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VOL. 21. NUMBER 22

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BUSINESS

WAITING FOR A VERDICT

Business incubators: starting them up for real Business incubators are nothing new, but the government is now making extra efforts to accredit a few to help their fostered startups turn into global successes. While it makes more funds available for the sector, channeling them properly is still of key importance. 12

320,000

expected to participate in revised relief scheme

SPECIAL REPORT

A flat new world All three mobile service providers revealed their flat rate offers almost simultaneously. While comparability has increased, Hungarian customers are still not spoiled by European standards. The new packages are unlikely to cause any major market share shift though.

Photo: Attila Kovács / MTI

The government remains resolute in fighting the foreign currency loans issue even if there are glitches in the process. Eyes are now on a reluctant top court to take a decisive stand and settle once and for all whether the forex−denominated policies are legally flawed, and to clear the way for legislation that can put an end to the story. 03

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BUSINESS

No room for competition?

Facebook over sex

The public utility tax introduced in 2013 has halted the natural concentration of the cable market. The sector is strangely imbalanced: the four large providers serve nearly three− fourths of the households, while some 200 smaller companies bickering over the remaining one quarter. 14-15

A survey finds there are Hungarians who would gladly pass up a passionate encounter with their significant other in order to use social media instead. Though most aren’t that hooked, nearly 90% of users say they have to log in on a daily basis. 07

Q&A

Bálint Szűcs, partner of RSM DTM talks about how desperately Hungarian SMEs need funding in order to improve competitiveness

26-27

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CHARGING THE IMPERVIOUS If the very serious allegations made by a former audi− tor of the tax authority were only partially true, it would mean the biggest corruption charge leveled against the reining government. Still, if there are to be any conse− quences, somebody should actually care. András Horváth, who earlier worked in investigating cross−border tax frauds at the state tax and customs authority NAV, claims that for years, several market− leading retail companies have established a daily prac− tice of dodging taxes with the active assistance of the state and its authorities. According to Horváth, the total of the damages he claims to have uncovered comes to HUF 1.7 trillion, more than 5.5% of the country’s gross domestic prod− uct. Opposed to the widespread practice and implicitly accepted notion that small businesses all cook the books to some extent so they can survive, these accusations involve multinational firms. Serious allegations, and serious amounts involved. NAV refuted the story and said it had conducted a thor− ough screening of its practices during the course of a sin− gle weekend (!) and found everything to be in order. It also pressed charges against Horváth. The political opposition pounced on the testimonial as a means of finding a story, a solid case that could be

used against the Fidesz government to illustrate to the electorate the corrupt and captured nature of the state led by Viktor Orbán. Based on all the stories so far, they’ll have a tough time making anything stick and an even tougher time using any proof to shake the resilient confidence of Fidesz’ base. Today, it may seem like successive corruption cases, arrests and court hearings were the main reason why the Socialists were crushed at the 2010 general elec− tions. They played a role in further undermining the party’s character, even though the mismanagement of the country before that was more than enough for disaster at the polls. Fidesz and Orbán have found the magic recipe against all such cases, and the conspicuous public pro− curements, the farmland allocation, the tobacco shops and the cash registers did nothing but get those already in opposition riled up, only to be completely ignored by the general public. The same political weapons do different degrees of damage to each side, depending on the solidity of the ranks as well as the ground they stand on. At the heart of the matter is the sad realization for the outside observers that, deep down, nothing has changed in the past nearly four years.

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GRIN AND BEAR IT After complaining about the insurmountable adversi− ties presented by the Hungarian environment and the constantly changing tax policies, the major telecommu− nication firms are falling into line, obviously realizing that even with the abundance of liabilities, Hungary is still a juicy market. The Orbán govern− ment was very clever when it picked the sectors to be burdened by spe− cial taxes that were first meant to serve as a tem− porary source of revenue to weather the worst of the crisis, but were then made a permanent fix− ture. It had to be indus− tries that were profitable, but had invested exten− sively, meaning they won’t be able to pack up shop and skip town overnight, as some of the smaller banks did. The telecoms took every opportunity to voice their legal concerns over the unfair nature of the mea− sures and while they only implied as much by ques− tioning the value of the Hungarian frequencies, observers were constantly led to ponder when the moment would arrive when one of them had enough and called it quits. These outlooks were only under− lined by the state’s drive to enter the market with a provider of its own. Soon, most of these matters were put to rest. The European Commission ended its inquiries into whether the Hungarian tax violates European Union laws.

A local court ruling removed the prospect of a state player on the market and the project company estab− lished for the purpose was eventually disbanded. The providers struck a much friendlier tone and reaf− firmed their commitment to Hungary by extending their frequency licenses for another 10 years, in spite of getting little to no indi− cation from the govern− ment that their burdens will decrease at anytime in the near future. Telenor went so far as to join the camp of companies that have signed one of the government’s strategic coop− eration agreements, being only the second firm to do so out of the sectors where the special taxes were levied. Just like the banks, the telecoms have accepted their fate, but more impor− tantly, and which is ulti− mately good news for the Hungarian economy, they decided to respond by renewing their commitment instead of cutting their losses and running. The conclusion from this resignation to their fate is that there is still plenty of money to be made in the country, money that can only come from a growing economy, rising household spending capacity and busi− ness output. If these compa− nies are so determined to stay and thrive as best they can, despite hinting they are on the verge of collapse, maybe the rest of us can feel better and look more favorably at the future ahead of us.

THE ORBÁN GOVERNMENT WAS VERY CLEVER WHEN IT PICKED THE SECTORS TO BE BURDENED BY SPECIAL TAXES

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1 News

NEWS IN BRIEF

Nationally coordinated tax frauds?

NEWS

Tokaji revamped

macroscope

GOV’T SEEKS FURTHER EXPANSION TO FOREX RELIEF

GERGŐ RÁCZ

Prime Minister Viktor Orbán has commissioned the Justice Ministry to commence consultations and find legal solutions to resolve the persisting issue of foreign currency denominated loans and the problems they present to troubled debtors and the economy in general. Seeing that there have been various court rulings with contradictory results in cases between banks and their debtors, Orbán also called on the top court, the Kúria to take a stand. “If we see that the matter has been put in order, then the government can, without risk of upsetting peoples’ everyday lives, take a decision that is in harmony with the legal position established by the judiciary,” he said in his regular interview with public radio. Based on a number of recent rulings, government officials have referred to foreign currency loans as “flawed products”, which would entail that those signing such policies were misled and that reparations may be due. Feeling the pressure and weight of the issue, the Kúria took steps to lower expectations regarding any resolution it may reach. It said it “wants in the near future to gauge how many court cases are underway in the country related to foreign currency−denominated lending contracts, and furthermore, to determine based on legally binding rulings whether disparate legal practice can be established.” The head of the legal body’s civil department György Wellmann went further to quell hopes, saying that the public shouldn’t expect a conclusive solution to forex lending from the Kúria, despite pressure from the government. JITTERY BANKS The banking industry nonetheless seems concerned about the matter. OTP Bank

STORY HIGHLIGHTS ■

Government expands range of relief options for foreign currency debtors ■ Calls on Kúria to create legal grounds for legislating the matter

has recently lost lawsuits against plaintiffs claiming they were unlawfully treated in regard to their foreign currency mortgages. The bank too filed an appeal with the Kúria, seeking a revised ruling. In the meantime, the government went public with its own plans for providing debt relief to those Hungarians who have so far been unable or unwilling to participate in any of the available schemes initiated to aid them. The latest terms are meant to abolish limitations to taking part in the exchange fixing solution that was so far only available to clients who were making due payments. The package also introduces a new moratorium on evicting residents who are 90 days or more overdue – making their policy a non− performing loan – until the end of April. The Hungarian Banking Association, which raised similar suggestions, appreciated the proposed measures, even though the initial government response to the finance sector’s suggestion was that it didn’t meet the requirements of permanently resolving the forex issue. Given that the government’s own solution equally doesn’t lead to that desired goal, further measures are possible. CASH REVERSAL While expanding the debtor relief effort, the government has also been forced to implement corrections to its earlier legislation on mandating a levy on all financial transactions. Fidesz caucus leader Antal

BANKING ASSOCIATION SECRETARY GENERAL LEVENTE KOVÁCS

Rogán said the move was necessary since the banks had passed on the costs of the tax to their customer through various other channels, meaning merely accessing one’s salary, whether it was a card payment or a withdrawal, incurred a cost. Consequently, parliament approved an amendment that allows free withdrawals twice a month up until a HUF 150,000 value limit starting February 1. Clients will be required to name the account with which they want to avail the option between December 1 and January 20 of next year. The Banking Association was less than

pleased about the modification and warned about the social effects of the large amount of cash entering the economy. Secretary General of the bank group Levente Kovács said that along with the transaction levy, the cash requirement entails another HUF 100 billion in obligations for the finance industry. He added that the new arrangement isn’t fair towards the banks and stressed that the state would have been better off by making bankcard transactions exempt, which would have had the same effect and also reduced the use of cash, which is a fueling agent for the shadow economy.

IF WE SEE THAT THE MATTER HAS BEEN PUT IN ORDER, THEN THE GOVERNMENT CAN, WITHOUT RISK OF UPSETTING PEOPLES’ EVERYDAY LIVES, TAKE A DECISION THAT IS IN HARMONY WITH THE LEGAL POSITION ESTABLISHED BY THE JUDICIARY

Photo: Hungarian Banking Association

The government is continuing to expand the options targeted at bailing out troubled foreign currency debtors by making existing efforts more inclusive, while also considering further options. It is also eyeing the top court with the hopes that a verdict could lead to legislation that resolves one of the focal issues of the second Orbán government’s policies once and for all.

04 News

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NEWS

IN BRIEF

Budapest Business Journal | Nov 15 – Nov 28

It is important that all of us, nation−loving real patriots support the greatest politician, our nation’s prime minister, Viktor Orbán A letter sent by the executives of the Hungarian CBA retail chain László Baldauf and Vilmos Lázár, encouraging employees and associates of the group to participate in commemorations supporting the government.

HUNGARIAN AID WORKERS HEAD FOR DISASTER-STRUCK PHILIPPINES

ECONOMY EBRD RAISES HUNGARY GDP PROJECTION The European Bank for Reconstruc− tion and Development raised its fore− cast for GDP growth in Hungary next year to 1.2% in a report published re− cently, up from 0.9% in a projection released in May. The government’s target for GDP growth next year is 2%. The EBRD puts GDP growth in 2013 at 0.5%. In May, it forecast a 0.8% contraction. The EBRD noted Hungary’s GDP grew for the second quarter in Q2 2013, but attributed the improvement mainly to public infrastructure spending. In the me− dium−term, contracting lending as well as growing uncertainty for in− vestors in utilities and other sectors will continue to undermine Hun− gary’s trend growth rate, the EBRD said. It acknowledged the National Bank of Hungary’s zero−interest lending scheme for SMEs but said it was “unlikely to be effective unless more investor−friendly policies sup− port loan demand”. BUDGET DEFICIT HUF 73 BLN LOWER LAST YEAR Hungary had a central budget deficit of HUF 599 bln last year, HUF 73 bln short of the modified plan, ac− cording to the law on the execution of last year’s central budget, adopted by parliament at the beginning of November. The central budget had spent HUF 15,021.171 bln, HUF 87 bln less than the modified budget plan had stipulated, and had rev− enue of HUF 14,422.528 bln, HUF 15 bln lower than planned, the law says. The law on last year’s budget further states that Hungary’s GDP fell in 2012, but the number of peo− ple in work increased, public debt

decreased, and the general budget deficit, at 1.9% of GDP, narrowed to a ten−year low. INDUSTRIAL OUTPUT UP 5.5% IN SEPTEMBER Hungary’s industrial output rose 5.5% year−on−year in September, prelimi− nary unadjusted data published by the Central Statistics Office (KSH) shows. The increase followed a 1.5% decline in August, revised down from an ear− lier reading. Adjusted for the number of workdays, output rose 3.1% in Sep− tember. In the previous 12 months, un− adjusted industrial output fell in all but two months. Workday−adjusted output rose for the fourth month in a row. In a seasonally− and workday−adjusted month−on−month comparison, output rose 1.8%. Except for May, output has risen month−on−month every month this year, so far. KSH will publish a sec− ond reading of the September data on November 15. RETAIL SALES EDGE UP 0.3% IN SEPTEMBER Retail sales in Hungary rose a calendar year−adjusted 0.3% year−on−year in September after climbing 1.4% in the previous month, the KSH said in a first reading of data. Retail food sales edged down a calendar year−adjusted 0.4%. Non−food sales were unchanged and fuel sales rose 3.1%. KSH will supple− ment the data on November 26. Erste Bank chief analyst Gergely Gabler told state news agency MTI the small increase in retail sales was a negative surprise. The low base, low inflation and higher levels of disposable income resulting from utilities price cuts are not yet apparent, he added. Takarékbank senior analyst Gergely Suppan said an− other utilities price cut in November as well as pay rises for teachers and health− care workers could raise retail sales close to 4% in the last quarter.

