Budapest Business Journal 2820

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BUSINESS JOURNAL BUDAPEST

VOL. 28. NUMBER 20

OCTOBER 30 – NOVEMBER 12, 2020

SPECIAL REPORT Telecoms

SPECIAL REPORT

COVID-19 Sees Hungary’s Data Traffic Surge The effects of the pandemic somewhat stole the limelight from 5G development as traffic on landline and mobile internet networks surged, kickstarting digitalization for many of those who had been reluctant to make the change. 14

SPECIAL REPORT

Lockdowns and Social Distancing Lift Phone Use As people sought refuge from the spreading coronavirus in the spring, they resorted to their phones to a much greater degree to keep in touch with family and friends and stay in the loop at work. 18

Through the COVID Looking Glass

SOCIALITE

How Budapest’s Restaurants are Surviving Onyx and Costes, two of Budapest’s finest Michelinstarred restaurants, recently pulled stunts to keep their name in the public eye.

But, away from the spotlight, eateries with more modest ambitions are thriving. 22

NEWS

Long-term Plan to Restore Growth The “V”-shaped recovery is a thing of the past. The finance minister has told a Parliamentary committee that it is clear the economy will only recover at a slow pace from the coronavirus pandemic. His ministry is now working on a plan to restore the economy’s growth in the next three years. 3

IAL S PEC

RT

R E PO

Gerald Grace, CEO of Invitech, beleives telecommunications and IT infrastructure has performed very well, both in Hungary and globally, with the whole industry being ‘showcased through this lens of COVID.’ 13

BUSINESS

MOL Fights Trends, Disputes to Maintain Share Value When MOL announced in late September that it was prepared to buy back up to 5% of its free-float shares, it signaled to investors that the Hungarian energy group felt its stock was undervalued; is it?  7

News

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Budapest Business Journal | October 30 – November 12, 2020

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Kálmán Béres, Zsófia Czifra,

Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Robert Smyth, Zsófia Végh.

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DIGITAL TRANSFORMATION MUST BE EMBRACED BY ALL The need for it has long been there. Organizations such as the American Chamber of Commerce in Hungary went so far as to make it one of the four key strategic areas it focused on in its 2017-2020 Policy Agenda publication, its “roadmap for [...] advocacy activities.”

The “it” in question is the digital transformation of the Hungarian economy. Over the years we have written countless articles on the subject, looking at progress and problems, at government programs, at education and workforce needs. That it is a trend is obvious; that it is also a necessity seems to have gone unnoticed by some, not least Hungary’s SMEs. Our special report in this issue looks at the telecoms sector. From the conversations we have been having with various market players, it is clear that to the small number of good things to come out of the coronavirus pandemic (less air pollution, more caring communities, the rediscovery of morning birdsong) can be added the acceleration of the digital transformation.

In one sense this is obvious. When the schools closed and the country started to a work from home from mid-March, three things were required: individual laptops or desktops; greater national band width to support all those extra computers going online; and added security (just think of all those home office work stations outside the company firewall).

In living through this mass experiment we learned a number of things. Some people adapt better to remote working than others; video conference calls might be a good (and certainly a cost effective) alternative to longhaul business travel, but creative solutions tend to be better where social interaction allows in-person brain storming.

Perhaps most importantly, bosses learned they can trust the vast majority of their staff to work from home, and we all learned first-hand some of the benefits of digitization.

Taken at face value, this is to be welcomed indeed.

One of the particular problems Hungary has faced is a reluctance to digitize among SMEs, who perhaps saw it as just another cost to be borne. But even larger Hungarian companies weren’t always moving with lightning speed to adapt themselves. Gerald Grace, the CEO of Invitech ICT Services, who we interview in this issue, says larger companies now get the need.

They have learned the lessons of lockdown, and in many cases were already coming under pressure from competitors in export markets who were further advanced in their digitalization journey. He also makes the point that many of these larger companies are relatively well capitalized, and thus able to invest in digital transformation.

But while that is good news, careful attention also needs to be paid here, or there is a real danger the digital divide between Hungarian SMEs and multinational companies will only widen. Regardless of the industry, MNCs rely on SMEs. If suppliers in Hungary are not able to meet the digitalized needs of the bigger players, the country’s competitivity is damaged and those multinationals will find somewhere else to set up business.

It isn’t quite true to say it doesn’t matter how quickly large Hungarian corporates transform their businesses, but it is fair to say that how far behind the SME cohort is might be very important indeed. To be fair, the government seems to be aware of this, but it needs to be, and must do all it can to help further accelerate the process and close the digital gap.

Robin Marshall Editor-in-chief

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Budapest Business Journal | October 30 – November 12, 2020

News///macroscope

Long-term Plan to Restore Economic Growth

The hoped for “V”-shaped recovery is a thing of the past.

The finance minister said at a hearing in the Parliament that it is clear the economy will only recover at a slow pace from the coronavirus pandemic.

His ministry is now working on a plan to restore the economy’s growth momentum through financial restructuring covering the next three and a bit years.

ZSÓFIA CZIFRA

The Ministry of Finance is working on a long-term recovery plan for the Hungarian economy, Minister of Finance Mihály Varga announced at his annual hearing before the budgetary committee of the Parliament on October 27. The financial scenario, covering from 2020 until 2023, will outline how the government plans to help the economy return to the fiscal course it ran before the coronavirus hit.

The plans target economic growth with an emphasis on government debt reduction and maintaining a low budget deficit, the finance minister said. According to him, the virus is likely to cause a rather slow recovery.

The ministry has also worsened its GDP growth expectations: while it had projected a 5% annual setback in 2020, it now says the fallback might be as high as 6.4%.

A turning point of the crisis could come in the second quarter of 2021, as a COVID-19 vaccine may be out by then, Varga said. Following the introduction of an effective vaccine, Hungary’s economy will be able to return to a growth path quickly, the minister added. He also said that the government was able to handle well the damages caused by the coronavirus-induced crisis.

He detailed how actions have been financed by a fund that was set up to handle the pandemic from an initial amount of HUF 426 billion. In the previous months, HUF 747 bln has been paid by the fund. As for the economic

General Government Balance as a Percentage of GDP (2011-first half of 2020)

-2.3%

-2.0% -2.6%

-2.8%

-1.8% -2.4%

-2.1%

-2.1%

Maastricht Criterium: -3.0%

-5.2%

-5.3%

Numbers to Watch in the Coming Weeks

Source:

protection fund, the original budget was HUF 942 billion, but HUF 2.059 trillion has been paid out from it so far.

Higher Deficit

The finance minister now projects that the budget deficit will likely be much higher than in previous years. Ministry calculations show it might reach 8-9% of GDP. Not so long ago, it had expected a 7-9% budget deficit for 2020.

A turning point of the crisis could come in the second quarter of 2021, as a COVID19 vaccine may be out by then, Varga said. Following the introduction of an effective vaccine, Hungary’s economy will be able to return to a growth path quickly, the minister added.

According to analysts at Hungarian business site portfolio.hu, the fact that the ministry outlines a time span until 2023 suggests that the government does not plan to return to the 1-3% budget deficit any time sooner, which is not surprising, looking at this year’s larger deficit and worsening economic outlook.

A similar projection was given by Danske Bank A/S recently: The Danish bank said that Hungary’s economy, similarly to that of the Czech Republic, will shrink by around 6% this year, due to the strong second wave of the coronavirus pandemic.

between 3.4 and 3.6%. For 2022, the MNB expects growth to be between 4.5 and 5.7% and inflation to be 3%. The central bank predicted that economic activity will return to pre-crisis level by the beginning of 2022.

In the meantime, the Central Statistical Office (KSH) has released revised data for Hungary’s general government deficit for 2019.

The KSH said on October 27 that Hungary’s general government ran a HUF 985 bln deficit last year, equivalent to 2.1% of GDP. The deficit was revised up from HUF 958 bln, equivalent to 2% of GDP, in a preliminary reading released in the spring. KSH noted that MNB data shows government sector debt reached HUF 31.078 tln at the end of 2019, equivalent to 65.4% of GDP.

The fact that the projection is close to that of the Hungarian government means that the bank’s analysts have not become particularly pessimistic in spite of the quick spread of the virus. As for 2021 and 2022, however, Danske Bank puts Hungary’s economic growth at 4%, which would be the lowest among its peers in the region.

ʼVʼ-shaped no More

The latest forecast by the Ministry of Finance clearly shows that a “V”-shaped recovery is now a thing of the past, although not that long ago it was thought a likely outcome. Back in September, in its quarterly Inflation Report, the National Bank of Hungary (MNB) expected them to contract between 5.1-6.8% this year and annual inflation to be 3.5-3.6%.

The central bank also said it expected the economy to rebound next year, with predicted growth of between 4.4 and 6.8% and inflation ADVERTISEMENT

The Central Statistical Office will publish several important data sets in the upcoming two weeks.

Yesterday, it was due to release unemployment and employment data for the period between July and September, followed today (Friday) by the earnings statistics for the January-August period the very next day. Also on October 30, the KSH will publish the second estimate of data for external trade in goods for August. September retail trade figures will come out on November 5, together with the number of construction permits issued in the first three-quarters of the year. The next day will show whether the August pick-up in industry continued into September, and also how the tourism sector was doing in the first month of fall.

The October consumer price index will be released on November 10.

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Budapest Business Journal | October 30 – November 12, 2020

HIPA Named top CEE Investment Promotion Agency Again The Hungarian Investment Promotion Agency (HIPA) has been recognized as the best investment promotion agency in Central and Eastern Europe and Turkey at the Annual Investment Meeting (AIM), a high-profile international FDI event, state news wire MTI reports.

Innovation being one of them, which opened its first and unique European production units in Komárom, creating more than 2,500 new workplaces in the region,” Ésik said.

AIM is described as one of the most significant FDI-related events around the globe. Due to the coronavirus pandemic, the program was held online, with the participation of entrepreneurs, researchers, as well as high-level

decision-makers from the business and government sector.

The 2020 edition of the event primarily addressed the economic crisis caused by COVID-19 as well as possible alternatives for its management.

AIM is an initiative of the United Arab Emirates’ Ministry of Economy, held under the patronage of Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, and Ruler of Dubai.

Swisscham to Plant 25 Trees to Mark 25th Anniversary The Swiss-Hungarian Chamber of Commerce (Swisscham) is due to plant 25 trees on November 3 in a Budapest park to mark the 25th anniversary of its foundation in 1995.

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HIPA was acknowledged as the best investment promotion agency in the region for the second year in a row.

In 2019, HIPA helped broker deals on 101 investment projects worth EUR 5.35 billion, creating 13,493 jobs. South Korean companies accounted for around 50% of investment volume and more than 30% of jobs created.

HIPA CEO Róbert Ésik said, “Hungary has strengthened its position in the field of electro-mobility and has become one of its centers in Europe,” according to hipa.hu.

“In the past three years, electro-mobility related investments totaled over EUR 3.5 bln in the country, creating more than 6,000 new jobs,” he explained.

Key Players

“South East Asian companies are key players in this respect, with SK

“We planned various jubilee events to celebrate this milestone, but due to the pandemic we had to postpone some of them,” Swisscham director Júlia Lipovecz tells the Budapest Business Journal.

“Thankfully, one of the main events will take place: the jubilee tree planting. We have decided to symbolically plant 25 trees in Népliget park, not only to represent the 25 years we were blessed to spend with our great members, but also to emphasize that sustainability and health are now more important than ever,” Lipovecz explains.

“To depict the common past and future, the 25 trees will be symbolically planted by enthusiastic Swisscham member companies.

Every tree will get a ribbon that’s printed with the adopter company’s name and logo.

Pedestrians will see the memorial plaque we are going to place on that day.”

Physical Distancing

The celebration of the anniversary will see a limited number of participants due to

ongoing COVID concerns, with attendees asked to adopt epidemiological measures such as keeping physical distancing distance and not shaking hands. (If it is raining on November 3, the planting will be postponed to November 10.)

