector languishes in uncertainty and procrastination despite the advent of liberalisation, the mobile market continues to expand strongly. By the end of September 2003 there were 7.57 million mobile subscribers nationwide, equating to a penetration rate of 75%, up from 64% at the end of 2002 and 48% twelve months before that. Matav’s wholly owned Westel Mobile subsidiary controls 47.5% of the market ahead of Telenor-backed Pannon GSM with 36.5% and Vodafone Hungary, the newest player having launched in 1999, with 16%. Despite experiencing a 45% rise in subscribers to 2.21 million in the first nine months of 2003, Vodafone’s distant third placing in the market has provoked suggestions that the government effectively hindered its development by awarding a licence so late on in the race, enabling its rivals to become too firmly established. In the face of stagnating growth and low returns from its Hungarian subsidiary, it is possible that the UK-based giant could yet launch a bid for one of the larger rivals. Such speculation has, however, been dismissed by Westel’s owners Matav, while Pannon GSM has said that its parent Telenor’s decision in early 2002 to buy out KPN’s 44.7% holding along with the 23% and 6.56% interests held by Sonera and TDC, prove its long-term commitment to the market.
Whilst the government is understandably wary about launching the 3G licensing process, it is also aware of the fact that the 2G services market is quickly approaching saturation levels. In late 2002 Pannon GSM’s outgoing chief executive Bjorn Flakstad warned that Hungary’s relatively low GDP would ultimately restrict long-term subscriber growth. He predicted that penetration would peak at 80%, aided by downward pressure on prices and subsidies for handsets, with matters such as churn and average revenue per user (ARPU) coming to the fore. Churn rates currently average around 30% across the three Hungarian networks.