Photo: Barnabás Honéczy/MTI

A seven−member group of medical and emergency response expert set off for the Philippines to support rescue efforts in areas of the country devastated by typhoon Hainan, which killed thousands of people and destroyed entire communities. The group organized by the Hungarian Reformed Church Aid is also carrying $15,000 worth of medical equipment and aid. .

Numbers in the news

0.9% was Hungary’s 12−month consumer price index in October, dropping sharply from 1.4% in September, KSH data show.

857 borrowers with foreign currency denominated loans joined the exchange rate cap scheme in September. MNB data shows the number of contracts signed to join the scheme between April 2012 and September 2013 came to 165,564.

DOMESTIC NATIONALLY COORDINATED TAX FRAUDS? A former employee of the national tax and customs authority NAV, András Horváth, has stepped forward claiming that the authority is actively involved in allowing tax “discounts” to numerous major firms operating in the Hungary. As he told media, without naming any specific companies, the practice has been ongoing for years and has led to more than HUF 1 tln not being paid to the treasury. As he explained in an in− terview, he has repeatedly raised mat− ters with his superiors as well as top government circles, so far, to no avail. NAV responded by saying it conducted a full audit of its own practices over the course of a single weekend and found everything in order. It rejected Hor− váth’s claims and responded by press− ing charges against him. NEW TILL RULES RAISE VAT REVENUE A 13% increase in budget revenue from VAT in May−October com− pared to the same period a year earlier shows the effect of new rules requiring businesses to use tills that can communicate directly with the tax office, daily Magyar Nemzet said. Deputy state secretary for tax affairs Zoltán Pankucsi told the paper that, excluding VAT refunds, revenue was up 6% during the period. “Favorable wage and inflation trends as well as changes in production cycles are not the only reason for the rise, rather the whitening of the market is tangi− ble,” he said. The government intro− duced the new till rules in an effort to crack down on tax evasion and raise budget revenue. Businesses started complying with the requirement in the spring.

GOV’T EXPANDS FAMILY SUBSIDIES Hungary’s government decided at a cabinet meeting to introduce four new types of family subsidies that will add HUF 18.6 bln to the expenditure side of next year’s budget, state secretary for social affairs Miklós Soltész said. The government decided to pay child subsidies in full, even if new moth− ers return to work one year after their child’s birth, Soltész said. It also de− cided to allow doubling up of subsidies for siblings born in overlapping pay− ment periods, he added. Preferences for young mothers paying off student loans as well as payroll tax preferences for employers who hire young mothers will also be introduced. The measures are expected to affect about 65,000 people, Soltész said.

POLITICS GOV’T CLEARED TO RUSH MERGERS Parliament has approved an amend− ment giving the government the right to declare mergers of “national strategic importance” and thereby make them exempt from the obli− gation to acquire a permit from the Competition Office (GVH). MPs ap− proved the proposal with 277 ‘yes’ and 43 ‘no’ votes. As a result, the government will have the right to classify mergers, otherwise liable to GVH permission, as those of national strategy importance, espe− cially in order to help preserve jobs and to secure supply, according to the amendment to the Competi− tion Act. The proposal does not af− fect the authority of the European Commission to approve mergers, the explanation of the bill said. The amendment will take effect one day after its publication.

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News 05

Budapest Business Journal | Nov 15 – Nov 28

COMPANY NEWS

Hungary’s government could set up a ‘tourism bank’ to provide financing for developments in the sector, business daily Világgazdaság said. The tourism bank is part of a development plan for Hungary’s tourism industry drafted by the National Economy Ministry.

GOV’T SIGNS STRATEGIC PARTNERSHIP AGREEMENT WITH TELENOR

The Hungarian unit of German sweets maker Haribo has wound up a HUF 3.5 bln investment at its base in Nemesvámos (western Hungary). The company won an HUF 800 mln European Union grant for the investment, which created 40 jobs. The plant in Nemesvámos produced more than 12,000 tonnes of sweets in 2012. Haribo Hungaria expects revenue this year to climb by about one-third over last year’s HUF 7 bln. The investment will add two new products to the plant’s range: candy strawberries and Smurfs. Marek Kisielewski, financial managing director, said developments at the base would continue until 2015, doubling capacity and revenue.

TELENOR VICE PRESIDENT KJELL-MORTEN AND PRIME MINISTER VIKTOR ORBÁN

Audi Hungaria Motor Kft in Győr has announced the ﬁnishing of its 25 millionth engine and its 500,000th TT model. The 500,000th car assembled at the plant was one of the 500 exclusive TTS competition models manufac− tured for the occasion of the production anniversary of Audi’s compact sports car. The company said the Győr plant currently makes 235 engine variations. Magyar Telekom’s third−quarter net income fell 37% to HUF 9.3 bln from the same period a year earlier on base effects, the company’s consolidated IFRS report shows. Revenue was lifted by non−core activities and margins widened, but a property transaction at Telekom’s business in Macedonia as well as the sale of a unit in Hungary in the base period hit the bottom line. Drug company Egis had proﬁt of HUF 3.33 bln in the fourth quarter of the company’s business year ended on September 30, 2013, slightly more than double that recorded a year earlier, on rising revenue and declining cost of sales, Egis announced in its unaudited, consolidated IFRS report for the period. Emerson Process Management has expanded its base in Székesfehérvár with the acquisition of a 25,000 sqm plant from TP Vision, the process auto− mation company’s local unit said. Emerson’s control valve unit Fisher bought the property, doubling the size of its base.

Photo: Tamás Kovács / MTI

HARIBO INVESTS HUF 3.5 BLN IN HUNGARY

Hungary’s government has signed a strategic agreement with the local unit of Norwegian telco Telenor. Prime Minister Viktor Orbán and Telenor Executive Vice President Kjell−Morten Johnsen signed the agreement on the occasion of the opening of Telenor Magyarorszag’s shared services center in Hungary. Telenor employs more than 1,200 people in Hungary. It has 3.4 mln subscribers and had 31.4% market share, based on active subscriptions, at the end of September. The unit had revenue of HUF 158 bln in 2012.

MVM Paksi Atomerőmű has submitted an application to extend the lifespan of its number two block by 20 years to the National Atomic Energy Office (OAH). The plant in Paks was awarded a permit to extend the lifespan of its number one block by 20 years last December. Hungarian−owned Gránit Bank’s total assets exceeded HUF 70 bln at the end of October, chairman−CEO Éva Hegedűs told MTI. Total assets are ten times their level when the bank was established, a little more than three years ago, and were up 24% from the end of 2012, Hegedűs said. Four companies, Magyar Telekom, Mercedes−Benz Hungária, Provident Pénzügyi and Samsung Electronics, were best in serving their clients in 2013, according to an award dubbed ‘Excellence in client services’, launched by ClientFirst Consulting ﬁve years ago. French drugmaker Servier has raised its stake in its Hungarian unit Egis from 50.91% to 96.43% in a public purchase offer that ended November 5, Servier told MTI. Servier made the offer through its wholly owned unit Arts et Techniques du Progres starting October 2, at a price of HUF 28,000 per share. Hungarian−owned machinery maker MPF Holding is in advanced talks on the purchase of do−it−yourself chain Praktiker’s stores in Hungary, daily Népszabadság said. MPF Holding is carrying out due diligence at the 21 Praktiker stores in Hungary, the paper learnt from several independent mar− ket sources. French engineering giant Alstom’s announcement of planned layoffs are not expected to affect the company’s Hungarian unit, Alstom Hungária told MTI. Alstom chairman Patrick Kron said the company would eliminate at least 1,300 jobs, mostly in Europe, because of weak growth. Alstom Hungária said the lay− offs would be made in countries in which Alstom has big production capacities. U.S. agribusiness Monsanto has inaugurated a $67 mln expansion at its seed plant in Nagyigmánd. Output of seed for maize and rapeseed at the plant, which Monsanto Hungária bought from IKR, was doubled. Last year, Mon− santo Hungária had revenue of HUF 35 bln, half from exports. Graphisoft Park, a company that owns and operates a business park in Buda− pest, had after−tax proﬁt of €490,000 in the third quarter of 2013, down 15.4% yr/yr, the company announced in its unaudited, consolidated IFRS report for the period. Graphisoft Park generated turnover of €2.02 mln during the period, down 2.5%. Property developer WING said General Electric would expand at its East Gate Business Park in Fót, near Budapest. GE will spend several billion fo− rints to add an 11,000 sqm production hall at the site where it will make central control units for power plants.

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06 News

Budapest Business Journal | Nov 15 – Nov 28

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EBRD CUTS FORECASTS FOR CENTRAL EUROPEAN ECONOMIES The European Bank for Reconstruction and Development cut its growth forecasts for Central Europe, citing weak demand for their exports and unfinished reforms. Deflation− ary pressures were also coming from the euro zone, but internal risks of deflation were limited, the bank said in its latest Regional Economic Prospects report published on November 11. Growth in the region picked up in the second quarter of the year, as the eurozone finally showed signs of exiting recession. Central Europe and the Baltics will grow at 0.9% this year before modestly recovering to 1.9% in 2014, the EBRD said. The London−based bank expects growth in Poland of 1.2% in 2013, but raises its forecast for the country to 2.3% in 2014. The Slovak Republic similarly saw a revival in industrial production over last quarter, in particular in manufacturing. EBRD projections remain at slightly under 1% for this year and about 2% in 2014. Hungary has seen a welcome cycli− cal recovery, with growth in the second quar− ter. For 2013 the EBRD expects growth to be marginally positive and for 2014 to edge up to 1.2%. The recession in Slovenia deepened in the first half, and for the year as a whole a GDP contraction of 2.4% is expected. The re− ADVERTISEMENT

cession that took hold in Croatia in 2009 has persisted into 2013. POLES TO SPEND LEAST IN EUROPE ON CHRISTMAS According to consultancy ﬁrm Deloitte, the average Polish family will spend the equivalent of €267 on food, beverages and presents this coming Christmas, meaning Poland ranks the lowest of 17 European countries surveyed, including emerging economies such as Ukraine and debt−rid− den Greece. The average European family will spend €450 on this year’s festivities. The typical Danish family will fork out as much as €634, while Czechs will spend €430. Looking east, Ukrainian families will spend an average of €374. Deloitte’s audit− ing director Adam Chroscielewski told the Puls Biznesu daily that in spite of Poland’s traditional attachment to Christmas, Poles do not want to borrow to cover the costs and plan to give practical presents. KOSOVO ANNULS MUNICIPAL VOTE IN SERB-POPULATED TOWN Kosovo election officials said on November 6 they had decided to annul a vote in a Serb− populated town that was violently disrupted by hardliners last weekend, and ordered a re−

run. The central electoral commission said results from three polling stations in Serb− populated Kosovska Mitrovica were “an− nulled due to damaged ballot boxes”, news agency AFP reported. In a blow to Serbia, which hoped a peaceful election on Novem− ber 3 would accelerate its EU membership path, voting was disrupted in Serb parts of Kosovska Mitrovica after Serb extremists stormed a polling station and destroyed bal− lot boxes. The commission decision came as the prime ministers of Serbia and Kosovo, Ivica Dacic and Hashim Thaci, met in Brus− sels to discuss the violence with EU foreign policy chief Catherine Ashton. ROMANIA GOV’T AGREES ON ’14 BUDGET WITH IMF, EU Romania’s leftist government has agreed a budget plan for 2014 with the International Monetary Fund and the European Com− mission under an aid deal, introducing new taxes but raising the minimum wage, Prime Minister Victor Ponta said on November 4. The government does not intend to draw on the €4 billion made available. Ponta said his government will target a ﬁscal shortfall of 2.2% of gross domestic product in 2014 – in both cash terms and European accounting standards – down from this year’s target of 2.5% of GDP. Ponta said the minimum wage will rise in two stages to RON 900 (€203, $270), from the current RON 800, while some state employees will receive modest salary hikes and state pensions will be in− dexed by 3.76%. The government will hike royalty taxes on all mineral resources except oil and gas by 25% and introduce a new ex− cise tax on fuels.