The event will start with welcome remarks from István Béres, the president of the chamber, followed by the speeches from István Kocsis, Chargé d’Affaires of the Swiss Embassy in Hungary, and Gergely Karácsony, Mayor of Budapest.

That will be followed by the representatives of the participating companies shoveling the last few grains of soil to finish the planting of each tree. The main sponsors of the event are Philip Morris Magyarország Kft., Roche Magyarország Kft. and CMS Hungary.

“Today, the chamber has a quarter of a century history to look back on: a history filled with successful corporate gatherings, professional and friendly collaborations, informal and official events,” Lipovecz says. “We thank our members for these wonderful 25 years together, and are looking forward to many more.”

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WHO’S NEWS

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

AutoWallis Selects Chief Financial Officer

Chinese clients, coordinating cross-border projects, as well as the development of new, innovative business strategies and products.

“Chinese-Hungarian relations have gained new momentum recently, with numerous Chinese companies planning on investing and innovating in Hungarian markets. For this, they require high level legal and commercial expertise. Baker McKenzie is continuously expanding the range of its services in response to these needs,” says Zoltán Hegymegyi-Barakonyi, the head of Baker McKenzie’s Budapest office.

“Csaba, leveraging his more than 15 years of experience and outstanding proficiency in the Chinese language, will occupy a key role in our office’s efforts to this end.”

Attila Seres Automotive company AutoWallis has appointed Attila Seres as its chief financial officer. Seres took up his position on October 1.

The new position was created as the executive workload related to financial coordination is expected to increase significantly at AutoWallis due to recent business developments and acquisitions.

Seres has 20 years of financial and more than 10 years of senior management experience and comes to AutoWallis from the position of CEO and CFO at Scitec Group, a food supplement production company.

He earned a master’s degree in economics from the University of Debrecen, then worked in executive positions at General Electric (1999–2006, commercial finance manager), Magyar Telekom (2006-2008, head of business controlling), and Graphisoft Group (20082014, Global CFOO). He was appointed CFO of Scitec Kft. in 2014, and became its CEO in 2019.

Leading China Expert Joins Baker McKenzie’s Budapest Office

Baker McKenzie’s Budapest office has announced the appointment of Csaba Wolf, whose responsibilities will involve meeting the rising demand for expert advice on investment between Hungary and China.

Wolf has held numerous positions in economic diplomacy over his 25-year-long career. He served as economic and commercial counselor at Hungary’s embassy in Beijing, where his responsibilities included export development, investment promotion, and economic diplomacy.

As Commercial Counsellor at Hungary’s Pyongyang embassy, he gained experience in occupying leading diplomatic, consular, and economic positions.

The expert also spent seven years at Deloitte Hungary, where he led the company’s regional China team, encompassing 18 countries.

There, his responsibilities involved increasing the portfolio values of

Csaba Wolf Wolf gained leadership, commercial, and business development experience at several private firms. In recent years, he has worked on implementing the products of various startups in international markets, which involved the formulation of sales and marketing strategies, as well as determining efficacious product development schemes and business plans.

Veronika Spanarova manager and her professional insight into our operations will ensure that, under her leadership, Citi Hungary will continue to contribute to the economic growth and progress of the country.”

Spanarova started her career with Citi in the Czech Republic in 1995, having gained extensive managerial experience both in the Czech Republic and overseas.

She worked in the corporate banking business in Prague, then joined Citi’s corporate banking team in Sao Paolo, Brazil, where she spent five years. In 2010, she relocated to Citi Czech Republic in Prague and held several leadership positions within Citi Retail Bank. In 2012, Veronika became the Retail Bank Head of Citi in the Czech Republic. She relocated to Bratislava, Slovakia when she was appointed to the role of Citi’s CEO for Slovakia in May 2016.

She is a graduate of the Charles University in Prague, majoring in Economics, and is married and has three children.

Sales and Marketing Director at Kempinski Hotel Corvinus Budapest

With the departure of Alexandra Schmidt, on maternity leave since September 1, Judit Dénes has taken over the position of director of sales and marketing at Kempinski Hotel Corvinus Budapest.

Citi Appoints CEO for Hungary Citibank Europe Plc has announced the appointment of Veronika Spanarova as Citi’s chief executive officer for Hungary.

Spanarova replaces Kevin A. Murray in the role, following his appointment as the CEP branch head and Citi Solutions Center head Poland. Murray will also remain Citi’s CEO for Central Europe.

“Citi has an outstanding history of 35 years of leadership in serving our clients in Hungary with innovative solutions.

Today, Hungary is also home to one of the Citi Solution Centers in the EMEA region.

I am very excited to lead our highly capable, committed professional team to continue to build our franchise and help our clients grow,” says Spanarova.

Commenting on the appointment, Murray notes, “I am extremely pleased to have someone with Spanarova’s experience coming to run this critically important branch for us. Veronika has been working at Citi for more than 25 years; she is an experienced banking

Judit Dénes Dénes began her career as a management trainee at the Kempinski Lufthansa Center in Beijing in the year 2000. She joined Kempinski Corvinus in Budapest as a conference and

News | 5

banqueting sales coordinator in 2002.

Since then, she has moved up the ladder, gaining experience in both corporate sales and group sales.

After her own maternity leave, she strengthened the hotel’s team as marketing manager for a while, and her name is associated with the launch of the hotel’s catering service, The Kitchen Caters brand. For the past two years, she has held the position of sales director as the head of Kempinski’s field sales team.

She has extensive experience in dealing with local and international clientele, global market trends, and sales conversion strategies, and will be a key player in reestablishing and retaining Kempinski Hotel Corvinus’ presence on the international market.

Magyar Suzuki Names HR director Anita Herbácskóová was named HR director at Magyar Suzuki Zrt. in June 2020, becoming the leader of the company’s HR and general affairs area.

The specialist is also responsible for the HR affairs of the company’s five offices abroad.

Anita Herbácskóová Herbácskóová joined Magyar Suzuki’s team 16 years ago, gaining extensive experience in many areas of HR. She originally joined the company as a recruiter and before her most recent appointment, worked as the head of the manpower management and HR controlling group at the Esztergombased company.

She has also been actively involved in the creation and implementation of HR measures related to COVID. “In my work, I am motivated by the collaboration and the results we achieve together,” Herbácskóová says. “Clearly, HR is teamwork, we can only succeed together. I consider myself lucky to have a strong team behind me with diverse individuals and extensive knowledge.”

She says her goal is to maintain a “continuous harmony” between the needs of employees and employer at Magyar Suzuki, and to consider the needs of both current and future colleagues.

“In addition, as a leader, my task and goal is to provide the human resources needed for production, as well as ensuring personalized horizontal and vertical career paths. Seventy percent of our employees have been with Magyar Suzuki for more than 10 years. We can further increase this beautiful number together with my team,” she adds.

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Budapest Business Journal | October 30 – November 12, 2020

Váci Greens Complex Completed The last building of the 120,000 sqm Váci Greens office complex has completed, as the 23,500 sqm Building “E” has received its final occupancy permit. It brings to an end 13 years of phased work on the speculative project by Atenor, with the Váci Corridor development financed from the Belgium developer’s own equity.

GARY J. MORRELL

The ambitious project was undertaken in the post-financial crisis economic environment, when the Budapest office market was seen as being in a crisis situation. However, Atenor successfully anticipated the longer term prospects for the market, having completed its first Váci út project and sold it onto investors.

20 years

Zoltán Borbély, country director of Atenor at the Váci Greens closing reception.

The Váci Greens office park was the first in Hungary to receive the BREEAM “Excellent” certification in 2011, Atenor says. Furthermore, the company was the first developer to announce it will design all its buildings according to criteria tailored to people with special needs created by Access4you.

“This concept is justified by maximum success, as 102,000 sqm of the

total

123,000 sqm

of office space has already been leased to leading multinational tenants and five out of six of the buildings have been sold to domestic and international investors,” says Atenor.

The “A”, “B”, “C” and “D” office buildings have all been fully let for several years; the 23,500 sqm Building “E” is 40% leased and

the 25,000 sqm Building “F” is 73% leased.

The tenants of the office park currently employ nearly 8,500 people. With the full leasing of the last phase, this number of employees will increase to 12,000-13,000.

Five of the six Váci Greens office buildings, along with the basic overall concept, were designed by TIBA Architects Studio, with Building “D” penned by Vikár and Lukács Architect Studio.

Excellent Cooperation

“Thanks to our excellent cooperation with District XIII, we were able to continuously

Mask-wearing, Q3 Contraction and EU Funding Approval As the second wave of the coronavirus pandemic continues in Hungary, the wearing of masks at outdoor sports and cultural events has also become mandatory.

NICHOLAS PONGRATZ

The government decree includes sanctions both for those who fail to comply and for event organizers.

Previously, mask-wearing was only compulsory in shops, theaters, cinemas, museums and shopping malls, as well as on public transport.

Due to the prolonged effects of the coronavirus pandemic, data available so far suggest that Hungary’s economy

tailor the ergonomics of Váci Greens to the current needs of the office market,” Zoltán Borbély, country director of Atenor, said at the closing reception. The event, reflecting concerns over the coronavirus pandemic, was held in an internal garden area with masks, hand cleansing facilities and thermometers all available.

District XIII Mayor József Tóth reflected on the transformation and redevelopment of the district into a major independent office and business area over

contracted in the third quarter compared to the same period a year earlier, Gergely Gulyás, the head of the Prime Minister’s Office, said fielding a question at a regular press briefing, according to state news agency MTI. Gulyás said the government has “partial information, but no concrete numbers” on Q3 GDP, but added that it was “certain” the economy contracted.

Meanwhile, Minister of Finance Mihály Varga said at an annual hearing before a parliamentary committee that the GDP of Hungary could fall by 6.4% this year and economic trends could start to change for the better from Q2 2021, were a vaccine against the coronavirus to be available at that time.

To bolster increased spending on government measures to preserve jobs threatened by the crisis, the Council of the European Union has approved EUR 504 million in financial support for Hungary under the SURE instrument, according to the Ministry of Finance Ministry.

The preferential credit will be used to refinance the cost of job preservation and workplace health safety measures introduced after February 1, the ministry said. Half of the credit will be disbursed in 2020 and the rest early in 2021, it added.

through a partnership between the municipality and developers, which involved the redevelopment of the infrastructure, business base and residential areas.

“Our base criteria for the location of a good development site is a metro [station] and other kinds of public transport connections; the services and facilities of the micro and macro environment are also the key factors,” says Nikolett Püschl, leasing and development director at Atenor Hungary.

In parallel with finalization of Váci Greens, Atenor is developing the speculative, phased 85,000 sqm Aréna Business Campus in the outer boulevard of Budapest.

“Atenor has experience in developing large-scale projects with a number of different buildings. We have celebrated the topping-out of Building ‘B’ and this will be completed by mid-2021. After that, with the approval of the board, we plan to continue with Building ‘C’ and Building ‘D’ in the same way as with Váci Greens,” adds Püschl.

Váci Greens Building “F” is now being offered to the investment market.

Coronavirus ///roundup

The ministry noted that 900,000 Hungarians have benefited from workplace preservation, job creation and training support programs since the start of the coronavirus crisis.

Industry Losses

Different industries have been noting the losses they’ve incurred so far this year. Magyar Posta expects sales revenue to drop 10% this year as turnover in conventional services, letters, postal cash transfers, dropped by more than 30% in April due to the effects of the pandemic, CEO György Schamschula said in an interview with daily Népszava (Word of the People).

Revenue of Hungarian baths has fallen at least 50% this year because of the pandemic, and 76% of baths and spas will become insolvent by next spring without assistance, the head of the Hungarian Baths Association László Attila Boros said.

Advertising industry insiders expect a big drop in revenue this year, according

to the latest survey by the Hungarian Advertising Association (MRSZ), although not quite of the scale projected in the previous survey conducted in the spring.

