Hungary Food and Drink Report

BMI's Q409 Hungary Telecommunications Report contains updated mobile forecasts, following reports of declining subscriber numbers during the first half of the year.

Mobile penetration hit 116.5% at the end of 2008, but during H109 the sector saw sustained subscriber losses from the prepaid segment as operators discounted inactive SIMs. Operators have also been looking to migrate prepaid customers onto postpaid contracts, and the sharp economic contraction is also weighing on the mobile market as consumers cut back their spending. This resulted in a sharp downturn in ARPU rates in Q408 and Q109 as customers became more price conscious and operators rolled out improved tariffs. Market shares in the mobile sector have remained relatively stable over the past few years, with T-Mobile the clear market leader, followed by Pannon and Vodafone, respectively. The tender for a new mobile entrant has been cancelled owing to the economic and financial climate, but the market does appear to be in need of additional competition. Once the economic environment begins to pick up the tender could be relaunched, but in the meantime mobile virtual network operator (MVNO) licensing could provide the market with the stimulus that it needs.

Hungary's telecommunications market is one of the most developed in Central and Eastern Europe (CEE), owing largely to the regulatory framework set in place by the country's telecoms regulator, the National Communications Authority (NHH), which has taken a proactive approach to liberalising the telecoms markets and encouraging investment. This has seen a number of the region's top players enter the market and invest heavily. The incumbent, Magyar Telekom, is owned by Germany's Deutsche Telekom, which also owns the country's leading mobile operator, T-Mobile. Other major regional players include Vodafone, Telenor, Liberty Global's UPC Broadband and Denmark's TDC, which owns the country's largest alternative fixed-line and broadband operator Invitel. This has seen the widespread deployment of advanced technologies such as HSDPA, digital cable and IPTV, and the development of next generation networks including fibre-to-the-home (FTTH) and DOCSIS3.0.

Hungary's fixed-line sector is in a continuous state of decline as customers drop their fixed lines in favour of mobile and VoIP services. To help stem this decline, operators are turning to double- and triple-play bundles, packaging fixed lines with broadband and pay TV services. While this should mitigate the situation to some extent, we still expect the fixed-line sector to continue declining.

During 2008 it was cable broadband that accounted for the majority of the sector's growth. There are four main cable operators in Hungary that combined control around 70-75% of the market. The largest is UPC Hungary, which had 323,000 broadband customers at the end of Q109. Incumbent Magyar Telekom is also present in the cable sector through its cable unit, T-K??bel, which had 141,000 broadband customers at the end of Q209. In addition to their far-reaching networks, the cable operators are also benefitting from the rising demand for double- and triple-play packages. This has seen a number of the ADSL operators launching IPTV and DTH services in an effort to tap this demand. As customers increasingly demand higher bandwidth services, next generation broadband networks are being developed such as UPC's 100Mbps cable network and Magyar Telekom's fibre-optic network, which reported 880,000 customers at the end of Q209.