EU STARTS ASSOCIATION TALKS WITH KOSOVO The European Union launched negotiations for a Stabilization and Association Agree− ment (SAA) with Kosovo on October 28. “This is an acknowledgment of Kosovo’s ef− forts in moving forward key reforms, as well as to its progress in building neighborly re− lations with Serbia,” said EU Enlargement Commissioner, Stefan Fule. One of the main difficulties for Kosovo joining the EU will be its status. Currently, five EU member states have not recognized the former province of Serbia, which declared independence in 2008. The EU has already signed association agreements with all the other West Balkan countries that are not members. TWO THIRDS OF CZECHS VIEW DOMESTIC ECONOMY AS BAD Nearly two thirds of Czechs believe the Czech economy is in a bad condition, but the share of people with this opinion decreased slightly against September, according to a poll carried out by the CVVM research in− stitute. Less than one−fifth of respondents think the situation of the Czech economy is very bad, while 7% believe it is good. More than one−quarter of respondents say the domestic economy is neither good nor bad. Optimism in the assessment of the current economic situation grows with respondents’ assessment of their living standards, accord− ing to the survey. Almost one−fifth of respon− dents consider the living standards of their households bad, while more than one third of respondents view their living standards as good. The poll was conducted among 1,039 people in October.

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News 07

Budapest Business Journal | Nov 15 – Nov 28

BETTER THAN SEX? Using Facebook takes an hour away from an average Hungarian’s life. Work time and bedtime are equally affected. ZSÓFIA VÉGH

Facebook is more appealing than sex – at least for those 6% of Hungarians who swap intimacy for some browsing on the largest social media network, according to a recent survey by ArvaliCom, a communication agency that looked into Hungarians’ Facebook habits. Two− thirds of people still opt for coupling, while for roughly a fifth, every now and then Facebook wins over sex. Having read the above, the fact that 88% of the 4.7 million Hungarian users of Facebook visit the site every day should come as no a surprise. Some have already discarded their televisions and stay informed via social media. News, events, advertisements, invitations are all to be found here. Our friends select these items, not unknown editors, which make them more attractive. Would you read the article ‘10 things that makes you hate Sweden’ unless it was posted by a colleague/friend you like? Probably not. Almost 100% of those polled said they find Facebook a platform packed

with useful information – including why not to like the Swedes – which they do not hesitate to like or share. Even from a business viewpoint Facebook seems unavoidable. There is hardly any firm that is not present on the social media site. Even traditionally cautious companies, such as law firms, have bent to the trend; corporate digital marketing strategies for 2014 all include Facebook. Some companies use it for recruitment, mainly targeting the younger generation. Others encourage their employees and managers to use it as an extension to their LinkedIn accounts. This makes (business) sense: Facebook reaches users at times – usually early in the morning, late in the afternoon and at night – when professional accounts are less likely to be visited. Facebook also offers a chance to approach potential business partners in a semi−formal fashion. If done smartly, ties with people met at social encounters can be strengthened via Facebook. As an advertising site, Facebook is improving; with 15% of online advertisement revenues projected for 2013 – a 10% rise from the previous year – it is well on way to claiming a bigger share of the market. Hungarian users are not (yet) wary of clicking on ads, 85% are curious enough to do so. The chance to win is less attractive, though: less than 80% will try a game.

Newspapers may curse the digital advent, but Facebook works for them too. Thousands of articles are linked to daily, increasing the number of individual visitors on their homepage. There are some problems, however. Several users say they have a difficulty in logging off, 55% of the respondents, to be precise. For the other half, however, a life without Facebook would be no problem at all. Some 40% of active users spend more than one hour on the webpage, working hours included. That may account for why 8% of firms have limited Facebook usage at work. Apparently, Facebook can be detrimental to your love life. The socializing site has caused relationship problems for 15% of couples, and led 3% to break up. So use it sparingly. WHAT MAKES USERS ANGRY? 53% are annoyed by advertisements 35% by offers to win at games 25% by frequently posting friends 20% by quotes 11% by animals 8% by children 6% by themselves About the survey: ArvalCom quizzed 503 people via SurveyMonkey in October 2013. Some 64% of the respondents were female, 36% were male. One−third live in Budapest.

TOKAJI REVAMPED The Tokaji wine community has designed stricter regulations to strengthen premium quality winemaking. ZSÓFIA VÉGH

Tokaji, possibly the only Hungarian wine that is familiar outside Europe, is undergoing a revamp. A set of guide− lines approved by the wine region’s leaders on October 30 will make stricter the rules of its production. Under the new regulations, winemak− ers can produce 2.2 liters of aszú wine per one kilogram of aszú grapes. Sugar content is set at 120 mg/liter – the lower limit of 5 puttonyos Tokaji – excluding from the market the lower range 3−4 puttonyos wine. (Tokaji quality is mea− sured by degree of sweetness; the limit for 3−4 puttonyos wine is 60 mg/liter). Overall alcohol content of aszú should be at least 19%. These constraints, as well as the recent election onto the wine region committee of board members favor− ing high−end wine production, signal a shift in winemaking towards the pre−

mium end. It has also triggered discon− tent among those who produce lower− priced Tokaji in higher volume, as their market and revenues may shrink. Another novelty is that Tokaji wines of Protected Designation of Origin (PDO) may only be bottled at Tokaj−

Hegyalja from July 31, 2014. Adding sugar and sweeteners to these wines will be completely phased out from July 1, 2015. Cellars producing lower−range wines will have to report sweetening to the wine region and keep a log of it, too. Unlike the previous regulations, the new rules do not exclude the possibility of making red wines in the region; up to now Tokaj wine has been defined as white, a description the new code does not include. Old local varieties such as szerémi zöld, piros bakator, and villláskacsú that are less prone to philoxera are to be reintroduced and will replace varieties like cserszegi fűszeres, királyleányka and tramini, which will be allowed to grow only in moderation. Embracing these older wines can be explained by a recent surge of interest in local varieties over more global grapes. Clearer requirements and reinforced quality control will guarantee the pre− mium status of Tokaji wines, claims Miklós Prácser, head of the Tokaji wine community. Prácser believes these steps are vital to restore the rank of the iconic winemaking region. “Placing wine pro− duction on new basis will help boost the region’s growth and help ever more peo− ple to live from winemaking.”

PLASTIC BAGS TO BE WAY OFF Since measures at national levels have not helped reduce the volume of plastic bags, the European Union is obliging member states to take action.

Approximately 100 billion plastic bags are used in the European Union every year. That is more than 190,000 bags per minute. On average, every EU citizen uses 200 bags annually, but only 6.6% of them are recycled. Half of all used bags end up in landfills, and 8% as litter. Much of this plastic debris floats in the oceans, broken into micro plastic or plastic soup. They harm sea fauna and humans through the food chain: because of chemical additives in them, some of the plastics are endocrine disruptors and can migrate into body tissue. In the European Union, no comprehensive policy has been set to solve these problems yet. Specific aspects are addressed in various pieces of legislation, such as the Waste Framework Directive with its 2015 separate plastic waste collection target, or its 50% household waste collection target by 2020. Member states themselves are at various stages in handling the problem. Some, such as Ireland and Luxemburg, excel. In Ireland, a levy introduced 11 years ago has helped reduce the number of single−use plastic bags from 328 per person per year to 18. On November 4, the European Commission adopted a proposal for a directive to reduce the consumption of lightweight plastic bags in the EU. It obliges countries to take action. What measures are taken is up to each member state, but the proposal also stipulates that these may include the use of economic instruments (such as taxes and levies, which in some member states have proved to be very effective), national reduction targets, as well as marketing restrictions.

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2Business insight

SHARED SERVICE CENTERS: SPOTLIGHT TIME Hard work is sometimes done merely for the glory of it, but getting rewarded surely sweetens the effort. Shared Service Centers (SSCs) have been shy of seeking the spotlight since they first set up camp in Hungary at the end of the 1990s. They have been rather busy with creating jobs and a quality service culture in a subtle manner. Now a survey reveals why they are worthy of public recognition. LEVENTE HÖRÖMPÖLI-TÓTH

Shared Service Centers (SSCs) have been around in Hungary for about one and half decades now, but it would be an overstatement to claim they have been economic buzz−makers. In fact, apart from their own customers, few are even aware of their existence here. Despite that, while providing a wide range of high quality services in various indus− tries, SSCs have become one of Hun− gary’s fastest growing sectors and truly deserve the main spotlight.

STORY HIGHLIGHTS ■

The great performance of SSCs has got marginal media coverage ■ Certain areas need improving, but growth perspectives are promising

DISTRIBUTION OF MATURITY MODEL RESULTS FOR HUNGARIAN SSCS

PROGRESS UNDER SCRUTINY A comprehensive survey on the assess− ment of SSCs was conducted by Pricewa− terhouseCoopers (PwC) Hungary for the first time back in 2011. This year their progress was analyzed in a similar fash− ion. The results provide a representative overview of the current stage of develop− ment of around 80 units in total, where some 30,000 are employed. Each SSC was assigned one of four maturity levels on a maturity model developed by PwC, from the lowest ‘start up’ Level 1 stage to growth, expansion and the so−called ‘2nd Generation’ Level 4 stage. The key findings demonstrate that Hungarian SSCs are operating in an ever more mature and sophisticated man− ner. Among the evaluation criteria, it was human resource management with respect to which the participating centers did best. Another segment where they scored high was the criterion of continu− ous improvement, as the vast majority of SSCs are seeking the potential optimiza− tion of processes all the time.

SSC CENTER CONCEPT INCLUDING THE WAY SERVICE PRICING IS ORGANIZED

PICK A MOOD There are also areas of less cheerful findings, though. In terms of business processes, only 14% of the survey par− ticipants reached the ‘2nd Generation SSC’ phase, and customer relations lag behind as well with a mere 20% ratio of highest development stage entities. As to organization, governance and com− pliance, further progress is needed since none of the SSCs performed at the highest maturity level and more than half were still in the ‘Level 2 – Expan− sion’ phase. But the overall sentiment of the con− clusions is definitely a thumbs−up. SSC leaders are happy with what has been achieved as a result of the oper− ation of their centers. The initial tar− gets have been met and picking Hun− gary as a business location has paid off. The two main driving forces behind the initial investment decision were low labor costs and the availability of highly skilled workers. From such a launch pad, the sector has been creating high

added value and jobs for a large number of highly skilled white−collar workers at a competitive cost level. A REGIONAL EDGE “Regarding skilled workforce, the coun− try is still among the best in the region and IT, telecommunication, logistics and transport infrastructure is excellent,” said András Loós, Director at PwC Hungary. “While Hungary can still offer excellent opportunities, both for setting up new centers and for further growth of exist− ing SSCs, the country has to find a way to better position itself within the region and identify how to become distinctive in the CEE.” Cost−effectiveness and retention of tal− ent are as much of a decisive nature now as before. “We see a clear tendency that quality improvement became almost as important an objective as maintaining cost for the SSCs,” Loós said. “Therefore labor costs and the availability of work− force with the right skills will determine the future of the sector.”