Sales volume of Hungary’s five biggest brewers fell 5.5% to 4.9 million hectoliters in January-September from the same period a year earlier, according to Sándor Kántor, the head of the Hungarian Brewers Association (MSSZ).

The most notable impact recently has been in construction and real estate.

Output of Hungary’s construction sector fell 13.6% year-on-year in August, according to data released by the Central Statistical Office (KSH). KSH data also indicates that resale home prices were down by 6.3% annually in the second quarter, which is the biggest drop in prices in the past five years.

Yields on the rent of investment housing may have fallen by as much as 25% in 2020 compared to a year earlier, according to Takarékbank. Take-up on Budapest’s office space market reached 247,000 sqm in Q1-Q3, the lowest level since 2013, according to an analysis by property consultancy Eston International. Alone in Q3, take-up dropped 59% as lease extension volume plunged 76%, Eston said.

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Budapest Business Journal | October 30 – November 12, 2020

Business

MOL Fights Global Trends, Regional Disputes to Maintain Share Value

When MOL announced in late September that it was prepared to buy back up to 5% of its free-float shares, it signaled to investors that the Hungarian energy group felt its stock was undervalued.

On September 28, the next trading day, the share price duly rose by 6.7%, to close at HUF 1,664, prompting the question; is MOL undervalued?

KESTER EDDY

Oil, big money-oil, was once the basis for glamorous sit-coms like Dallas, portraying a world of jet-set, have-it all American living. It couldn’t happen today.

“Oil companies are very big C02 emitters, plus the products they produce are very much C02,” Tamás Pletser, Erste Group’s oil and gas sector analyst, tells the Budapest Business Journal.

“They are somehow one of the major enemies of all the green movements, and all green thinking.”

Loathed by environmentalists, and with the arrival of shale gas in the United States, falling energy prices, plus the rising use of electric cars, oil companies across the globe have been coming under pressure for some years, with managers facing tough decisions with regards to investing in expensive exploration and extraction projects and capital-intensive refinery assets.

As if these were not enough headaches, along came the coronavirus, and a slump in demand for core products, namely auto and aviation fuels.

MOL, the Hungarian energy group still essentially built around oil and gas, is

no exception. Expansion in the last two decades means it has major subsidiaries with refining assets in Slovakia (Slovnaft) and Croatia (INA), plus some 1,900 service stations stretching from the Czech Republic to Montenegro and Romania.

From a five-year high of HUF 3,450 (hit in April 2019), MOL shares had tumbled to

move that causes INA significant losses on its gas business. A judgement in favor of MOL would likely see damages awarded in the region of USD 400 million-500 mln, analysts say.

just

HUF 1,559

by September 25, when the share buy-back plan was announced.

During the first wave of the coronavirus pandemic, MOL suffered a decline of “core market fuel demand by 30-35% on average”, the company said, which in turn led to refineries working at only 75% of capacity. However, demand has recovered somewhat in recent months, with the key refineries at Bratislava and Százhalombatta (20 km south of Budapest) now operating at 100% capacity.

Considering the general global turmoil caused by the pandemic, along with the fact that the region is no longer the focus of attention that it was from 1990-2010, this again begs the question: is MOL undervalued? The Erste analyst, for one, does not buy into this.

Stormy Relationship

“Currently I don’t really see the story there,” Pletser says, pointing not only to the current trends affecting the sector in Europe, notably the carbon target by 2050, but to MOL’s specific difficulties, including political risk, the current lack of dividend payments and, crucially, the company’s complex, stormy relationship over INA, MOL’s counterpart in Croatia.

Gellért Gaál As part of this, the biggest question currently is whether a Washington court will rule in favor of MOL in a dispute over what it says is Croatia’s failure to raise gas prices to a commercial level, a

However, Gaál is positive on MOL’s stock.

“We think MOL is undervalued at the moment, because, although the refinery sector is under pressure, if we assume that this current pandemic situation will improve and as a consequence tourism too, then refining margins will stabilize, and also the oil price as well, then there is a huge upside,” he argues.

Peak Oil

Although EU legislation and increased use of electric cars will, eventually, lead to a decline in auto fuel demand, he predicts peak oil demand at around 2030, while up to then, the growth in car ownership, powered by petrol or diesel engines, will support demand for refined products.

“For every 1,000 population in Germany, there are between 500-600 cars, whereas in Hungary and the CE region, it’s much less, roughly 300-400. So, even if the share of electric vehicles grows, the cake will grow,” he says.

In his last prognosis, Gaál put a target price of HUF 2,500 on MOL shares last May. MOL has long seen its dependence on oil as a risk, and is four years into a diversification strategy aimed at moving away from auto fuels and into more valueadded products. To this end, it is building a

USD polyol 1.4 mln

investment project at Tiszaújváros (174 km northeast of Budapest), expected to open late next year.

It is also expanding its high-ambience retail outlets at filling stations. Branded as Tamás Pletser “Fresh Corner”, both Gaál and Pletser note this segment performed well even in the first wave of the pandemic.

The Croatian government has said it hopes to buy back MOL’s controlling stake in INA. MOL is happy to sell, but “We think MOL is meanwhile has initiated a

USD 600 mln project

undervalued at the moment, because, although the refinery sector is under pressure, if we assume that this current pandemic situation will improve and as a consequence tourism too, then refining margins will stabilize, and also the oil price as well, then there is a huge upside.”

to upgrade INA’s inefficient refinery at Rijeka, a project MOL says it will continue to pursue despite the onset of the COVID19 pandemic.

“Yes, it will go as planned. We do not expect significant delays. This investment is increasing the overall efficiency and complexity of the Rijeka refinery and a significant part of the INA Downstream 2023 New Course transformation program, which is aimed at turning INA’s Refining and Marketing segment into a sustainable and profitable business,” MOL wrote for this story.

But given the current over-capacity in refinery assets in the region, Pletser is not Yet, despite positive signs, in his bullish on the project. “I think, rationally, September report, Pletser said MOL Rijeka should be closed down,” he says. faced “a weaker refining outlook, Gellért Gaál, senior equity analyst, at lacks catalyst” and gave a “hold” Concorde Securities, argues that MOL recommendation on the stock, with a is between a rock and a hard place, as share price target of HUF 1,760 (almost it needed to upgrade Rijeka in order to exactly where shares rose after the buymollify the Croatian government and back announcement in September). close the older, obsolete refinery at Sisak, However, the burst of interest at the near Zagreb.

“It’s difficult to say today that as a stand- time has waned, the share price closing on October 27 at HUF 1,575, although alone investment it [the Rijeka upgrade] analysts put the decline down more to will yield a return as you would want it, market sentiment than MOL-specific fears. but if you take into account the broader Nonetheless, as Pletser put it to the BBJ: picture in MOL’s stance in Croatia, in this “Owning an oil company is not a good respect we think it will give a return,” he business any more. It’s like a hot potato.” says, and while he accepts it is a risk, he He might have added: Especially during counters: “Yes, more or less, but at this the second wave of COVID-19. point, it was an optimal decision.”

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A New Bretton Woods Moment For this week’s corporate finance column, former World Banker Les Nemethy takes a sobering look at the time bombs ticking away in the world financial system.

Kristalina Georgieva, managing director of the International Monetary Fund, titled her recent October 15 speech at the IMF Annual Meeting “A New Bretton Woods moment”, hinting that COVID-19 may trigger a financial crisis of such scale as to require rejigging the Bretton Woods agreements, the foundation of our postWorld War II financial system.

With the exception of a handful of countries like China and New Zealand, most governments have lost control over COVID-19. In other words, the virus has reached such a scale that contact tracing cannot be effective in suppressing contagion.

Given the uncertainties in most of the world about whether there will be further spikes in the virus, the extent of those spikes, possible lockdowns or other restrictions, economic forecasting becomes highly uncertain, if not impossible.

Lockdowns, due to their exorbitant economic cost, have been dropped from the agenda of many governments. Yet, the infection rate in the fall of 2020 is already higher in many countries than it was in spring (400,000 new infections tallied per day as at time of writing, and rising).

If fatality rates were to reach a certain threshold, lockdowns may once again become the ordre du jour (witness recent developments in Wales and Ireland). Or, if governments do no not impose lockdown, economic activity may shrivel due to people retreating into self-imposed isolation.

Kristalina Ivanova Georgieva-Kinova, the Bulgarian economist, and managing director of the International Monetary Fund since October 1, 2019. File photo by ID1974 / Shutterstock.com

Record Debt

The world economy today is characterized by record levels of indebtedness (sovereign, corporate and personal) and record declines in GDP, which makes the debt all the less sustainable.

Debt levels were globally at record levels even before COVID-19 hit. And the solution for high debt during the coronavirus crisis seems to be taking on even more debt.

The only reason that the record levels of indebtedness have not created a financial crisis to date is that interest rates have been extremely low, often negative. (Even Italy has been able to float debt at very low interest, most recently, three year bonds at zero coupon, for example).

It is easy to see how, with mountains of debt, higher interest rates could bring down the house of cards. Inflationary expectations or loss of confidence in fiat currencies are two factors which might lead to higher interest rates.

In the United States, foreign interest in Treasuries seems to be evaporating, and the Federal Reserve has become the largest purchaser of them. The Fed and other branches of the U.S. government hold more than USD 10 trillion of the total

USD 27 tln in Treasuries outstanding, and the share is growing rapidly.

While foreign and private buyers are shying away from Treasuries, an enormous amount of new debt needs to be issued, and old debt refinanced, over the next few years. Rapidly increasing issuance of Treasuries and diminished demand should lead to rising interest rates, save for the artificial suppression of interest rates by the Fed stepping in as the largest purchaser.

Other than mountains of debt and the possibility of rising interest rates, there are also numerous other time bombs ticking away in the financial system, to name few (though not in any order of importance): • Sovereign Default. More than USD 100 billion has already flowed out of emerging countries since the spring of 2020, three times the outflows during the Lehman crisis, raising the possibility of sovereign default.

• Bank Default. This could be triggered by any number of factors, such as the high level of bankruptcies (which are set to rise exponentially). Then there are Collateralized Loan Obligations (CLOs), securities backed by pools of debt, similar to the Collateralized

The Corporate Finance Column Mortgage Obligations that created the 2008 financial crisis; CLOs are basically bundles of corporate debt of differing quality, estimated to be over USD 1 tln in the United States by theatlantic.com.

Another problem area are derivatives, given that there is no transparency concerning counterparty risk, this catalyzed financial markets seizing up during the Lehman crisis. Simply put, it was impossible to ascertain how risky banks were. This has not been a lesson learned from the Lehman crisis. The level of derivatives are higher than ever.

• Paper gold. This was the subject of a recent column of mine (see the October 2, 2020 issue of the Budapest Business Journal). In the event of a massive short squeeze, owners of ETFs and gold contracts could be victims of default; here we are talking about numbers potentially exceeding USD 100 tln.

Fortunately, the IMF has already stepped into shoring up emerging countries with more than USD 100 bln in new sovereign loans, and banks were much better capitalized going into 2020 than they were going into the Lehman crisis, but COVID dragging on and reaching new heights has the potential to create further stress in the system, and trigger a financial crisis, through any of the mechanisms mentioned above.

It is hard to predict when or where the financial system will experience its blowout; suffice it to say there are quite a few points of weakness or vulnerability.

Should it happen, given the unsustainable levels of debt being accumulated, economists are beginning to talk about a reset of the global financial system.

“A New Bretton Woods Moment” is a strong hint that the IMF may also be thinking in this direction.

Les Nemethy is CEO of EuroPhoenix (www.europhoenix. com), a Central European corporate finance firm, author of Business Exit Planning (www.businessexitplanningbook. com) and a former president of the American Chamber of Commerce in Hungary.