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2 Business

Budapest Business Journal | Nov 15 – Nov 28

HITTING THE GAS PEDAL, WITH CAUTION Most participating centers are planning further growth. An increase of quality and productivity has been mentioned by almost every SSC as key initiatives for the next two years. The most critical func− tions for future enhancement are linked to human resources, IT and customer ser− vices. Employee development programs are increasingly important in this regard. In spite of the overall positive bal− ance, some concerns plague SSC exec− utives when weighing future scenarios. Most of them involve unpredictabil− ity and the lack of sufficient transpar− ency. The business environment is rated as being very volatile, which has a direct impact on the cost of services and the availability of employees with the required skills and language knowl− edge. As to the latter, employers would prefer more assurance that significant changes in higher education will not have a deleterious impact as regards the skills of their potential work force. CERTAINLY UNCERTAIN The unpredictable regulatory environ− ment and negative international media publicity about Hungary also pose a threat that less new centers would be set up. Expansion has stalled, indeed, in the past few years, and projects could use some solid impetus. Help may come in various forms. The Hungarian Trade and Investment Agency (HITA) visits the centers to provide the government with proposals on how to facilitate fur− ther development. On the other hand, several, mostly tax−related investment incentives are available, and training subsidies are also available. It should be noted that with the upcoming EU budget around the corner, the subsidy scheme would inevitably change: Budapest, for instance, is con−

sidered too developed for regional subsi− dies. That should give the opportunity to push growth towards cities in the coun− tryside that have been underrepresented among SSC locations. Employment rates could go up as a result. In this regard, however, continuous communication between policy makers and industry players is vital to ensure that such mea− sures boost further investment.

AIMING HIGHER Hungary has managed to keep its com− petitive edge not only compared to other parts of the world, but also in the CEE region. Therefore, there is no immediate danger of reallocation for SSCs. Most credit for that goes to the highly dedicated and skilled employees and effective cost−management. Shared Service Centers have been doing an

excellent job since they first appeared in the country. Now is the time to aim even higher, with the help of system− atic improvement of delivery, and a hopefully ever growing level of well− deserved recognition. (This article is based on PwC Hungary’s study Hungarian Shared Service Centers Survey 2013.)

CRITERIA USED TO SELECT CURRENT SSC LOCATION*

(a maximum of 100 points could be distributed between the criteria)

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10 2Business EXPERT OPINION

NUCLEAR POWER PLANTS: TO BUILD OR NOT TO BUILD Diána SZŐKE

Péter Simon VARGHA

News surrounding the construction of two new nuclear power stations in Europe suggests that Hungary should not hurry with an expansion of its Paks nuclear power plant.

NOTE: ALL ARTICLES MARKED E XPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILIT Y

he British government announced this month that a consortium comprised of French utility company EDF and two major Chinese investors will construct the new Hinkley Point C plant in Somerset. The news stirred attention, as it will be the United Kingdom’s first new nuclear station in two decades. The project is expected to cost £16 billion (equivalent to HUF 5,500 bln), with plans to finish the first of two reactors by 2023. Critics warn that the £92/MWh (per megawatt hour) guaranteed ‘strike price’ (roughly twice the current wholesale electricity cost) would raise energy bills for end-consumers in the long run. Meanwhile, the construction of the Olkiluoto nuclear plant in Finland has been delayed yet again. Building a third block commenced back in 2005, with an initial deadline of 2009. However, this has been put back three times already, and recent reports indicate it may be postponed until 2016. The project has already cost more than twice as much as originally planned. Why is this important to Hungary? Because the question of nuclear power plant construction strikes close to home. There are plans to announce a tender for one (or perhaps two) new nuclear blocks at the existing Paks site. A 1 GW block could cost HUF 1,500 bln (equivalent to around 5% of GDP) or even more, an amount that would further increase public debt. This means the electricity generated by the new block would not be cheap; its price could reach up to €90-100/MWh, depending on the cost of capital, which is likely to be higher in Hungary than in the UK. All this comes at a time when the current market price is around €40-45/MWh, and domestic electricity demand remains 3-4% below its pre-crisis level. Overall, Europe has a large capacity surplus, partly as a result of subsidized renewables. Conventional wisdom holds that nuclear power plants generate cheap electricity, and it is only the greens who don’t like them. But in reality, the technology is incredibly capital-intensive: you have to pay a huge sum upfront to get electricity later. Because of this, any delays in the project could lead to substantial increases in power costs. A one-year-delay, for example, could drive up electricity prices by 10%. (The reason for this is that the yields of the already invested money must be paid for a further year, whereas the revenues stemming from production would only be incurred later.) This means that project management skills determine costs to a large extent. And in this regard Hungary probably does not fare very well. Furthermore, because of the expected technological developments and cost declines in renewable energy production (e.g. solar PV panels or wind), it seems unwise to spend money earmarked for meeting electricity demand 40 years in advance, thus fixing high prices. Based on the above, it should come as no surprise that nuclear construction is so rare in Europe, especially in light of the nuclear phase-out in Germany following the 2011 Fukushima disaster. Overall, there are several arguments against nuclear expansion in Hungary: it is extremely expensive, while sufficient electricity demand, access to cheap financing and the necessary project management skills are all lacking.

Budapest Business Journal | Nov 15 – Nov 28

HUNGARY STICKING TO ITS NUCLEAR AMBITIONS Environmental concerns and the still haunting image of the Fukushima disaster continue to divide the world on whether nuclear energy should grow or go away. For Hungary, the drive is clear, with widespread support of nuclear power and the expansion of the country’s key electricity production unit to double output capacity. GERGŐ RÁCZ

The division among member states of the European Union hasn’t become any narrower in the recent past, even though it has been more than two years since the Fukushima disaster in Japan. Some countries remain strongly supportive, while others are categorically opposed to the utilization of atomic power in light of the Japanese incident.

This lack of a global direction has also been perceived to influence the European Commission’s approach and how it would finance investments into the technology and how it plans to regulate it. According to Hungary and its partners in the Visegrád Four group (Czech Republic, Poland, and Slovakia), the EC should be more permissive and even supportive of atomic power, which is seen as vital to the continued energy supply of the region. “We expect the European Union to help rather than hinder the increase of nuclear capacity in central Europe,” Hungarian Prime Minister Viktor Orbán told reporters after meeting with his V4 colleagues in Octo− ber. “This area must not be over−regulated and the issue of state aid for energy investments should also be reviewed, because we think that nuclear energy is being discriminated against here,” he added. That Hungary, Czech Republic and Slovakia are expanding their nuclear capacities is in stark contrast to other European countries that drew greatly different conclusions from the aftermath of Fukushima. Germany has decided to completely phase out nuclear power over the course of a decade, while Italy and non− EU member Switzerland also decided to base their future energy consumption on sources other than atomic power.

STORY HIGHLIGHTS ■

Central European countries ask EU support for nuclear power ■ Hungarian population unconcerned by safety issues

But the support for nuclear is by no means limited to the developing economies of Central Europe: similar ven− tures are underway in Finland and most recently, Great Britain. On a global scale, there are a vast amount more, with new plants springing out of the ground in Asia, most a notably China where 30 projects are underway. Russia is also continuing with 10 plants, India with six, and even the United States is currently building four units. Jordan is only just entering the scene, having newly commissioned the country’s first nuclear power plant. HUNGARY ALL FOR NUCLEAR The continued and expanding role of nuclear power in Hungary’s future energy portfolio is not only backed by the political elite; the general public is also supportive of the Paks power plant, which still accounts for approximately

40% of the country’s annual electricity consumption. If there was ever any doubt in the minds of the general public about the value of nuclear energy after the Fuku− shima disaster, it has all but disappeared, but skimming the related polls, never really emerged at all. A recent survey conducted by TNS Hoffmann and commissioned by state energy group MVM found that 76% of Hunga− ry’s adult population is pro−nuclear. Just as in the years before, the approval rating of nuclear energy was above 70% among respondents, who cited nuclear power as the cheapest source of electricity, and there is also rising awareness of the virtually zero harmful emissions associated with the use of the technology. As opposed to many other countries, safety worries con− cerning the country’s only major nuclear power plant are negligible. The market research found that the majority find nuclear perfectly safe: in fact, 95% of those residing in the direct vicinity of the Paks nuclear power plant said they are completely unconcerned about any prospective risks. The Paks facility also boasts outstanding results in the so−called stress tests, disaster simulations that were conducted worldwide after Fukushima to determine whether the facilities have adequate safeguards to pre− vent disasters in the case of unforeseen circumstances.

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2 Business

Budapest Business Journal | Nov 15 – Nov 28

SMEs NEED FUNDS BIG TIME SMEs continue to play a significant role in the Hungarian economy. However, the past 20 years saw fundamental changes among them, including a huge number of liquidations. The latter came partly as a result of the turmoil and recession caused by the financial and economic crisis in Hungary and globally, while the whitening of employment relationships may also have played a role in this. The ‘surviving’ SMEs are now seeking new funds in order to improve their effectiveness and competitiveness. Bálint Szűcs, attorney−at−law, tax expert and partner of RSM DTM, talks about the situation and prospects of small− and medium−sized businesses in Hungary. KRISZTIÁN KUMMER

Are company setup procedures regulated in an effective manner in Hungary in your view? A: Generally it can be concluded that company setup and alteration procedures are regulated in a simple and effective manner. A simplified company setup pro− cess can be used for quick setup needs, which is practically administered within a day by the court of registration, but even general company establishment proce− dures are implemented within 15 working days. All company procedures are dealt with in an electronic manner, so the docu− mentation as well as the resolutions of the court of registration are sent in electroni− cally signed documents, which makes the administration quite simple.

Are there any restrictions for company setup for individuals who were involved in bankruptcy

before? A: There are relevant rules to protect and to sanction those situations directly where the central budget was damaged. Pursuant to the so−called tax registration procedure introduced in 2012, new com− panies connected through their major− ity shareholder or executive officer to an insolvent or bankrupted company having or having left significant unpaid tax obli− gations cannot receive a tax number and therefore cannot be established. However, there is no such restriction if a bankrupted company has or leaves unpaid dues towards creditors other than the state. Accordingly, the tax registra− tion procedure is a kind of positive dis− crimination of the state as creditor, but, from the other side, the debts left towards

other creditors do not result in the same negative effect for prospective company owners and managers. There are certainly anti−avoidance rules in place for shareholders misusing the limited liability of their companies or managers withdrawing funds serving as a basis for creditors’ claims, but the prov− ing and enforcement of such regulations are burdensome and do not have such direct effect as the above mentioned tax registration rules.

What was the effect of the cri− sis on the number of companies going into bankruptcy and liqui−

dation? A: This is a complex question, as it is driven not by one factor only. For exam− ple, the whitening of employment rela− tionships may also play a role in the number of liquidated companies. It can be assessed generally that the number of companies going into liquidation was highest in 2010 and the number has been decreasing since then. On the other hand the number of voluntary liquidations and bankruptcy proceedings is increasing and as a result of this the total number of ter− minated business shows an increasing trend. The construction industry has been clearly affected by bankruptcy in a deeper manner than other sectors.

Is this because ‘chain debts’ affected this sector much more than others? A: Chain debts are still a very cur− rent problem. There have been signif− icant steps by the government to cure this issue, such as the recent introduc− tion of minimum hourly rates in the con− struction industry, using an independent organ for the certification of perfor− mance and monitoring of disproportion− ately low prices in public procurement procedures. These are new instruments aiming at the right direction, but their effect cannot be measured yet.

How can the situation of small− and medium−size enterprises in Hungary be described? A: Small businesses form the spine of business enterprises in Hungary, but in the past 20 years there has been a funda− mental change in the structure of these companies. In the 1990s, small enter− prises were found in large numbers due to high unemployment and therefore a lot of companies were established by so− called ‘forced entrepreneurs’. There has been a trend for eliminating these compa− nies and the workforce returning back to normal employment. The portion of micro enterprises, namely businesses with less than 10 employees, is still more than 90%, so SMEs – although they have a signifi− cant role in the economy – still have a lot room to improve. Another interesting issue is that most of the businesses are set up and working in central Hungary, mainly in the Budapest region. Subsidies are available with more beneficial conditions for underdeveloped regions, but statistics show that the chances for long−term survival of a business are greater in the central region of Hungary.

SMALL BUSINESSES FORM THE SPINE OF BUSINESS ENTERPRISES IN HUNGARY, BUT IN THE PAST 20 YEARS THERE HAS BEEN A FUNDAMENTAL CHANGE IN THE STRUCTURE OF THESE COMPANIES

What kinds of funds are available for SMEs? A: The range of possible fund− ing measures is wide from credits through subsidies and private equity to venture capital. The most recent inter− esting initiative was the favorable SME growth credit program introduced by the National Bank of Hungary. The scheme, which was available for SMEs for investments, financing of their own share of subsidies and refinancing of

foreign currency credits, drew signif− icant attention. As a result, a similar funding scheme was announced by the national bank as of October 1, consid− ering the experiences of the first round and focusing more on financing of new investments. The intensive awareness of these credit programs shows that SMEs have significant need for funds and also that a beneficial credit facility may serve their purposes well, some− times even better than a subsidy.

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12 2Business

Budapest Business Journal | Nov 15 â&#x20AC;&#x201C; Nov 28

BUSINESS INCUBATORS: STARTING THEM UP FOR REAL The concept of business incubation went on a victory tour from Israel and Finland where governments realized that they needed to step in to help embryonic innovative ideas turn into global economic success. Hungary strives to become a regional startup giant by playing the same card. The recent award of Accredited Technology Incubator titles could turn out to be the draft print of a bestselling story. LEVENTE HĂ&#x2013;RĂ&#x2013;MPĂ&#x2013;LI-TĂ&#x201C;TH

â&#x20AC;&#x153;Budapest aims to become the startup capâ&#x2C6;&#x2019; ital of the region and the government will play the catalyst role in this effort,â&#x20AC;? Zolâ&#x2C6;&#x2019; tĂĄn CsĂŠfalvay, state secretary of the Minâ&#x2C6;&#x2019; istry for National Economy (NGM) said at a recent conference. A precondition for accomplishing that mission is to have a critâ&#x2C6;&#x2019; ical mass of startup enterprises and to idenâ&#x2C6;&#x2019; tify comparative advantages. In terms of financing, the biggest problem to tackle is not necessarily raising money, but channelâ&#x2C6;&#x2019; ing funds to the right place.

STORY HIGHLIGHTS â&#x2013;

Business incubation is being given serious impetus by the government â&#x2013; More funds will be available, but they need to be channeled properly promising

In Hungary, venture capital worth HUF 133 billion is on the hunt for investments; however, it rarely finds its way to the early seedâ&#x2C6;&#x2019;funding phase of businesses, which is crucial for their development. In order to make up for the lack of that sort of financing, the government has come up with a business incubation program of its own. PREPARING FOR BREAKTHROUGH After a rigorous selection procedure by the National Innovation Office (NIH), four applicants were awarded the Accredâ&#x2C6;&#x2019; ited Technology Incubator title. Winners gain access to a pool of funds of HUF 2.1 bln, from which HUF 1.860 million goes directly to the startups selected for incuâ&#x2C6;&#x2019; bation, while the rest is used by the incuâ&#x2C6;&#x2019; bators themselves. Three of the awarded operators, ACME Labs Zrt, Digital Factory Zrt, and iCatapult Zrt, are in the ICT secâ&#x2C6;&#x2019; tor only. Aquincum TechnolĂłgiai InkubĂĄâ&#x2C6;&#x2019; tor Zrtâ&#x20AC;&#x2122;s portfolio covers biotech and medtech on top of ICT. â&#x20AC;&#x153;We are planning to incubate ten compaâ&#x2C6;&#x2019; nies annually. What matters most is not the number of jobs created or the capital raised,

but the how many of the startups supported by us will become a world success story,â&#x20AC;? Emese Maczucza, spokesperson of Central European Investment Services TanĂĄcsadĂł Kft, speaking on behalf of Aquincum Techâ&#x2C6;&#x2019; nolĂłgiai InkubĂĄtor Zrt, told the Budapest Business Journal. So far the problem on the domestic startup scene has been that the Hungarian founders were involved in technology development only, and it was the foreign partners who dealt with the factors such as intellectual property rights issues and business develâ&#x2C6;&#x2019; opment that are essential for a global breakâ&#x2C6;&#x2019; through. â&#x20AC;&#x153;We are confident that the handsâ&#x2C6;&#x2019; on experience of the owners will allow a smooth kickâ&#x2C6;&#x2019;start for most of our target companies,â&#x20AC;? Maczucza added. INCUBATE ME ONE MORE TIME Four may have won, but 14 others have lost in the race for accreditation. Yet, there are some who seem rather encouraged by failâ&#x2C6;&#x2019; ure. AVEC Accelerator Program, backed by three OTP Bank funds, has already started operation without state money. Even so, the first round losers will have a second chance soon. A new accreditation procedure is scheduled for the first quarter of 2014, where up to five or six new entities may gain access to the state money taps. â&#x20AC;&#x153;The ATI title cannot be earned twice. But those incubators who have won may apply again for the resources meant for startups, as their longâ&#x2C6;&#x2019;term financing must

be ensured,â&#x20AC;? LĂĄszlĂł KorĂĄnyi, acting chair of the NIH said to the BBJ. Funding gives an overall hopeful impression in the midâ&#x2C6;&#x2019;term. In the EU budget period of 2014â&#x2C6;&#x2019;2020, around HUF 700 bln will be available for R&D and innoâ&#x2C6;&#x2019; vation, from which HUF 140 bln could reach the startup ecosystem. â&#x20AC;&#x153;Together with NGM we are planning that the techâ&#x2C6;&#x2019; nology incubation program itself could be assigned a total of HUF 35 bln in that period,â&#x20AC;? KorĂĄnyi estimated. Apparently money will meet minds, then. And as Rina Pridor, one of the masterminds behind the Israeli incubation program insisted: â&#x20AC;&#x153;The potential in Hungary is out there.â&#x20AC;? It is time to make use of it.

INCUBATION ALL OVER THE PLACE According to data from the National Innovation Office, the estimated number of incubators in Hungary amounts to around 100, but most deal with property management only, or a very few other services, with limited results. The central region of the country hosts some 34 of those entities.

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3Special Report Why don’t cable providers compete with each other?

14-15

TELECOMS The participants in Hungary’s saturated telecoms market have few hopes of shifting the balance one way or another, but that doesn’t stop them from going up against each other in fierce competition everyday. Slowly but steadily, consumer habits are shifting and the providers are ready to pounce, even if it means getting only an inch ahead of the competition.

Flat new world

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Budapest Business Journal | Nov 15 – Nov 28

WHY DON’T CABLE PROVIDERS COMPETE WITH EACH OTHER? The public utility tax introduced by the government in January 2013 is anything but a stimulation to the cable providers to develop their networks; the more extensive one’s cable network is, the more tax one has to pay. Acquisitions have largely stopped although the market could still use a good deal of concentration. While four big cable companies dominate the sector, providing services to 72% of all Hungarian households, about 200 smaller companies cover the remaining one−quarter of the market. ANDRÁS ZSÁMBOKI

“For big multinational cable providers such as UPC and Telekom it is not worth expanding their networks any more,” Ferenc Kéry, president of the Hungarian Cable Communications Association told the Budapest Business Journal. He enu− merates possible explanations. Firstly, most of the potential acquisition tar− gets are simply too small to consider. Secondly, these small service providers operate in such remote regions that their networks would be too costly to connect. Thirdly, the Public Utility Tax Act that came into effect as of January 1, 2013 has had a hindering impact. The new

STORY tax wasHIGHLIGHTS meant to increase the revenues ■

The public utility tax introduced in 2013 has halted the natural concentration of the cable market ■ Market actors are maintaining their competitiveness and increasing their revenue by providing more diverse and advanced services to their existing customers

of municipalities, making it possible for them to levy a HUF 125 tax on every meter of wire – including coax cable and above−ground cables. If a company exceeds a certain cable network length determined by the law, the amount of tax to be paid will rise. “Such a tax comes as a surprise from a government that declares itself com− mitted to the principle of Internet access being a citizens’ right,” Kéry remarked. Since the levying of the new tax, cable companies have preferred hiring to acquiring. “It has become common for small cable providers to lease out their networks to the big cable companies which continue to oper− ate them, as has recently happened in Nyíregyháza,” he added. László Szűcs, communications director of UPC believes that the small number of acquisitions is a sign of the market’s maturity. “Cable network penetration has reached quite a high level on the service providers’ footprint,” Szűcs explained. “Having invested in the technical upgrade of these networks, operators in the past few years have focused on roll− ing out advanced new digital services to the customers,” he added. CONCENTRATION IS A MUST “Our three largest members are UPC, Telekom and Digi. They together pro−

vide services for 1.6 million households in Hungary, which means about two− thirds of all subscribers,” Kéry said. In addition, there are four middle to large providers: Invitel, Tarr, PR−Telekom, and ViDaNet. These provide for 16% of Hun−

Source: NMHH

DISTRIBUTION BY SERVICE PROVIDERS FOR WIRED BROADCASTING SERVICES

Note: The market shares were deﬁned on the basis of the number of wired subscriptions (CATV, IPTV) related to the total market’s estimated values.

garian households. The remaining 17% of subscribers are divided among more than 230 small providers. “In the profes− sion, providers which cater for 5,000 to 20,000 subscribers are already consid− ered middle size, but there are no more than 10 such companies in Hungary. There are hundreds of further companies which provide for 1,000 to 5,000 sub− scribers,” the president said, character− izing the membership of his association. This is all the more surprising because all the actors in the profession agree that economy of scale is the keyword in the trade. “Only large−size networks can be operated in an economical way. Further− more, technological development, mean− ing for example digitalization, favors the establishment of large networks,” László Szűcs told the BBJ. It does not matter whether a company provides for 1,000 or 100,000 subscribers; it has to invest into a digital headend station when a transi− tion from analogue to digital broadcast− ing has to be made. In order to transmit the Internet signal to the BIX Center in Budapest, the company has to rent a line irrespective of the number of its sub− scribers. “In situations of procurement, one has a better bargaining position if one can boast more subscribers, whether it is about set−top box purchases, servic− ing, or contracts with television chan− nels,” Szűcs added. There is, however, an inherent contra−

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THE GREAT ACQUISITIONS OF THE PAST FIVE YEARS

Note: The market shares were deﬁned of the total market’s estimated values based on the number of wireless subscriptions (DTH, coded DVB−T, HDig).