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Business | 9

Record Bond Issuance and New Markets at EXIM Hungary The Hungarian Export Credit Agency (EXIM) became the talk of the town recently, after successfully performing a bond issuance, raising an unprecedented amount of financing on the market. In addition, huge European and OECD markets for export credit insurance have opened up for EXIM as a result of EU regulation relaxations brought about

by COVID-19. We talked about these developments and new world economic trends with Gergely Jákli, president and CEO of EXIM Hungary.

BENCE GAÁL

BBJ: At the beginning of October, you raised a considerable amount of funding from the market. Why was this needed as a state institution?

Gergely Jákli: First of all, it is important to know that Eximbank, like commercial banks, funds itself from the broader money market in addition to the capital provided by the owner [the state]. Due to its special nature, the bank does not collect customer deposits or maintain current accounts, but receives significant funds from international institutions, the European Investment Bank (EIB), the Council of Europe Development Bank (CEB) and the World Bank Group, as well as on a market basis; from commercial banks and bond issues as well. With the current bond issue, we have raised more than HUF 52 billion

Gergely Jákli in funding, the largest in our history under Hungarian law. This is an excellent reflection of investor confidence and we are very proud of this success.

BBJ: This year is extraordinary; no one could have calculated with the COVID epidemic and especially its economic impact. What novelties has this brought to the world economy and to your operations?

GJ: The shock of the pandemic situation has reminded us all of the importance of diversifying customer and supply relationships as well as the relationships needed for the operations of businesses in general, as in this changed situation there is a serious risk if entire production, supply and distribution chains fall geographically into one zone. Significant production capacities are expected to “migrate” between continents: there will be capacities that will leave Central Europe, but there will certainly be many that will come here, creating more opportunities for domestic companies.

The Hungarian economy is extremely open (86-87% of GDP comes from exports, 80-90% of exports go to the EU), so we consider it a priority to help the exports of domestic companies as much as we can, as in many strata, domestic economic actors are organized around them. To this end, we have redesigned several of our services and products to better suit the mitigation of the damage caused by the extraordinary situation and to help domestic companies through the crisis.

BBJ: What should we know about new products, and how have they been received on the market?

GJ: In addition to our existing loan and insurance schemes, we launched so-called COVID-19 Compensation Programs in May. Within this, there is

both a Compensation Loan Program and a Compensation Loan Protection Program, i.e. banking products for the rapid supply of funds to companies, as well as the Compensation Insurance Program. To date, we have received applications for more than HUF 300 billion in compensation loans and signed loans for approximately HUF 150 bln, so we can say that we are the second most successful among the statesubsidized loan programs behind the National Bank of Hungary’s FGS (Funding for Growth Scheme).

As for the Compensation Insurance Program, a European Commission decision this year allowed us to provide export credit insurance for export shipments to the European Union and

other developed OECD countries around the world on a temporary basis until June 30, 2021, in order to alleviate the economic damage caused by the epidemic. In simple terms, we can provide export insurances of deferred trade receivables from export buyers operating in any country in the world.

In addition to taking on the risk of nonpayment by foreign customers, we are able to pre-qualify a potential foreign customer with our knowledge and experience, so we can essentially be business decision-making partners for export-minded companies. And in case of customer non-payment, of course, we, with our budget background, pay the counter value of the invoice.

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Company ///news Automotive Industry Operating at Close to Full Capacity Nearly all of Hungary’s automotive industry companies are operating at close to full capacity in the fourth quarter, the chairman of the Hungarian Vehicle Industry Association (MAGE) said, according to mfor.hu. István Pintér said the pandemic had accelerated capacity expansions and technology upgrades, be they ones fully funded by companies or supported by government stimulus. He added that many automotive industry companies had become better positioned to take advantage of the changed economic environment postpandemic. Pintér, who is also chairmanCEO of majority state-owned automotive industry company Rába, said his own firm’s order book is “practically full.” MAGE’s more than 60 members include Audi Hungaria, Magyar Suzuki and MercedesBenz Manufacturing Hungary. They account for about 80% of the sector's output and 90% of its investments.

ACE Lays Cornerstone of HUF 10 bln Hangar State-owned aircraft maintenance service provider Aeroplex of Central Europe Ltd. (ACE) laid the cornerstone for a HUF 10 billion hangar on October 27 where widebody aircraft can be serviced at Ferenc Liszt International Airport, according to news channel HírTV. The 8,000 sqm hangar can fit one wide-body aircraft or four narrowbody aircraft at the same time for maintenance work. ACE CEO Árpád Demény noted that, up till now, it was not possible to service widebody craft at the airport. State

secretary János Fónagy, said the investment creates 200 jobs. Katalin Simon, CEO of the Hungarian National Asset Management Company (MNV), which owns ACE, said MNV would raise capital in the company by HUF 3 bln to finance the project, which it expects to generate HUF 700 million in additional revenue annually from 2023 on. Photo shows Demény of ACE (left) and Rolf Schnitzler, CEO of Budapest Airport, cutting a hangarshaped cake at the ceremony.

Photo by Zoltán Máthé / MTI

reasoning behind the decision is not Richterspecific, and also affects the supplies of other pharmaceutical manufacturers, as the system for processing data on mandatory drug identification marks has been facing problems in Russia for a month, which has also slowed down customs clearance.

Hungary Mercedes Plant Plans Routine Winter Shutdown German carmaker Daimler plans a routine winter shutdown at its plant in Hungary between December 18 and January 17, Mercedes-Benz Manufacturing Hungary said on October 26. Production at the plant was shut down between March 20 and April 28 because of the lockdown to contain the spread of the coronavirus.

A third shift was restarted at the plant from August 2. A summer shutdown, timed to coincide with a four-day weekend for the August 20 national holiday, took place between August 17 and 23. Last year, the plant turned out about 190,000 vehicles.

Fidelity Stake in Richter Back Above 5%

Aegon Selling Eastern European Business

Hungarian pharmaceutical Gedeon Richter has announced that the number of shares of the company owned by Fidelity International had risen to 5.07%, according to a release on the website of the Budapest Stock Exchange.

Fidelity’s stake went above 5% in Richter in August and then fell below the threshold in early October. But its share has now once again risen over 5%. Richter’s share price on October 26 fell 0.5%, while this year it has risen 5%, outperforming the Hungarian stock exchange. Meanwhile, it has announced it will stop pharmaceutical deliveries to Russia by the end of the month, and the Moscow branch of the company has notified the Ministry of Health and its pharmaceutical partners of the decision, according to Világgazdaság (Global Economy). The

Dutch insurer Aegon has put its Eastern European business up for sale, international news wire Reuters said it had learned on October 26 from sources familiar with the matter. Aegon is working with JPMorgan on the process and has held preliminary discussions with industry players to sell the unit, which is primarily focused on Hungary but is also active in Poland, Romania and Turkey, the sources, speaking on condition of anonymity, told Reuters. The business could be valued at about EUR 650 million, they said. Dutch insurer NN Group and Belgium's KBC are both studying possible bids for the assets, while German rival Allianz has also expressed interest, the sources told Reuters. Aegon sells both life and general insurance policies in Hungary.

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Business | 11

Business Meets Government: Opportunity in Crisis Lessons learned from the COVID-19 outbreak and the response, as well as an assessment of the priorities of the new normal; these were the main topics of the sixth edition of the Business Meets Government Summit, organized

by AmCham Hungary in association with the Hungarian Investment Promotion Agency.

KÁLMÁN BÉRES

In his keynote speech, Minister of Finance Mihály Varga described the economic fundamentals of the Hungarian economy as strong. These made the economy much more resistant to the current crisis than in 2008, he said.

To begin with, last year, the economy had expanded by 4.6%, compared to only 1.1% in 2008. During the first quarter of this year, when the crisis had already begun to impact the economy, Hungary not only succeeded in maintaining its growth surplus, but was even able to increase it, Varga noted.

On the negative side, “Our strengths have become our weaknesses throughout the crisis; certain factors have hit Hungary’s economy particularly hard. For

Record Investments

Mihály Varga, Minister of Finance. Photo by Lázár Todoroff example, the boom of the tourist sector achieved a low point in April. Another sector is the automotive industry, which was already facing a technological challenge before the crisis,” Varga said.

To contain these issues, immediate fiscal and monetary measures were taken. “The measures of the government and of the National Bank [of Hungary] constitute the largest ever economic package, which minimized the job losses and ensured new jobs. The measures together reallocated 20% of our GDP, ensuring Hungary’s rapid return to a dynamic growth trajectory,” Varga explained.

As a result of the economic protection action plan, the measures curbed the GDP downturn by 3-4%, according to ministry calculations. Measures included preserving jobs, wage support, online training, tax relief and administrative burden reduction, as well as job protection by supporting corporate investments, training and education support. After a significant decline, retail sales and the automotive industry are recovering, the finance minister said. From April and May on, a slight recovery started.

Job Protection

“The wage subsidy scheme aimed at limiting the negative impact of the first wave of the pandemic. More than 900,000 workers benefitted. The key elements of this program were job protection, student loans, [and] adult education. The

Farkas Bársony, AmCham; Róbert Ésik, HIPA; Írisz Lippai-Nagy, AmCham. Photo by Lázár Todoroff

government promoted the protection of jobs with targeted tax benefits as well, leaving HUF 400 billion in the economy,” the minister explained.

“The job protection measures can be regarded as successful; by August employment was reaching the 2019 level, with more than 4.5 million working. In the future, we will focus on job creation and investment-promoting forms of support,” Varga added.

As for the near future, the second wave of the pandemic might result in a “W” shaped or prolonged recovery in the Hungarian economy. In the first half of the year, Hungary overcame the lowest point of the crisis and is recovering but it is important that this recovery is as rapid as possible. The signs to this end are promising, the minister said.

“Hungary’s geographical location, its favorable tax system and outstanding infrastructure may be an excellent target for foreign investments. This is also reflected in the fact that Moody’s improved Hungary’s rating from stable to positive. It was a good sign from the business community for the business people,” Varga noted.

In terms of the bilateral cooperation between Hungary and the United States, America is the most important export partner outside the EU;, it is also the largest non-EU investor in Hungary.

“The stock of investments from the U.S. reached EUR 11.6 billion in 2018 and there is still room for improvement,” Varga said.

Looking at the investments, in 2019 Hungary recorded its highest amount of investment to date, with the government signing a total of 101 agreements.

“The volume of investments reached HUF 1,705 billion, which can also be regarded as an absolute record, amounting to almost 4% of the GDP in 2019. The Hungarian government supported the implementation of these investments with non-refundable subsidies amounting to HUF 156 bln.

Hungarian large companies implemented 10 large investments in 2019, the total volume amounting to HUF 126 bln,” Varga explained.

Closing his keynote address, the minister announced that, in order to promote investments, the HUF 10 bln threshold for development reserve will be abolished; the development reserve will be applicable without limitations to the total profits. Also, the development reserve provides a tax exemption for reinvested profits, Varga added.

In the second section of the summit, government officials and managers discussed the focal points of countering the negative effects of the second wave of the COVID-19 pandemic. In order to overcome this, a very close cooperation will be needed between companies and the government. Innovation will have a leading role in the development, as the world is transforming and adaptation to the new environment is based on innovation.

Besides this, two crucial aspects must be carefully addressed: the use of EU funds and providing a competitive labor force, the summit heard.

In the Business Environment section, Róbert Ésik, CEO of HIPA, outlined the priorities for containing the setbacks of the second wave. These are: financing investments, both domestic and foreign, financing the fight against job losses, and taking advantage of the opportunities raised by the crisis, for example the shortening supply chains. Ésik added that the outlook for Q4 is promising. As for further measures for improving the economy, the government is looking at a new version of a training subsidy program, which will soon be announced.

We would like to thank our partners, BT, Citi, Continental Automotive, Philip Morris International, Tata Consultancy Services and Tungsram for supporting the conference.