COMPETITION OUTWARDS Parallel network development as a form of competition is still conceivable. “Digi used to be notorious for establishing its own cable lines right next to the existing cable lines of UPC and Telekom, seduc− ing their customers away,” one expert said. “Digi is in fact present on 50% of UPC−covered territory with its own par− allel network, which generates a perma− nent price competition. The situation is

similar between Digi and Telekom, too,” our informant remarked adding, however, that recently Digi too has given up the practice of parallel network development. “The majority of the cable companies, especially the smaller ones, today com− pete less with each other but rather with other technologies,” Szűcs explained. True, cable technology is still dominant in the transmission of TV channels, but satellite TV services and the Mindig TV digital content service of Antenna Hun− gária are definitely gaining ground, especially in suburban areas. As far as the Internet is concerned, cable TV is pre−eminent in its provi− sion, while the ADSL technology, which was favored by Telekom for a long time, is rapidly losing its importance. There exists an even more up−to−date technol− ogy too, namely mobile Internet, but its ADVERTISEMENT

Source: NMHH

DISTRIBUTION BY SERVICE PROVIDERS FOR WIRELESS BROADCASTING SERVICES

diction in the present situation. Even though economy would dictate concen− tration, a surprisingly large number of small providers operate in Hungary at the moment. Kéry provides the answer by suggesting that many of these small cable companies are family enterprises, the owners of which make a living out of their activities. “Such owners would not consider selling the family firm even if they are struggling with the operations,” Kéry explained. Of course, the large companies have also lost much of their enthusiasm for new acquisitions since the public util− ity tax was introduced in January 2013. Prior to that, an ever−increasing num− ber of acquisitions had characterized the 25−year history of the business. “Today’s big providers have all been created through acquisitions and continued to grow organically,” one of the BBJ’s infor− mants pointed out. The predecessor of UPC bought up municipally developed cable networks. So did MATÁV Kábel. PR Telekom and Fibernet have grown into mid−size companies via acquisi− tions, and Invitel acquired its entire cable operation by buying up part of Fibernet. The exception is Digi, the lat− est entrant. It is the only company which has grown mainly by pulling out new networks in the recent years, becoming the third biggest actor in the market by creating a network on its own, and pro− viding services for about half a million households today. “There are still some service provid− ers catering for more than 20,000 sub− scribers, e.g. DigitalVác, which are nonetheless not courted by dozens of suitors,” an informer wishing to remain anonymous told the BBJ. The reason for the lack of interest is probably the Pub− lic Utility Tax Act.

Budapest Business Journal | Nov 15 – Nov 28

relatively low penetration at this point does not jeopardize the position of cable providers. “In the early 2000s, UPC became market leader by triple play, that is, by the combination of television, Internet and telephone services. Sub− scribing for combined services proved to be a simple and convenient solution for many families,” Szűcs said. “In 2004, landline telephone started to decline, but with the help of triple play UPC man− aged to revitalize it. Today, we are the second biggest wired telephone provider after Telekom.” These days, time shifting (UPC Horizon) is playing a similar role in the rejuvenation of television. Time shifting means that view− ers do not have to adapt to TV programs any− more, but by the help of various telecommuni− cation technologies they can watch programs anytime, anywhere and on any device.

2009 May: PR-Telekom acquires the municipal cable networks of Sárospatak, Jászberény and Sátoraljaújhely (northeast Hungary). October: János Tarr’s family enterprise, the leading provider for Tolna County, buys up Zelka, a similar family-operated cable TV company that used to provide services for 35,000 subscribers in Zala County. 2010 September: UPC and Intel acquire and share the cable network and some150,000 subscribers of FiberNet, the fifth biggest cable provider, which had functioned earlier as the integrator of small cable TV companies itself. 2011 Competition watchdog GVH approves Telekom’s acquisition of ViDaNet, the major cable provider for northwestern Hungary. 2012 March: UPC acquires RubiCom (63,000 subscribers)

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Budapest Business Journal | Nov 15 – Nov 28

BUNDLING INTO 2014 It’s not easy for companies when it comes to the telecommunications market. Since there is tough competition on the already crowded market, new technical solutions alone won’t suffice to conquer a big crowd of customers, who are very price sensitive, especially if you take in account the price of using a mobile phone, which is relatively expensive in Hungary compared to other European countries. So companies are looking for different solutions to keep their customers and draw other away from rival providers. GERGELY HERPAI

“This year was not an easy one: if you check the economy in the world and in our coun− try, the best we can say is that it’s kind of ‘flat’,” László Szűcs, the director of commu− nications at UPC Hungary said. He con− firmed that UPC has a hard time to con− ADVERTISEMENT

vince their customers to subscribe to more sophisticated services like HD television channels, since they are still rather expen− sive and their customers are mainly inter− ested in the cheapest solutions. On the other hand, their bundle model with a very popular Internet subscription, which is linked to other services like television and landline phones, is very successful. 4G AND DIGITAL BROADCASTING ON THE WAY? “I want to highlight our mobile Internet ser− vices, which have improved a lot. Our cus− tomers are especially interested in our ‘Hip− ernet’ 4G service,” Nelli Kadlok, corporate communications specialist at Telenor Hun− gary confirmed. “Thanks to this service we are currently the fastest mobile Internet com− pany in our country, so if we talk about num− bers, this means that we had many new sub− scribers this year,” she added. András Tóth, director of communications at Antenna Hungária Ltd confirmed, “We closed an eventful and successful year, and we are especially happy that we success− fully completed the digital switchover pro− cess without any major hitches on October 31, when we turned off the analogue terres− trial television network. As far as the pay− TV service is concerned, Mindig TV Extra has become the fourth−largest operator, and we expect its evolution as the fastest−grow−

ing wireless pay−TV operator which within a short period of time will serve hundreds of thousands of our clients,” he added. HD TV TO REIGN SUPREME? Televisions with higher resolution capabil− ities like 720p or 1080p have been with us for about eight years, but Szűcs says UPC subscribers have been able to enjoy the two most watched Hungarian TV channels, RTL Klub and TV2, in HD only since this year. That says a lot about how customers are still in the phase of getting into HD broadcasting. “Sometimes ideas about technology and cus− tomer interest differ, as in the case of the 3D television technology. Many people thought that it will be an extremely popular service, but actually it didn’t meet the interests of cus− tomers, who failed to see why they should by another new television after their HD one, just because it’s 3D. Channels in 3D are also very small in number, so this technology is rather unsuccessful. And we are not even talking about the brand technology called 4K or 8K (super high resolution televisions) which is slowly getting popular abroad, but not really in Hungary,” Szűcs added. MOBILE INTERNET AND THE GOOD OLD LANDLINE PHONE “We want to improve our mobile Internet even more, make it even faster and mobile coverage must be even greater,” Kadlok

from Telenor said. “Although ‘Hipernet’ is already the fastest 4G mobile Internet net− work in our country, still the development cannot stop: we need lightning−fast Inter− net access anywhere made available to our clients,” she added. Szűcs, of UPC, confirmed, “We were pleasantly surprised by our success in the field of the good old landline phones. Since we can offer really inexpensive prices, there was a significant growth in our landline phone service market, and we are actually the second most important actor in this field in Hungary.”

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Budapest Business Journal | Nov 15 – Nov 28

FLAT NEW WORLD LEVENTE HÖRÖMPÖLI-TÓTH

Concept ‘unlimited’ is the magic formula of the fall for mobile providers in Hun− gary. Almost exactly one year after Voda− fone came out with the first such package in October 2012, Telenor and Telekom have joined the game too. The shared ideology is based on three principals: 1) Sign for two years for best deal; 2) No handset with basic packages; and 3) Be happy with 500 MB data to start with. The offers encourage users to stick or move to what phones were originally meant for: talking. In return, you have to be sat− isfied with relatively low amounts of data credit. The reason for the policy lies in the fact that voice services place a lot less burden on networks than mobile Internet. Network intensive Internet data transmis− sions require heavy investment. Frequency license fees top the bill. Such costs trim profits for mobile data services, so generos− ity is not part of the deal: the basic flat rate

packages contain 500 MB of data only. STORY HIGHLIGHTS ■

New mobile ﬂat rate packages unlikely to cause major market share shifts ■ Hungarian mobile data trafﬁc trends are decreasing

“We detected a justified need on the part of customers that they wanted unlim− ited calling and text messaging as many never used up their data credit anyway,” György Márton, spokesperson for Voda− fone explained to the Budapest Business Journal. Data−thirsty users still have the option to pick a larger package, or they can go separately for additional Gigs at an extra charge (see table). DEFINE ‘FLAT’ Customers have waited long enough for the era of limitless talking and texting. “The rate structure is simple and transpar− ent, and prices are reasonable since they have decreased by almost 50% compared to our previous offer with similar param− eters,” Magyar Telekom’s Directorate for Communications stated. But despite claims of better transparency, it does take an effort to cut through the clutter, for there are degrees of ‘flatness’. You could buy unlimited monthly free− dom inside your own provider network for between HUF 4,990 (Vodafone) and HUF 6,490 (Telekom). The trick is that subscrib− ers of Telenor and Vodafone, the two pro− viders with smaller market shares statisti− cally, have to place more calls outside the network, which inevitably generates more costs beyond the package.

THE GRASS IS ALWAYS CHEAPER ON THE OTHER SIDE While Hungarian mobile customers are being bombarded by their providers’ unlimited packages, it is worth stopping for a moment and assessing to what extent they should feel spoiled by European standards. Not that much, to put it mildly. Go to the Czech Republic and you will find that flat rate offers are well under the HUF 9,000 mark (CZK 749) with a data pack of up to 1.5 GB included (see table). In the heat of a mad price race in Poland, the best package is down to PLN 57, the equivalent of around HUF 4,000. “When setting rates, several factors need to be taken into account such as the size of the market, consumer habits, the tax burden of providers, the amount of VAT and frequency license fees”, György Márton of Vodafone Hungary commented. Fair enough, but it also may be of relevance how rates correlate to purchase-power parity. This is striking especially drawing a parallel with wealthy Austria: A1 charges merely EUR 22.90 (approximately HUF 6,700) for its unlimited package.

SHARE OF MOBILE OPERATORS IN TERMS OF MOBILE SUBSCRIPTIONS*

*(Subscriptions of operator / Total number of subscriptions)*100

Level 2 on the ‘flat scale’ implies “infi− nite” monthly phoning and SMS sending to all networks, complemented by a standard data volume of 500 MB. Rates were set in a copycat fashion, at HUF 9,990 (with the exception that T−Mobile offers this fee only for loyalty program members). But there is more to keep an eye out for. It is only Vodafone where calling voice mail, num− bers normally dialed from fixed lines at a discounted rate, and sending MMS are all included in the price. The flat nirvana can be reached by dig− ging a bit deeper in your wallet and then your reward is more data. Monthly fees range from HUF 13,990 to HUF 19,990 (see table), and providers justify their rates with different arguments. T−mobile prides itself on having the largest 4G−net− work coverage in the country (40%), which is bound to ensure maximum speed data transmission. Vodafone, in turn, stresses

CREEPING BACKWARDS Another important aspect is the amount of data included in the flat offers. Rewheel, a Finnish consultancy pointed out in a survey that Hungary is the most expensive country in the EU with respect to smartphone use when looking at how much one Gigabyte costs on average when included in unlimited packages. It is also a fact that the maximum amount of data included in a flat price is 3 GB (without using further options for extra charge). There is no other EU member state where so little is offered under such conditions. It is true, though, that demand here seems to be lacking for better terms. The average monthly data traffic per active user is falling, amounting to only 0.87 Gigabyte as of September 2013, compared to 1.07 GB in October 2013. And that includes all mobile devices connected to the Internet, not only phones. In Europe, with mobile Internet fueling a digital economy, trends are quite the opposite. In Scandinavia the share of value added services available through mobile Internet is a lot higher than in Hungary and customers there pay not for access, but for accessible contents. So the revenue per subscriber is several times higher than in Hungary. The Hungarian market is, in turn, phone-oriented, that is subscribers decide on the basis of choice of handsets, and average spending is smaller. It seems the country is going backwards.

its unique handset insurance and the pro− vision of cloud−based storage. MUCH ADO ABOUT NOTHING? It remains to be seen what impact the flat rate race will have on the market. In certain cases the time limit to choose an unlimited package is guaranteed only till the end of the year. That makes projections difficult. But pundits think that because of the similarity of the new rates, huge tremors will not come about and market shares should not change significantly.