Róbert Keszte, Continental Automotive; Balázs Rákossy, Ministry of Finance; Joerg Bauer, Tungsram. Photo by Lázár Todoroff

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Special Report COVID-19 Sees Hungary’s Data Traffic Surge 14 5G to be Built on World-class 4G Network

15

5G Coverage Expanding as Mobile Data Demand Rises

16

Lockdowns and Social Distancing Lift Phone Use

18

Vodafone: Telecoms Industry Hungary’s ‘Invisible Lifeline’

19

From data surges to accelerated digital transformation: How COVID has shaped the telecoms industry in 2020.

Photo by NicoElNino / Shutterstock.com

Telecoms

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Invitech Looking to Grow on Accelerating Digital Transformation The COVID-19 pandemic saw a short-term spike in demand for additional bandwidth and security services, but in the long run it will likely have a much more meaningful impact on the adaptation of digital transformation, Gerald Grace, CEO of Invitech ICT Services Ltd., tells the Budapest Business Journal.

the European Commission a few months ago, which places Hungary 21st out of 28-member states (at the time its data was collected, the United Kingdom was still considered part of the EU).

“Hungary is a follower, not a leader in this area, and you can see the results in the terms of this report. On a positive note, the government seems to be aware and is putting more focus and resources on the issue,” he says.

Significant Acceleration

Gerald Grace most), but he does think they will invest more. He points out that not all businesses have been as hard hit as tourism and hospitality; the automakers, for example, which initially closed down operations, have now largely bounced back. Many of the larger companies in Hungary are also well capitalized, the CEO argues, meaning they have the money to invest into their digital transformation.

ROBIN MARSHALL

“We see digital transformation accelerating because of COVID. Our customers are integrating digital technology into more areas of their business. Their motivations include accelerating revenue growth, improved efficiency and security,” Grace says in an exclusive interview, conducted, appropriately enough for an ICT company, via a video conference call.

Invitech’s business is built around two pillars, an Infrastructure Business Unit, responsible for development and management of datacenter, fiber and radio communication assets and serving the so-called “carrier customers” (domestic and international service providers who use Invitech’s services to serve their own end users); and an Enterprise Services Business Unit, which serves corporate customers, adding technology and knowhow on top of owned infrastructure to deliver complex bundled ICT managed service solutions.

“We provide our customers the building blocks that enable their digital transformation; communications infrastructure, technology and skilled ICT staff. We are very positive about the future because we see many opportunities to help our customers in the coming months and years,” says Grace He does not expect the number of clients to grow significantly (he says Invitech has relationships going back years with

Special Report | 13

“Telecommunications and IT infrastructure has performed very well during the pandemic not just in Hungary but across the world showcasing the importance of the industry to the success of the economy and society in general.”

“They are using this opportunity to move along faster, and that is where we see benefit from the lift they are going to give us in terms of the increased demand for managed telecommunication and ICT services,” Grace explains. Does that also point to a potential problem for Hungary, in seeing the digital divide between SMEs and larger players, already an area of concern, further widen?

“I think it potentially does, and the government is aware of this. They need to work, and I think they are, to make sure this gap does not widen. Large corporates in Hungary are frequently involved in export; they are competing against others who are further along the [digital

transformation] journey than they are and obviously that is another reason why they are willing to move faster.”

The SMEs themselves are not a direct concern of Invitech, given its focus is on large and mid-size corporations. “Of our 5,500 customers, the largest 1,000 make up more than half of our business,” Grace, the company’s CFO before he took on the CEO’s role, explains. But there is an indirect impact: Hungary’s SMEs need to be able to serve the larger companies, and without the digital transformation of the former as well as the latter, they could lose competitiveness.

“But it is evolving; Hungary is definitely moving in the right direction.

In broadband connectivity, Hungary is actually quite high up, but on digitalization it is behind. I expect it to significantly accelerate in the next years.”

All of which means Grace is excited about the potential future for his company.

“Invitech is ideally placed to capitalize on this whole opportunity. The reorganization into business units in 2019 helped improve focus, allowing us better understand and serve our customers’ needs so they can focus on their core business.”

That new structure followed the sale of the Invitel residential business unit to Digi; Grace insists the restructuring “wasn’t anything mind blowing”, but rather the implementation of an operational model used internationally by similar B2B focused telecom operators. Grace says the company is currently expanding and investing into both its fiber network and data centers.

As mentioned earlier, Grace was CFO before he took over the chief executive’s position. The big difference in the roles, he points out, is that however significant a role the finance position might be, the person filling it still has a boss.

“Now, the buck stops with me. I try not to be the cleverest guy in the company. Our decision-making process here is that we try to collect all the inputs from the various areas of the business, so it is not like I am deciding on my own with incomplete information. We adopt a collaborative approach to decision making where possible”.

Smooth Switch

For Invitech, the switch to home office the pandemic forced was relatively smooth, as you might expect for an ICT company.

Service engineers working in the field and the data center staff cannot work from home, but all other employees have had the option to remote work two-days a week for several years.

Grace thinks permanent home office is not a viable long-term solution for Invitech; roles involving creativity and problem solving suffer from the lack of direct social interaction. But trust between management and employees has been boosted, he says. “In Invitech, we have hit some of our best numbers in the last months and quarters.”

If the pandemic has proven one thing, though, it is that digital solutions work, whether that means enabling home office, or ushering in more efficient processes.

And that has placed a focus on an area that was already rapidly rising up the agenda.

“Our whole industry has been showcased through this lens of COVID,” says Grace.

“Customers have become more aware how dependent they are on technology.”

The need for acceleration is clearly there. Grace cites the Digital Economy and Society Index (DESI), published by

Invitech Fact Box Revenue (2019):

HUF 26 bln Employees:

600 Customers:

5,500 Fiber optic network: 11,000 km Commercial buildings connected:

7,000 Data Center: 3,500 sqm Products: Connectivity, Voice, Colocation, IT Security, Cloud and End User Support

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COVID-19 Sees Hungary’s Data Traffic Surge The effects of the pandemic somewhat stole the limelight from 5G development as traffic on landline and mobile internet networks surged, kickstarting digitalization for many of those who had been reluctant to make the change.

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Telecommunication service providers’ insight reveals that total mobile internet usage keeps growing year after year as a general trend. People consume more internet on the go as time passes.

Nevertheless, in 2020, especially in second quarter, the growth rate of mobile internet was higher than usual.

“2020 is a special year for several reasons due to the coronavirus pandemic, which had a huge impact on consumers’ everyday lives. The pandemic has transformed our phone usage habits as well as the place and means of communication,” Zsuzsanna Varga-Hering, digital channels and sales director at Telenor Hungary tells the Budapest Business Journal.

Mobile internet data traffic saw a 20-25% increase in the coronavirus emergency, Vodafone Hungary told the BBJ. In the case of major events, such a press conferences or broadcast information by the coronavirus task force or the prime minister, more than a

50% increase

was recorded by Vodafone.

The telco experienced significant mobile internet data congestion only in the area of border crossings cells (such as at Hegyeshalom, 172 km northwest of Budapest, near the border with Austria, and Csanádpalota, 219 km to the southeast, near the border with Romania), where it had to reallocate spectrum to deal with the situation.

The pandemic has seen recognition of the importance of digital channels.

According to Telenor, the use of online channels has never previously seen the highs of this period.

Additionally, the situation caused by the COVID lockdowns led more people onto a digital springboard, motivating them to acquire new online skills at a faster pace than the market average.

“In the first wave of the pandemic, Telenor enabled customers’ digital transition by simplifying popular

customer service options and launching a series of easy-to-understand tutorials,” Varga-Hering explains.

Increased Demand

“Besides [domestic] consumers, business customers also demonstrate a rising need for digitized solutions. As there is an increased demand for online services, Telenor wants to strengthen its sales and support functions and provide highquality digital services to an even larger portion of its business customer base,” she adds.

Landline internet data traffic also saw a higher-than-usual spike, especially during the lockdown period, chiefly driven by movie and game downloads, as well as torrenting (downloading and uploading files through a distribution network that is often used to share copyright material illegally), Vodafone Hungary said.

“2020 is a special year for several reasons due to the coronavirus pandemic, which had a huge impact on consumers’ everyday lives. The pandemic has transformed our phone usage habits as well as the place and means of communication.”

Vodafone said that the publication of a new game or a new version of a game tends to overload the network. The telco says it has always paid special attention to such releases to ensure that the work of authorities, the flow of digital education and the connectivity of people working from home would not be affected.

To cope with the increased load, Vodafone Hungary has invested

more than

HUF 1 billion

in its mobile and landline internet network infrastructure. The telco says its experts keep monitoring the situation to execute capacity expansion wherever needed.

Beyond maintaining and operating a network that caters to the increased needs of internet users, Vodafone said it also retains focus on developing its 5G infrastructure.

Following on from Budapest and Zalaegerszeg (where the ZalaZONE autonomous vehicle test track requires a host of smart technology solutions that run instantaneously on 5G), Vodafone is now installing 5G stations across the larger cities in Hungary and around Lake Balaton, increasing station numbers to close to 300.

During the summer, Telenor saw text message numbers go up by 10%, and voice calls were

15% longer.

Yet, these increases did not trump internet usage trends: data traffic was up by 35% in the summer months for Telenor users. Total used GBs also climbed 35% in the summer.

Key Theme

The telcos focus on developing the latest generation networks is understandable considering both national and international trends.

“5G will be a key theme of the coming years, bringing about a change of the same magnitude as the switch between 2G and 3G,” says Tamás Csaba, chief network strategist and senior advisor at Telenor Hungary.

“Offering better network parameters, and an ability to serve millions of devices concurrently at low network latency and high speed, 5G will create a broad range of new use cases for data services,” he adds.

Customer behavior and expectations change quickly. In fact, they can be changed overnight by unexpected events. Based on its data, Telenor found that the pandemic transformed phone usage habits, both relating to place and the way of communication.

Starting from mid-March, when the COVID-19 started to significantly affect Hungarian residents’ lives, longer calls fueled higher voice traffic, while data traffic went up by 30% on average.

Zsuzsanna Varga-Hering Like Vodafone, Telenor also emphasizes that the pandemic has caused unexpected potential increases in traffic, and the telco says it monitors the use of its networks to prepare for capacity upgrades if needed.

Preparedness appears to be the key in these times. Only one-third of small- and medium-sized businesses worked without interruption during the lockdowns, according to a nonrepresentative research project, albeit one performed on a large sample, that eNET undertook for Magyar Telekom.

The research found that 56% of the businesses asked will focus more on digital developments, with almost one-quarter making it the first thing they will do post-pandemic.

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Special Report | 15

5G to be Built on World-class 4G Network On the other hand, the phasing out of 3G technology started in other countries earlier. Using the so-called “”refarming solution, the released spectrum (2,100MHz and 900MHz) was reallocated to 4G. Another notable factor is that wherever 5G is rolled out, it will also trigger the modernization of 4G equipment, which in turn results in higher capacities. Let me add, however, that Hungarian users are still lucky because Hungary’s 4G networks are of world-class quality.

György Koller, CTO of Telenor Hungary, talks to the Budapest Business Journal about the likely evolutionary path from 4G to 5G in Hungary.

BBJ STAFF

BBJ: We hear a lot of talk about the roll out of 5G. How is the 4G network holding up? Is it still fit-for-purpose?

What can be done to update it until 5G rollout is complete?

György Koller: Hungarian customers are lucky in terms of mobile user experience as the Hungarian 4G networks available to the public are of world-class quality and they satisfy current needs. Telenor’s Hipernet network is available to more than 99% of the population. When it comes to standard daily mobile usage, continuously developing current 4G-based networks are capable of providing the high-quality user experience Hungarian customers have come to expect.

Telenor believes in 5G and wants to make a high-quality network available by the time there is genuine user and market need for this service, be it for business or industrial solutions or consumer applications. Currently, future 5G-based solutions can be fully supported by the existing network and 5G handsets have a very low penetration. Several countries at a more advanced stage of 5G implementation (e.g. South Korea) acted earlier because they were running out of 4G capacity and had no other option but upgrade to 5G. Currently, we still have enough capacity reserves in our 4G network.

Due to the constant development of the fourth generation technology, our network has nearly the same capacity now as was previously projected for 5G networks. The key benefits of 5G (lightning fast speed, ultra-low latency and concurrent use by a large number devices) will all be available more in the post-2022 period when standalone systems (those capable of operating without 4G networks) gain dominance.

The COVID lockdown has shown that the nationwide Hipernet network is able to smoothly cope with a sudden 30% increase in traffic and it demonstrated the capacity reserves available in this technology.

BBJ: Telenor has been placing a lot of emphasis around Lake Balaton.

What have you been doing, and what has been the public response?

GyK: In an average summer season, the number of mobile users may increase more than tenfold in the Balaton region.

In that period, the area often accounts for over 10% of nationwide mobile traffic.

No other region experiences this rate of

György Koller traffic increase in Hungary. During the three summer months, Balaton generates more than 10% of overall nationwide traffic, which makes it a key focus area not only for tourism but also for mobile communication.

Telenor customers generate data traffic of nearly 20TB and send and receive more than 100,000 text messages in lakeside towns and villages on an average day.

In 2020, five new base stations were installed in the region for the beginning of the season to beef up our mobile internet and 4G voice services. In addition, 32 existing Telenor base stations had a capacity upgrade. Telenor provides a mobile network coverage of 97% for the nearly 140,000 people living in lakeside communities. This summer, a lot of Hungarians were expected to choose domestic vacation destinations instead of foreign ones due to the coronavirus pandemic, which is why we prepared for an even higher traffic than in previous years.

BBJ: How are customers habits (both business clients and retail clients) changing?

GyK: Overall mobile internet usage keeps growing from year to year as a general trend. People tend to use more internet, but this year (and especially the summer period) had an even higher growth than usual. The pandemic has transformed our phone usage habits as well as the place and way of communication. Both voice and data traffic started to grow on our network from mid-March. Interestingly, higher voice traffic was mostly attributable to longer calls.

Overall, daily data traffic was up by about 30% on average. This growth was visible on both uplink and downlink from the early morning hours on. In the summer months of the pandemic, calling habits changed relative to the summer of 2019.

In July, 10% more text messages were sent and more calls were made. Moreover, calls were longer than the year before: the average number of call minutes increased by 10 to 15%. Nevertheless, most people

used the internet to communicate with data traffic growing by 35% over the summer months of 2019.

Telenor customers used 59 million GB of data in total this summer which is 35% higher than the year before. The mobile network is designed for “peacetime” traffic including some capacity reserves. When the lockdown was announced, our network was prepared for a potential increase in traffic, enabling it to handle higherthan-average needs. The need for further capacity upgrades has been continuously monitored since. If we identify the need, we will take the necessary action.

As the geographical distribution of mobile usage is different now from the usual pattern (business day traffic declined in previously high-traffic areas, while it increased in traditionally low-traffic areas), our network was fine-tuned at more than 130 points across the country. As a result, network capacity was optimized for changed user needs in a very short time.

A major change in usage habits was the increased importance of digital channels during the pandemic period.

BBJ: Hungary has fallen back in the OpenSignal ranking. What’s behind this?

Should we be concerned?

GyK: It is the combined result of multiple factors that Hungary’s mobile network now ranks 17th on the OpenSignal list (which is still a fairly remarkable position) based on the Download Speed Index measurement (indicating average download bandwidth) evaluating operator data from 100 countries.

On the one hand, traffic has been massively increasing on the Hungarian network which requires further capacity upgrades. Currently, the 800MHz band is the most overloaded and it is often the only 4G spectrum band available at a base station. This situation will be changed significantly by the launch of the 700MHz low spectrum band later this year that is already used in other countries. It may result in an up to twofold increase in capacity.

BBJ: When will full 5G rollout be achieved?

GyK: The launch of commercial 5G services will be largely influenced by current market needs. Therefore, I cannot give you an exact date. 5G rollout was an urgent need in many countries of the world because their existing technologies were no longer capable of satisfying user needs.

The nationwide outdoor residential coverage of Hipernet 4G had reached 99.5% by 2020 and this constantly developing technology now offers a capacity close to what was projected for 5G before (and 4G still has some further development potential). In the near future, growing user needs may be served by 5G and 4G technologies combined, especially in high-traffic areas, but as was the case with past technology transitions, the new technology will take the place of existing solutions in a phased manner ensuring unbroken development.

In an average summer season, the number of mobile users may increase more than tenfold in the Balaton region. In that period, the area often accounts for over 10% of nationwide mobile traffic. No other region experiences this rate of traffic increase in Hungary.

BBJ: Once it is in place, what trends should we be looking out for?

GyK: 5G will probably bring about a change of the same magnitude as the switch between 2G and 3G. Offering better network parameters, and an ability to serve millions of devices concurrently at low network latency and high speed, 5G will create a broad range of new use cases for data services. In addition to consumer use, Telenor considers industrial applications and experiments as the most promising potential fields of using 5G in the near future. Until 5G is made available to B2C customers in a few years from now, 4G will continue to provide an outstanding experience that was unthinkable before.

We believe that customers will see the benefits of 5G through services developed by other market players in the years to come. The next few years will be more about development, as well as exploring new ways and viable business models.

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INSIDE VIEW

Digital Transformation in CEE: 2020 Opens new Horizons Dóra Petrányi CEE Managing Director, Head of TMT at CMS

NOTE: ALL ARTICLES MARKED INSIDE VIEW ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

CMS Budapest

investing in data analytics, and this can deliver amazing things. How to access data and what to use data for are some of the key questions people expect regulators to provide guidance on.

What makes it even more interesting is that the vast majority of companies (98%) consider ethics as part of their current policies, so general councils and privacy officers should expect that ethics will become an important part of their daily lives.

The global COVID-19 pandemic continues to Value-driven promote the acceleration Ethics is no longer a “tick-the-box” but a conscious, value-driven of digital transformation exercise, process that involves a great deal of thinking. There needs to be the in ever-broadening right balance in corporate behavior sectors. To find out how between complying with law and markets in the CEE region being ethical, as this is not always the same thing. Therefore, companies’ are responding to the new ethics guidelines should be revised to reality, CMS carried out an address the current digital challenges, including realizing the consequences in-depth and wide-ranging of using data.

AI solutions are expanding into an survey in 18 countries ever-greater number of industries that involved more and sectors. This is another situation where EU and global regulators than 100 participants are lagging a tad behind what is in August of this year. happening in innovation. Is it an The survey explored accelerating developments in digital infrastructure, data and ethics, artificial intelligence and how tech-smart industries are advancing. The results ranged from the surprising to the thought-provoking.

If you look at the European Commission’s DESI (Digital Economy and Society) index, our countries are unfortunately below the EU average in term of readiness, the Czech Republic being the closest and Bulgaria the least prepared. Therefore, the lockdown has been a great test for regional operations. The response speaks for itself: 38% of respondents have completed or initiated new digital projects and an additional 45% say it served to accelerate existing projects. It is certainly very encouraging that 92% of respondents said they believe the pandemic would accelerate future projects.

We have seen a couple of good examples, for example more use of digital signatures, more digital customer contracts, especially in the financial, life sciences and, of course, telecoms sectors. On the other hand, each lockdown has also revealed a social gap and even a gender gap; many households have struggled to access digital education, and women lag behind men in terms of digital literacy. There is now a great opportunity to boost digital transformation: reluctance has fallen away and people these days are much more amenable to conducting and concluding business via digital platforms.

Digital transformation means more use of data. Our study confirms that 62% of respondents are already

issue? It certainly seems to concern respondents, as 86% have key concerns about AI and liability. The EU White paper on AI takes a risk-based approach to regulation and covers key topics such as access and use of data, liability issues and ethical questions.

Finally, the rollout of 5G in several CEE countries has also spurred progress during the past months. Although more network sharing is already happening across Europe, including the CEE region, there is clearly some uncertainty from regulators at a national level, which is critical for the wider deployment of 5G-enabled technologies. But as and when it happens, it will have a profound impact on existing industries and our daily lives across the region.

We were happy to see that 88% are confident that EU/regional and local digital infrastructure strategies will meet their business ambitions in three to five years. This clearly demonstrates widespread optimism in CEE that the right medium-term infrastructure strategies are in place.

No doubt we are living in historic times. The pandemic has accelerated digital transformation and has provided a perfect opportunity for what was already necessary in terms of pushing businesses forward faster in digitalization and digital readiness.

Law . Tax cms.law

5G Coverage Expanding as Mobile Data Demand Rises Although fifth-generation mobile connectivity is just starting to unfold in Hungary, some people are already talking about the next generation 6G, although it is likely at least a decade away. In the meantime Hungary has seen some interesting 5G developments, which is welcome as the demand for mobile data has grown significantly this year, lifted by COVID-19 lockdowns.

CHRISTIAN KESZTHELYI

On March 26, Hungary’s National Media and Infocommunications Authority (NMHH) awarded 5G spectrums to Magyar Telekom, Telenor Hungary and Vodafone Hungary at an auction that brought in a combined HUF 128.5 billion for the state for spectrum in the 3600, 2100 and 700 MHz bands.

Tamás Csaba Licenses are valid for 15 years with a one-time, five-year extension possible, for an additional licensing fee. No participant submitted bids for spectrums in the 2600 MHz band.

Telekom was awarded two 10 MHz spectrums in the 700 MHz band, also two 10 MHz spectrums in the 2100 MHz band and a 120 MHz spectrum in the 3600 MHz band.

Telenor was awarded two 5 MHz spectrums in the 700 MHz band and a 140 MHz spectrum in the 3600 MHz band. Its bid for a spectrum in the 2100 MHz band was unsuccessful.

Vodafone acquired two 10 MHz spectrums in the 700 MHz band, two 5 MHz spectrums in the 2100 MHz band and a 50 MHz spectrum in the 3600 MHz band.

In terms of 5G readiness, Hungary is among the leaders in the region, despite being ranked 21st of 28 European Union member states on the European Commission’s Digital Economy and Society Index (DESI), an annual assessment of digital progress. Hungary scored an overall

47.5 points

in 2020, up from 42.3 points in 2019, but still below the EU average 52.6 points.

“Based on data prior to the pandemic, Hungary ranks most highly on broadband connectivity. It is among the leaders in the take-up of at least 100 Mbps broadband, 5G readiness, and also scores well in overall fixed broadband take-up,” says the DESI country profile.

It notes, however, that the country still lags in digital public services and in the integration of digital technologies in businesses, while more than half of the population lacks basic digital skills and software skills.

There is clearly room for improvement, but recent progress shows a busy digital landscape with many developments in the pipeline. While the three main telecommunications service providers are supplied with the frequencies needed for 5G and are working on expanding their 5G networks, there appears to be no exact date for the launch of commercial 5G service yet.

This is largely influenced by current market needs and 5G rollout is already underway and is urgently needed as some existing technologies are no longer capable of satisfying users’ demands.

Conspiracy Theories

Although the emergence of 5G has seen conspiracy theories emerging globally, especially concerning the possible negative or harmful effects of radiation,

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Budapest Business Journal | October 30 – November 12, 2020

and even a supposed link to the cause of COVID. However, experts have insisted that 5G is safe.

“The emergence of new technologies may always cause concern. The exposure to new base stations and mobile handsets is limited by international and domestic regulations,” Tamás Csaba, chief network strategist and senior advisor at Telenor Hungary tells the Budapest Business Journal.

“The health impact of electromagnetic radiation used for the purposes of 5G and 4G or other purposes (e.g. Wi-Fi) are virtually the same. As a mobile operator, Telenor considers it important to educate the market and involve other players in thinking about 5G models.”

“In Hungary, strict health limits in line with EU regulations have to be observed. In order to protect human health, compliance with regulations and limits is regularly verified by measurements completed by the regulatory authority,” he says.

“The health impact of electromagnetic radiation used for the purposes of 5G

Special Report | 17

and 4G or other purposes (e.g. Wi-Fi) are virtually the same. As a mobile operator, Telenor considers it important to educate the market and involve other players in thinking about 5G models,” Csaba adds.