ROOM FOR A FOURTH? There was a lot of hype about the government entering the mobile market with its own company, until the plan stalled. Now experts speculate to what extent the flat rate invasion by the operating providers could affect a possible market entry of a fourth stateowned player. It is expected that the new customers of such an operator would be employees of municipalities and governmentrun companies, but if prices are set low enough, they could poach customers from the three incumbent competitors as well. As to flat rate schemes, a general reason for applying them could be to serve as a ‘pre-emptive strike’ to deter new players from jumping into the playing field. But since profitability would not be among the motives, in the Hungarian case it should be totally irrelevant how competitive the playing field is at the time of market entry of a government mobile provider. And so the unlimited craze would have no impact on the new kid on the block.

Source: NMHH

A new era of mobile phone flat rates began in the past few weeks, with all three Hungarian providers gearing up for battle. Comparability has increased, although differences are still there if you look for them. Customers should benefit, but European counterparts are still far better off in terms of rates and data packages.

WWW.BBJ.HU

Budapest Business Journal | Nov 15 â&#x20AC;&#x201C; Nov 28

Telecom service providers

607,128

6,679,600

â&#x20AC;&#x201C;

COMPANY PACKAGE(S)

QUADRUPLE PLAY (INTERNET, TV, LANDLINE PHONE, MOBILE)

PACKAGE TYPES SOLD

TRIPLE PLAY (INTERNET, TV, LANDLINE PHONE)

OTHER

ISDN

ANALOG WIRE NETWORK

ANALOG CABLE NETWORK

OPTICAL CABLE NETWORK

MOBILE NETWORK

OTHER

SATELLITE TV

INFRASTRUCTURE TYPES

VOIP

LEASED LINE

CABLE TV

IPTV

CABLE INTERNET

MOBILE INTERNET

XDSL

MOBILE VOICE TRANSMISSION

LANDLINE TRANSMISSION

MAGYAR TELEKOM NYRT

NO. OF ACTIVE SUBSCRIBERS

COMPANY WEBSITE

TOTAL NET REVENUE IN 2012 (HUF MLN)

RANK

SERVICES

www.telekom.hu

TELENOR HUNGARY ZRT

159,224

www.telenor.hu

VODAFONE HUNGARY MOBIL TĂ VKĂ&#x2013;ZLĂ&#x2030;SI ZRT[1]

Âť

â&#x20AC;&#x201C;

123,420

2,600,000

â&#x20AC;&#x201C;

56,615

Âť

â&#x20AC;&#x201C;

YEAR ESTABLISHED NO. OF FULL-TIME EMPLOYEES ON JUNE 1, 2013

Ranked by total net revenue

1991

Âť

1993 1,105

1999

Âť

www.vodafone.hu

UPC HUNGARY KFT

INVITEL TĂ VKĂ&#x2013;ZLĂ&#x2030;SI ZRT

www.upc.hu

49,787

570,000

â&#x20AC;&#x201C;

www.invitel.hu

DIGI TĂ VKĂ&#x2013;ZLĂ&#x2030;SI Ă&#x2030;S SZOLGĂ LTATĂ&#x201C; KFT

36,654

www.digi.hu

GTS HUNGARY TĂ VKĂ&#x2013;ZLĂ&#x2030;SI KFT

BUSINESS TELECOM NYRT

Âť Âť

Âť

â&#x20AC;&#x201C;

3,547

Âť

â&#x20AC;&#x201C;

www.btel.hu

HUNGARO DIGITEL KFT[1]

11,424

www.gts.hu

Âť

1,889

4,000

â&#x20AC;&#x201C;

www.acetelecom.hu

NETFONE SZOLGĂ LTATĂ&#x201C; TĂ VKĂ&#x2013;ZLĂ&#x2030;SI KFT

Server location, cloud services, data networks

â&#x20AC;&#x201C;

Satellite telecommunicaton

www.hdt.hu

ACE TELECOM KFT 10

â&#x20AC;&#x201C;

Âť Âť Âť Âť

â&#x20AC;&#x201C;

Microwave, 26 Ghz frequency

â&#x20AC;&#x201C;

Satellite telecommunication system

â&#x20AC;&#x201C;

Microwave network

â&#x20AC;&#x201C;

700

3,300

â&#x20AC;&#x201C;

Virtualization

610

Âť

â&#x20AC;&#x201C;

serverhosting, VPS

Âť Âť Âť Âť Âť

â&#x20AC;&#x201C;

Âť Âť Âť Âť Âť

â&#x20AC;&#x201C;

Âť

â&#x20AC;&#x201C;

Âť Âť Âť Âť Âť

1994 889

1995

Âť

2000 1,202

1993

Âť

2006 69

1990

Âť

1997

Âť

2007

Âť

TOP LOCAL OWNERSHIP (%) EXECUTIVE HUNGARIAN CFO NON-HUNGARIAN MARKETING DIRECTOR

â&#x20AC;&#x201C; Magyarcom Holding GmbH (59.21), Free Ă RDW

Christopher Mattheisen JĂĄnos SzabĂł â&#x20AC;&#x201C;

1013 Budapest, Krisztina kĂśrĂşt 55. (1) 458-0000 (1) 458-7176 â&#x20AC;&#x201C;

Telenor Hungary SzolgĂĄltatĂł Kft (25.01) Telenor Mobil Communications AS (74.96), NYE Telenor Mobil Communications III AS (0.03)

Christopher Adam Laska Anders Bade â&#x20AC;&#x201C;

2045 TĂśrĂśkbĂĄlint, Pannon Ăşt 1. (1) 464-6000 (1) 464-6100 â&#x20AC;&#x201C;

â&#x20AC;&#x201C; Vodafone Group Plc (100)

Diego 1096 Budapest, Massidda Lechner Ă&#x2013;dĂśn fasor 6. David Garcia (1) 288-4288 Alexandre (1) 288-3200 Froment-Curtil â&#x20AC;&#x201C;

â&#x20AC;&#x201C; Zomerwind Holding B.V (100)

Betzalel Kenigsztein ZoltĂĄn BodnĂĄr â&#x20AC;&#x201C;

1092 Budapest, Kinizsi utca 30â&#x20AC;&#x201C;36. (1) 456-2600 (1) 216-0061 â&#x20AC;&#x201C;

â&#x20AC;&#x201C; Mid Europa Partners (100)

David McGowan David Blunck Marianne Langsteiner, AndrĂĄs BĂŠres

2040 BudaĂśrs, PuskĂĄs Tivadar utca 8â&#x20AC;&#x201C;10. (1) 801-1500 (1) 801-1501 info@invitel.co.hu

â&#x20AC;&#x201C; RCS&RDS S.A (100)

ZoltĂĄn TeszĂĄri, Ungureanu Florin, Ryszka Sambor â&#x20AC;&#x201C; â&#x20AC;&#x201C;

1134 Budapest, VĂĄci Ăşt 35. (1) 707-1000, 1272 (1) 707-6700, (1) 707-0009 ugyfelszolgalat@ digi.tv

â&#x20AC;&#x201C; GTS Central European Holding B.V (100)

PĂŠter KollĂĄr PĂŠter Apjok TamĂĄs SzabĂł

2040 BudaĂśrs, Ipartelep utca 13â&#x20AC;&#x201C;15. (1) 814-4000 (1) 814-4047 info@gts.hu

Individuals (100) â&#x20AC;&#x201C;

KrisztiĂĄn TakĂĄcs TamĂĄsnĂŠ Kurdik â&#x20AC;&#x201C;

6000 KecskemĂŠt, Mindszenti kĂśrĂşt 27/A (76) 585-027 (1) 999-5012 info@btel.hu

Antenna HungĂĄria Zrt (55.38) PT ParticipaĂ§Ăľes SGPS (44.62)

AntĂłnio Felizardo â&#x20AC;&#x201C; â&#x20AC;&#x201C;

2310 SzigetszentmiklĂłs-Lakihegy, Komp utca 2. (1) 488-8500 (1) 488-8501 info@hdt.hu

Individuals (100) â&#x20AC;&#x201C;

Attila Farmosi GĂĄbor Varga Viktor GaĂĄl

1039 Budapest, Ă rpĂĄd utca 21/B (1) 999-1000 (1) 437-0599 RIĂ&#x20AC;FH#DFHWHOHFRP KX

Individuals (100) â&#x20AC;&#x201C;

1026 Budapest, Zsolt Wilhelm GĂĄrdonyi GĂŠza utca 62. â&#x20AC;&#x201C; (1) 878-1814 â&#x20AC;&#x201C; (1) 325-5675 info@netfone.hu

Individuals (100) â&#x20AC;&#x201C;

Zsombor Papp 5H]VĹ&#x192; 'XQD\ â&#x20AC;&#x201C;

1138 Budapest, VĂĄci Ăşt 188. (40) 811-118 (1) 890-0891 info@dravanet.hu

Individuals (100) â&#x20AC;&#x201C;

AndrĂĄs Beliczay Anna Kutasi Judit Stark

1026 Budapest, (QGUĹ&#x192;GL 6iQGRU XWFD 15/C (1) 999-6000 (1) 999-6001 info@opennet.hu

www.netfone.hu

DRĂ VANET INTERNET 12 SZOLGĂ LTATĂ&#x201C; ZRT

557

www.dravanet.hu

OPENNETWORKS KFT 13 www.opennet.hu

Âť

â&#x20AC;&#x201C;

109

4,500

â&#x20AC;&#x201C;

Virtual PBX, Call Center, Click2Call

5,856

â&#x20AC;&#x201C;

EPHONE 14 MAGYAROSZĂ G KFT www.ephone.hu

2000

Âť

2004

Âť

2006

Âť

ADDRESS PHONE FAX EMAIL

,VWYiQ 6]Ĺ?FV (ULND .Ĺ&#x192;YiJy HorvĂĄthnĂŠ (40), ZoltĂĄn KovĂĄcs (10) â&#x20AC;&#x201C;

6723 Szeged, (ULND .Ĺ&#x192;YiJy JĂłzsef Attila sugĂĄrĂşt 115. HorvĂĄthnĂŠ (1) 445-0000 $WWLOD 7Ĺ?KHJ\L (1) 445-0100 PĂŠter MolnĂĄr info@ephone.hu

NOTES: (1) Data of business year April 1, 2012 - March 31, 2013.