Vodafone says it expects to reach full 5G-coverage for the capital soon, with its 5G station numbers expected to

reach

300

country-wide. Under a recently signed cooperation with the Budapest University of Technology and Economics (BME), Vodafone Hungary is providing the university with 40 MHz of frequency for research and development purposes.

“The engineers of Vodafone everyday work on providing high quality, high capacity and secure network for its customers,” the company says, with the aim being to deliver new generation mobile network experiences to hundreds of thousands of clients.

5G cellular repeaters on a post. Photo by Lisic / Shutterstock.com Magyar Telekom launched commercial 5G services in April and expanded its coverage in August to

23

Key Importance

Vodafone says the development of the 5G network is of key importance.

The telco says it will look to deliver the benefits of the new generation technology to industries, agriculture, logistics and transportation first, although country-wide 5G coverage is the ultimate goal, or course.

settlements

around the country.

“At Magyar Telekom, we have been working for years on contributing to the digital development of Hungary, making our customers’ everyday life easier, more limitless through our devices and services,” Tibor Rékasi, CEO of Magyar Telekom, said when announcing the expansion of its 5G coverage earlier this year.

“Our giga strong network provides a sound basis for that, and we have reached a new milestone in its development. We are proud that our gigabit bandwidth network is available at 2.2 million points: that is for 40% of homes and businesses in Hungary, and that gigabit speed is also available in our 5G service” Rékasi added.

As Hungary’s telcos race to reach wider coverage, growing user demands will be served by a mix of 4G and 5G technologies in the near future, especially in high traffic areas, until the new technology gradually phases out the old.

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Budapest Business Journal | October 30 – November 12, 2020

Lockdowns and Social Distancing Lift Phone Use As people sought refuge from the spreading coronavirus in the beginning of the year, they resorted to their phones to a much greater degree to keep in touch with family and friends and stay in the loop at work.

Recent data suggests COVID19 boosted mobile data, and even slightly resuscitated landline call minutes, for the first time in the past few years.

CHRISTIAN KESZTHELYI

As mobile phones have morphed into smartphones that allow us to binge-watch movies, write email, handle banking and shop via our handheld devices, it is often thought that the days of landline phones and voice calls are numbered, especially for non-business use. How valid is that point of view now?

Mobile phone networks in Hungary saw a total of 124 petabytes (which roughly translates to 17 million hours of a 4K movie) of data traffic in the first quarter of the year, which is a staggering

69.9% increase

as compared to the same quarter in 2019, according to data published by the Central Statistical Office (KSH) in July.

In the preceding two quarters, the year-on-year growth was 56% and 57%, respectively, which indicates the uplift may have been boosted by the extraordinary circumstances that were just beginning to come into play around the coronavirus pandemic. Some 94% of this data traffic traveled through 4G/LTE networks.

Data from the Central Statistical Office suggests we may have used the phone, including landlines, more during the COVID lockdown. Photo by Roman Samborskyi / Shutterstock.com

Changed Habits?

KSH says in its report that the quarterly figures may reflect changed contact habits in the light of the COVID-19 pandemic. Both mobile call and duration numbers grew by 15% and 17%, respectively, when compared to landline networks, year-on-year.

Although they fell in a quarterto-quarter comparison for the third consecutive quarter, the number of mobile calls exceeded two trillion, growing by a year-on-year 3.8% in the first quarter.

The total duration of those calls were up by 6.8% to 6.3 billion minutes, which translates to more than 11,000 calendar years. Per subscription basis, these figures average out at 5.5 minutes a day.

It appears that mobile internet data is biting into the text message pie. The total of 464 million text messages sent by mobile users in the first quarter was two million less than in the same quarter of 2019, and 16 million less than those in the fourth quarter of 2019.

Landline phone call numbers dropped further, seeing a 7.4% yearon-year decline at 157 million.

Nevertheless, the length of those calls increased slightly by 2.2% to

922minutes, million

presumably lifted by the lockdown measures as people began to self-isolate.

The Magyar Mobile Telephone Service Story Mobile phone services have come a long way. The first Hungarian commercial mobile service, the analogue 450 MHz radiotelephone service, was launched on October 15, 1990, by Westel Rádiótelefon Kft., later Westel 0660, which was established as a joint venture between the country’s legacy telephone monopoly Matáv (Magyar Telekom’s legal predecessor) and the U.S.-based West International.

In 1994, the second generation (2G) GSM-based service overtook analogue, and was launched by Westel 900 (later T-Mobile Hungary, then Magyar Telekom), in the 900 MHz band, delivering better voice quality, higher network capacity, the ability to send text messages (SMS), voicemail and roaming.

In 2005, the introduction of 3G made the use of high-quality

multimedia applications possible, together with video calls, mobile TV and high-speed mobile internet.

Since 2012, the majority of mobile users have been enjoying the benefits of 4G. According to data from the National Media and Infocommunications Authority (NMHH), in the fourth quarter of 2019, 96.3% of the total domestic mobile internet traffic and 25.2% of the domestic call traffic took place through 4G networks.

Magyar Telekom data shows that annual mobile phone voice traffic is still on the rise. By the end of the year, it is expected that mobile network minutes will reach 10 billion, up from nine billion in 2015.

Mobile data has been on an even steeper climb than voice. In the past half a decade, Magyar Telekom has seen annual mobile data traffic

In the meantime, mobile phone subscriptions kept increasing.

At the end of March 2020, mobile phone subscriptions reached 12.64 million, some 430,000 more than a year earlier, and 101,000 more than at the end of December 2019, this in a country with a total population of 9.8 million, according to KSH. The number of subscriptions per 100 inhabitants rose to 129.4 from 124.7 in Q1 2019.

Conversely, there were 3.2 million landline subscriptions at the end of the first quarter, 0.4% fewer than 12 months earlier, yet slightly more than in the previous quarter.

grow more than eight-fold. In the second quarter of this year (in other words, at peak lockdown), compared to the same quarter a year earlier, mobile data traffic grew by 60%. Telekom customers have used an average of 5.5 GB of data per month in 2020, which roughly equals to three-quarters of an hour of 4K video.

As 5G technology will be up to 100 times faster than 4G, reaching 10 gigabits per second (more than an hour of 4K video footage), Internet of Things solutions, such as selfdriving cars, for example, will become a reality in the upcoming years. Such speeds, and the fact that 5G networks can accommodate an increased number of devices connected to the same station at the same time, mean the prominence of mobile devices and their usage is only expected to rise further in the near future.

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Vodafone: Telecoms Industry Hungary’s ‘Invisible Lifeline’

technology. Therefore, it is particularly important that students receive an education that enables them to use and experiment with the latest, most up-to-date technology, preparing them for the labor market. We wish to contribute to this by bringing 5G, the most essential technology of our times, to the university.

Under the cooperation agreement, we will provide BME with 40 MHz frequency in the 3500 MHz band, separated from our own core network, which will be sufficient for running the 5G network across the full territory of the university, in the area from Rákóczi híd to Szabadság híd. This will help advance innovations built upon 5G at the university, as well as the joint participation of BME and Vodafone in the European Union’s 5G-themed research and development programs.

Gergő J. Budai, deputy chairman of the board of Vodafone Hungary, talks with the Budapest Business Journal about the role of the telecommunications sector during the pandemic, the company’s future plans, in particular around 5G. BBJ STAFF

BBJ: The world changed overnight in the spring due to COVID-19, and digitalization became even more important. How do you see the role of the telecommunications sector in restarting the economy?

Gergő J. Budai: After the announcement of the state of emergency, Vodafone acted quickly and introduced numerous new services and discounts intended to support the public, businesses and authorities during this difficult period.

I am very proud of our entire industry, as we have been – and are – an “invisible lifeline”, helping the country during this unprecedented period. In the past more than six months, the country’s network infrastructure, of an outstanding quality even in a European context, passed the test with flying colors. I think we can safely say that we succeeded in keeping Hungary connected at a time when it was needed more than ever. Thanks to our networks, life didn’t need to stop, and in the on-line space we could connect with our loved ones, as well as work, teach or learn from home.

Now, in the second phase of the pandemic, the telecoms sector is once again playing a key role. It is in our common interest to keep the country running, as well as to restart the Hungarian economy and support and enhance the competitiveness of businesses. The high-quality and high-capacity telecoms infrastructure and the digital technologies built upon it play a key role in achieving these goals. Accordingly, Vodafone Hungary is ready to contribute to the hard work ahead and steer the Hungarian economy back onto a path of sustainable growth.

Gergő J. Budai BBJ: 5G is one of the cornerstones of your network development efforts, launched a year ago in the inner city of Budapest.

How were your 5G developments affected by the pandemic? How far has 5G progressed in Hungary and what developments are expected for the rest of the year?

GJB: Indeed, in the autumn of 2019, we were the first mobile operator in Hungary to launch the country’s first outdoor commercial 5G service accessible by all, in the downtown area of Budapest, starting out with 34 5G base stations.

Fortunately, the pandemic did not significantly affect our network development plans, so the expansion of our 5G coverage could continue in 2020. In March, we purchased additional spectrum at the auction conducted by the National Media and Infocommunications Authority (NMHH): a total of 80 MHz from the 3500 MHz and 700 MHz frequency

Special Report | 19

ranges, which together allow for higher speeds, capacity and coverage.

Thanks to the newly acquired spectrum, we are able to further develop our commercial 5G service. As part of this development, back in the summer we announced a continuation of the rollout in county capitals and around Lake Balaton. In the coming weeks, we will also switch on 5G on approximately 200 base stations in and around Budapest, enabling us to offer outdoor commercial 5G services to even more customers.

BBJ: A few weeks ago, you signed a cooperation agreement with the Budapest University of Technology and Economics (BME), which also affects Vodafone’s 5G network. Can you tell us a little more about this?

GJB: Present and future generations of engineers will play a significant role in enabling 5G’s amazing capabilities, allowing us to explore the broadest possible range of use cases for this

BBJ: Let’s talk about the base stations that are essential for the operation of the network. In July, Vodafone Group announced that it would outsource passive base station elements into stand-alone companies. Where are you in this process now?

GJB: Last year, Vodafone Group, our parent company, announced the outsourcing of passive base station components in operation at its European subsidiaries, including in particular, but not limited to, towers, antenna support structures, power supply equipment and the facilities and containers used for storing active components, as well as any related air conditioning equipment and indoor antenna systems, into stand-alone companies, for more efficient utilization and sustainability. The new company, established under the name Vantage Towers, will be one of Europe’s marketleading tower infrastructure companies.

Vodafone Hungary will also join this group-level initiative, and from November 1, 2020, Vantage Towers Hungary will own and operate Vodafone’s passive base stations in Hungary. The newly established company will be demerged from Vodafone Hungary.

BBJ: What does this mean in practice?

What is the significance of this move from a business perspective? Is this linked to 5G developments?

GJB: The construction and development of a modern mobile infrastructure will accelerate the digital advancement of both Europe and Hungary, facilitating the rapid deployment of 5G technology, which, in turn, will enable the widespread adoption of additional new technologies in areas such as transport, urban life, smart cities, agriculture, healthcare or education.

This transformation also supports the proliferation of network sharing schemes in Hungary, allowing other players in the infocommunications and other industries to use our passive network components and infrastructure.

At this point, I also consider it important to emphasize that we have treated and continue to treat sustainable business operations as a top priority.

Nothing proves this more than the fact that from November 2020 we will satisfy the power consumption of all our domestic base stations exclusively from renewable energy sources.