Âť = would not disclose, NR = not ranked, NA = not applicable

This list was compiled from responses to questionnaires received by November 11, 2013 and publicly available data. To the best of the Budapest Business Journalâ&#x20AC;&#x2122;s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, MadĂĄch Imre Ăşt 13â&#x20AC;&#x201C;14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

BBJ

4 Socialite WINE REVIEW

OLASZRIZLING ON AN UPWARD CURVE This positively oozed tropical fruit with a smidgen of butterscotch, and while it is almost big, fat and Chardonnay−like in character, this sure is tasty stuff. “If peo− ple don’t like it oaky, then they should try something else,” asserts an ebullient Törö, who harvested the grapes for this one as late as October 8. 2HA has now doubled in size to four hectares. A relative newcomer to single varietal Olaszrizling is Pannonhalmi Apatság, which has totally eschewed the use of oak, with impressive results: its 2011 and 2012 were both named among the top whites at the Pannon National Wine Contest. Hailing from young vines planted in the Packalló vineyard, these wines were fermented in the tank and then rested there for just two months prior to bottling. They retained exhila− rating freshness, lime and spiced apple notes and have enough body and ripe− ness to do without propping up from oak. There was plenty of buzz around the Somló tables and many of the wines had a complex waxiness about them, albeit with the absence of the meticulous Imre Györgykovács. He picks early enough to capture both the grape’s varietal charac− ter and Somló’s salty minerality, before the wine becomes exaggerated and imbalanced. His Olaszrizling 2011 has notes of white flowers and pear, along with a distinctive savory character, and is very round and smooth. While his single varietal Olaszrizling is very decent, Frigyes Bott doesn’t con− sider the grape worthy of his top blend, Super Granum, which is made out of Fur− mint, Juhfark and Hárslevelű. It does however make an appearance in his estate wine, Granum, along with a host

The pan−Central European white grape Olaszrizling has long had a reputation as a journeyman compared to more glamorous grape varieties, but is this workhorse of Hungary’s former regime actually capable of producing outstanding wines? An afternoon spent tasting and chatting with winemakers at the Grand Olaszrizling October tasting at Gundel suggested that it can indeed sometimes step up to the upper echelons in the quality stakes. ROBERT SMYTH

It is in the volcanic basalt−based soils on and around Balaton’s northern shore, and in nearby Somló, where Olaszrizling often achieves its most profound expres− sion, although winemakers like Ottó Légli, with his Banyászó, prove you can reach great heights on the south− ern shore, too. Gyula Pálffy, a maker of some great value organic wines from Köveskál in the Balaton felvidék on Balaton’s northern shore, nevertheless plays down the pedigree of Olaszrizling. He openly admits that Olaszrizling all too often needs acidity to be added when seeking the kind of ripeness needed to make a big wine. This is because the life giving acidity can drop off rapidly as the grape is left out on the vine to reach full phenolic ripeness, picking up rich lay− ers of flavor in the process. Adding acid can leave the wine lacking that fresh and natural zippiness. Both Pálffy’s Olaszrizling Válogatás 2011 and 2012 are juicy and spicy, with flavors such as quince and pear. These flavors are more readily associated with the more highly esteemed Furmint, though the wines don’t quite have Furmint’s struc− ture building acid spine. Indeed, Pálffy is now also working with Furmint, which he says was once a common grape in his region. Olaszrizling Rezeda 2012 from Káli Kövek, one of Palffy’s neighbors in the Káli Basin, really jumped out of the glass with its magical combination of fresh fruit and floral notes, creaminess, rich− ness and savory minerality. Winemaker Gyula Szabó managed this by blending across three different vineyards – Szent

György hegy, Fekete hegy and Hegyestű – using a combination of controlled fer− mentation in the tank and spontaneous fermentation in the barrel, as well as age− ing in both tank and barrels. Csaba Török, owner and winemaker at 2HA in Badacsony believes the con− centration that Olaszrizling can pick up in the best parts of Szent György− hegy, means it can handle, and indeed be taken further by, the influence of new− ish oak and texture−enhancing lees stir− ring (battonage). The better the year, such as in 2011, the higher the propor− tion of new barrels used: that year the wine was aged in two− and three−year− old 225 liter barrels for seven months.

of international white varietals. The 2012 Granum is über fruity and fresh and is currently drinking beautifully, while its super sibling from 2012 has more power, intensity and depth, but is still a baby. Ethnic Hungarian Bott makes his wine just across the border in the Muzla region, in Slovakia. Olaszrizling, which is not at all related to the German grape Riesling, is known as Graševina in Croatia, Laški rizling in Slovenia and Welschriesling in Austria. While Austrian Blaufränkisch may be ahead of its Hungarian equivalent Kék− frankos, the Austrians could look at the success of Olaszrizling in Hungary as an example in making more exciting wines from its Welschriesling, opines Franz Weninger, who makes wine on both sides of the border. ADVERTISEMENT

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4 Socialite

Budapest Business Journal | Nov 15 – Nov 28

WHO'S NEWS

Name MARKUS HILKEN Current company/position SAP HUNGARY KFT / HEAD OF DEVELOPMENT CENTER

Name TAMÁS KOSZTOLÁNYI Current company/position KPMG / DIRECTOR

Hilken has been appointed to head the Hungarian development center of software company SAP Hungary. In addition to his current assignment, he will continue to hold his position as head of the support center in Hungary, a position he has held since 2001. Hilken has been with SAP since 1999. He succeeds Ádám Dudits, who has been promoted to an international position with SAP.

Kosztolányi, a qualified lawyer, registered tax advisor, and registered tax expert, has been working in the tax department of KPMG since 2004. As a VAT specialist, he serves clients in several sectors and areas. He also supports KPMG’s Budapest-based global Indirect Tax Compliance Center, which provides VAT and related compliance services in all EU member states and beyond.

Do you know someone on the move? Send information to research@bbj.hu

Name DAVID M JOHNSTON Current company/position CUSHMAN & WAKEFIELD / HEAD OF OFFICE AGENCY

Name GYÖRGY SALLAI Current company/position KPMG / DIRECTOR

Johnston has been promoted to head of office agency in Budapest, effective November. He is a graduate of Aberdeen University, Scotland where he gained an MA in geography and then took a post graduate degree in land and property economics. He was asked to join Cushman & Wakefield’s national office agency in Edinburgh, where he worked for four years. He joined the Budapest office agency in September 2008 and was promoted to associate in January 2011.

Sallai has led KPMG’s Information Risk Management advisory department since October as a director. He joined KPMG’s IT Advisory team in 2006. He has been leading the security service group and the ethical hacking lab for many years. His specialist areas cover data loss prevention, business continuity management, information security audits and attestation as well as compliance issues.

Name PETER CSERNITZKY Current company/position KPMG / DIRECTOR

Name FERENC L GAZSÓ Current company/position MTI / CHIEF EXECUTIVE OFFICER

Csernitzky was appointed director as of October 2013, and has been leading KPMG’s transaction services practice in Hungary since November 2012. He started his career at KPMG in 1997, working as an auditor for seven years. From 2004, he spent twoand-a-half years at GTS CE Group as regional finance manager, and rejoined KPMG in 2007 and has been working as a financial due diligence advisor since then.

Gazsó has been elected CEO of Hungarian news agency MTI. He has worked as a journalist since 1976, and worked at, among others, Magyar Hírlap, Mai Nap, and Üzleti 7. He was editor-in-chief of Magyar Hírlap between 19961998, and 2006-2008. He worked as head of the archive department of national TV Magyar Televízió, and has been deputy CEO responsible for content production at MTVA since the end of 2011.

SZAMOS GOURMET PALACE

MARKS 2ND ANNIVERSARY

he newest and most impressive jewel of the Szamos family, the Szamos Gourmet Palace, located in the heart of Budapest on Vörösmarty square, celebrates the second anniversary of its opening this November. The café, operating in the former stock exchange palace, is not only a traditional confectionery in an exceptional setting, but also a café with bistro cuisine, and a chocolate manufacturing workshop. Szamos follows in the footsteps of a traditional confectionery, creating recipes and tarts from the age of Dual Monarchy. It does so manually, with traditional tools and without using any additives. Apart from the classic selection, it offers health-conscious products such as low calorie, light French desserts and sweets. In the bonbon-manufacturing workshop, separated by a glass wall from the shop, chocolate masters make classic and modern creations. Szamos offers them in more than 40 flavors, ranging from traditional truffles to fruity specialties and ganache. Szamos also operates its own chocolate-making courses in the building. The

Szamos Chocolate School provides the opportunity of making bonbons, tarts, macaroons or candies. There are beginner and advanced courses, held both in Hungarian and English. Several companies choose the course as a unusual form of team building, and bachelorette parties are also held here. The selection of Szamos Gourmet Palace is much more colorful than that of an average confectionery: it also offers, besides cakes and bonbons, breakfast and lunch. The menu intentionally has a Hungarian tone, but with a touch of lighter – French and Italian – notes. They aim to address both Hungarian and foreign guests. The colorful breakfast offer and the daily lunch menu is not only for those working in the neighborhood: cooking is done at the weekends too. The café, with an area of more than 200 square meters, is a popular location for events, receptions, conferences and press conferences. 1052 Budapest, Váci street 1. Phone: +36 30 570 5973 www.szamosmarcipan.hu www.csokoladeiskola.hu www.facebook.com/SzamosGourmetHaz

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4 Socialite

Budapest Business Journal | Nov 15 – Nov 28

PROMOTION

LUFTHANSA LIVE: ENTE

FROM SILENT MONKEYS TO LIVE SCREAMING Bessie Love, George Bunny and Jocko the monkey‥ − these classical char− acters all appeared in the blockbuster movie, ‘The Lost World’. The silent fan− tasy adventure film was the biggest hit of the year 1925. Sir Arthur Conan Doyle’s work was chosen to be the world’s first in−flight movie, screened that same year on board the Imperial Airways flight between London and Paris. After WW II there were times when the on−board entertainment offered included live piano music, and a 23−seat cinema shar− ing the rear of the aircraft with a lounge, dining room, smoking room and cocktail bar. Those romantic and historic times are over, but these days Lufthansa offers 21st century on−board entertainment alternatives on the vast majority of its fleet. You can send messages from your smart phone, surf on the Internet with your tablet, or follow a live stream of your favorite football team’s game – and make new friends by screaming after the winning Champions League goal. BOARDCONNECT – WIRELESS ATTRACTION AND FLEXIBLE SOLUTION Lufthansa’s new revolutionary wireless infotainment platform, BoardConnect, offers passengers a wide range of enter− tainment and information services. This technical solution will make Lufthansa the first mainline carrier in Europe where passengers can access a rich choice of entertainment and information on intra− European flights using their own smart phone, tablet PC or laptop on selected routes. Next summer 20 Lufthansa A321 aircraft will be equipped with Board−

Connect. Lufthansa will have plenty of opportunities to offer passengers not just entertainment but new services and new ways of interaction: movies, music, shopping, electronic magazines, destina− tion information, passenger announce− ments and much more – everything that touches on entertainment and informa− tion. To use the services, passengers sim− ply connect to the in−flight infotainment server via Wi−Fi using their own laptop, tablet or smart phone. In contrast to con− ventional systems, BoardConnect does

not require every seat to be fitted with complicated wiring. It works with a con− ventional wireless network using stan− dard technology, meaning that the Luf− thansa Technik team only had to install a few access points in the cabin. The structure’s low weight and easy opera− tion make it especially suited to Lufthan− sa’s A321 aircraft. For a single A321 air− craft, that translates into 54 metric tons less fuel consumption in a year. BoardConnect brings in−flight info− tainment to work with a regular WLAN

based on the established Wi−Fi stan− dard. Depending on aircraft size, Board− Connect needs only between two and five access points in the cabin to deliver a broad variety of content, including lag− free streaming media to every passen− ger. BoardConnect holds the potential for significant savings across the board. At the same time the solution is user− friendly and impressively versatile. It can be used with iOS, Android and con− ventional Windows devices including the Windows 8 operating system. Lufthansa is presenting an interesting shopping module as well: while most air− lines still rely on traditional on−board catalogue sales, BoardConnect offers a contemporary shopping experience and helps boost revenues generated in flight. The new airline branded online shop excels through a clean and well−struc− tured interface design. Passengers are able to quickly find and purchase prod− ucts. Preloaded and wireless systems can also help airlines save money over tradi− tional systems by saving weight. A wire− less system could cut hundreds of kilos by ditching miles of cabling. For a single 767 airplane with 260 seats that trans− lates into 80 metric tons less fuel con− sumption in a year, or nearly $90,000 at current fuel prices. FLYNET – FAST INTERNET CONNECTION AT A REASONABLE PRICE Limitless communication on long−haul flights – this is more than a promise from Lufthansa FlyNet. More than 90% of all Lufthansa long−haul aircraft already have it: the first on−board broadband

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4 Socialite

Budapest Business Journal | Nov 15 – Nov 28