20 | 3

Special Report

www.bbj.hu

Budapest Business Journal | October 30 – November 12, 2020

Internet Service Providers Ranked by total net revenue in 2019 (HUF mln)

leaSed lIne

Cable

mICRoWave

mobIle

toP loCal exeCutIve CFo maRketIng dIReCtoR

4g

yeaR eStablISHed no. oF Full-tIme emPloyeeS on July 1, 2020

oWneRSHIP (%) HungaRIan non-HungaRIan

adSl

1

magyaR telekom CSoPoRt

666,700

5,378,000

–







–





1991 5,501

Free float (39.94) own shares (0.85) Deutsche Telekom Europe B.V. (59.21)

tibor Rékasi Daria Dodonova Zoltán Pereszlényi

1097 Budapest, Könyves Kálmán körút 36.

(1) 457-4755 –

2

vodaFone magyaRoRSzág távközléSI zRt.

205,209

A







–







1999 2,552

– Vodafone Europe B.V. (100)

amanda nelson Cüneyt Avci Balázs Révész

1095 Budapest, Lechner Ödön fasor 6.

(1) 288-4288 sajto@vodafone.com

telenoR magyaRoRSzág zRt.

182,631

3,500,000



–

–

–

–





1993 1,240

Antenna Hungária Zrt. (25) PPF Group (75)

Jan Hanuš Martin Oravec Mohamed ElSayad

2045 Törökbálint, Pannon út 1.

(1) 464-6000 –

dIgI távközléSI éS Szolgáltató kFt.

52,183

A







–







2004 2,468

– RCS&RDS S.A. (100)

dragos Spataru – –

1134 Budapest, Váci út 35.

(1) 707-0005 ugyfelszolgalat@digikabel.hu

– China CEE Fund (99.99)other (0.01)

gerald grace Dániel Majubu Orsolya Hladics

2040 Budaörs, Edison utca 4.

1) 801-1500 vip@invitech.hu , kapcsolat@invitech.hu

Rank

addReSS PHone emaIl

modem

meanS oF aCCeSS

ComPany WebSIte

www.telekom.hu

total net Revenue In 2019 (HuF mln)

no. oF SubSCRIbeRS on July 1, 2020

www.vodafone.hu

3

www.telenor.hu

4

www.digi.hu

5

InvIteCH ICt SeRvICeS kFt.

6

InvItel távközléSI zRt.

25,785

A











–

–

2016 580

www.invitel.hu

25,286 (2018)

A



–











1995 495

DIGI Távközlési és Szolgáltató Kft. (100) –

dragos Spataru – –

1134 Budapest, Váci út 37.

(1) 801-1500 info@invitel.co.hu

7

aCe teleCom kFt.

1,479

A

–



–

–



–

–

1997 44

Individuals (68) ThreeF Kft. (32) –

attila Farmosi, gábor varga Gábor Varga Péter Németh

1037 Budapest, Zay utca 3.

(1) 999-1000 office@acetelecom.hu

8

netFone teleCom kFt.

–

2012 37

NETFONEINVEST Kft. AZsolt Wilhelm (A) Scanwinavia AB (A)

lászló mészáros – István Kun

8900 Zalaegerszeg, Nefeljcs utca 2/A (1) 878-1814 info@netfone.hu

9

dRávanet zRt.

–

1996 9

Indiividuals (100) –

zsombor attila Papp Rezső Dunay Csaba Csizmadia

7624 Pécs, Budai Nagy Antal utca 1.

(80) 811-118 info@dravanet.hu

www.invitech.hu

www.acetelecom.hu

www.netfone.hu

www.dravanet.hu

1,454

568

A

5,323

–

–

–



–







–



–

–

3

www.bbj.hu

Budapest Business Journal | October 30 – November 12, 2020

Special Report | 21

Telecommunications Equipment Manufacturers Ranked by total net revenue in 2019 (HUF mln)

MEssagE Handling sysTEM

indusTRy spECiFiC soluTion

oTHER TElECoM and nETWoRk EquipMEnT

no. oF Full-TiME EMployEEs on July 1, 2020

yEaR EsTablisHEd

oWnERsHip (%) HungaRian non-HungaRian

2017

– Focus PC Enterprises Ltd. (100)

péter Tálos Gabriella Pistauer –

2900 Komárom, Bánki Donát utca 1.

(34) 886-888 komarom@emea. foxconn.com

1992

– LG Electronics European Holding B.V. (100)

kim dae Hwan, kim Hyeong Tae – –

1097 Budapest, Könyves Kálmán körút 3/A (1) 455-6060 kapcsolat@lge.com

2005

– Huawei Cooperatief U. A. (100)

gan Jianhua, shi yanli, li Jian, Wu biqiang – –

1138 Budapest, Népfürdő utca 22/A (1) 555-2300 hungary@huawei.com

1990

– Telefonaktiebolaget LM Ericsson (100)

gábor Éry, Edina Rózsa, bernadette Mária bohács – –

1117 Budapest, Magyar Tudósok körútja 11.

(1) 437-7100 valaszolunk@ ericsson.com

2006

– Nokia Solutions and Networks Oy (100)

balázs kökény, Erzsébet Tóth, béla zagyva – –

1083 Budapest, Bókay János utca 36-42.

(20) 977-7797 nokia.hungary@ nokia.com

2002

– NEC Europe Ltd. (100)

lászló Magyar, Edit Cserháti Hontiné – –

1142 Budapest, Ungvár utca 64-66.

(1) 814-6424 eszter.nagy@ emea.nec.com

1990

– Sierra Communications International LLCAAVAYA Emea Ltd. (A)

andrás Turai, györgy gombár, Massimo palermo – –

1062 Budapest, Váci út utca 1-3.

(1) 238-8200 ikovari@avaya.com

Evan sloves, ottó zoltán dalos – –

1123 Budapest, Csörsz utca 45.

(1) 225-4600 –

CTC/CRM soluTion

651

voip



–

vsaT sysTEM

5126 Jászfényszaru, Samsung tér 1.

(80) 726-7864 –

Call/ConTaCT CEnTER

Hwanseog Choi Sang-Woo Lim Gerda Witsch

businEss pHonE sysTEM/pbx

– Samsung Electronics Co. Ltd. (100)

Fax MaCHinEs

1989

ansWERing MaCHinEs

1,638

isdn pHonEs

–

analog pHonEs

–

TRi-band MobilE pHonEs

–

saMsung ElECTRoniCs MagyaR zRT.

761,628





–

–

–

–





–



–

Cloud nETWoRk TECHnology kFT.

454,693

–

–

–

–

–

–

–

–

–

–

–

–

CoMpany WEbsiTE

www.samsung.com

2

Top loCal ExECuTivE CFo MaRkETing diRECToR

dual band MobilE pHonEs (900/1800 Hz)

1

ToTal nET REvEnuE in 2019 (HuF Mln)

Rank

TypEs oF EquipMEnT

www.foxconn.hu

3

4

lg ElECTRoniCs kFT. www.lg.com

HuaWEi TECHnologiEs HungaRy HíRadásTECHnikai kFT.

136,697

76, 993



–

–

A

–

A

–

A

–

–

–

–

–

A

–

A

–

A

–

A

–

A

–

A

–

A

–

–

107

A

www.huawei.com

5

ERiCsson MagyaRoRszág koMMunikáCiós REndszEREk kFT.

49,011

A

A

A

A

A

A

A

A

A

A

A

A

A

–

1,975

www.ericsson.com

6

nokia soluTions and nETWoRks kFT.

38,034

A

A

A

A

A

A

A

A

A

A

A

A

A

–

2,280

www.nokia.com

7

nEC EasTERn EuRopE kFT.

8

avaya MagyaRoRszág kFT.

9

www.nec.com

www.avaya.com

4,196 (2018)

2,940

–

–

–

–

–

–

–

–

–

–

–



–





–

–

–

–

–

–

–

–



–

–

47

1997

– Cisco Systems Inc., CISCO Systems Management B.V. (A)

21

2009

Zoltán Havasi (100) –

zoltán Havasi Norbert Szabó –

1152 Budapest, Telek utca 7-9.

(1) 271-1141 info@mohanet.com

2010

– Junichi Suzuki (100)

david leslie preece – –

1117 Budapest, Alíz utca 4.

(1) 382-6060 reception.psee@ eu.panasonic.com

CisCo sysTEMs MagyaRoRszág kFT.

2,590

–



–

–









–









MoHanET MobilsysTEMs zRT.

293





–



–

–





–

–







–

A

A

A

A

A

A

A

A

A

A

A

A

A

A

www.mohanet.hu

panasoniC MaRkETing EuRopE gMbH souTH-EasT NR EuRopE FiókTElEp www.panasonice.com

25

–

Desktop UC rendszer üzenetküldési- és telefonfunkciókkal, videokonferecia és telepresence rendszerek

www.cisco.hu

10

–

–

90

addREss pHonE EMail

26

4

www.bbj.hu

Budapest Business Journal | October 30 – November 12, 2020

Socialite Pulling Stunts, Attracting Locals: How Budapest Restaurants are Surviving Onyx and Costes, two of Budapest’s finest Michelinstarred restaurants, recently pulled stunts to keep their name in the public eye. But, away from the spotlight, eateries with more modest ambitions are thriving.

Huge Trouble

DAVID HOLZER

In March this year, when COVID-19 shut down Budapest, Onyx, Hungary’s only two-Michelin-starred restaurant closed.

On its website, the restaurant promises something completely new called “Onyx Metamorphosis”. In the meantime, it has just concluded what it called “The Last Supper” competition.

Contestants had to say why they deserved to win a place at The Last Supper in a one-minute video message. The winners will dine on Onyx’s most “exciting dishes” for free.

To find out more about this ingenious stunt, I spoke to Anna Niszkács, CEOowner of the family-run Gerbeaud Gasztronómia Kft., which owns Onyx.

Everything we do will be guided by a sustainable approach.”

Another fine restaurant employing attention-grabbing tactics is Costes. For at least one weekend in October, the restaurant invited guests to dine on the Ferris wheel in the center of Budapest.

Speaking to international newswire service Reuters, Costes’ owner Károly Gerendai said “The Ferris wheel is ideal with its separate cabins so we can solve the issue of separate seating for guests.”

As stunts go, this isn’t a bad one, even if the restaurant at the Prater in Vienna has been doing it for years. I read the story on the U.K.’s Metro website.

The thing is, I’ve eaten at Costes Downtown and the ambience of the restaurant itself was as much a part of the experience as what we ate and drank. The photos on the Metro website didn’t make dining on the Ferris wheel look at all appetizing.

But that isn’t the point, I guess. It’s about survival. The interesting thing is that many restaurants in Budapest appear to be doing more than just surviving.

I recently dined at Irkafirka, a Hungarian place on Pauley Ede utca not far from Deák Ferenc tér, and the next night at La Coppola, a Sicilian restaurant on Károlyi Mihály utca, just down from Ferenciek tere.

They were packed.

You don’t have to be a rocket scientist to figure out the reason why.

Anna Niszkács “The Last Supper is a gag,” Niszkács told me, “a way of creating a buzz. It means guests can experience the Onyx environment with the same food and service as before for the last time before we metamorphosize into something different.

This metamorphosis didn’t happen as

a result of the pandemic. It was well underway by the middle of 2019.”

What was the idea behind inviting people to send in videos? “Due to COVID social-distancing measures, we would like to serve a limited number of guests.

Normally, Onyx can seat up to 52 guests but The Last Supper will be much smaller.

We didn’t want to give priority to the fastest paying or first to call guests, so we considered video application to be the fairest method.”

And what have the videos been like?

“Some of have been very funny, others very serious. But every video is really kind. People really appreciate what we’ve achieved so far and they’re very curious to see what Onyx will metamorphasize into.

At The Last Supper we’ll reveal some of our plans for the new Onyx.”

Manifesto

Onyx restaurant

And what are those? “We have a manifesto for how the new Onyx will reemerge more beautiful when the time is right. Some of our aims are to create an immersive experience and more than just a restaurant.

We will blend fine arts and food science into our creative process. We will develop new talent and forge a creative community.

As Gábor Bánfalvi of culinary experience company Taste Hungary told me, “My impression is that local cafés and restaurants that were targeting local demand are doing fine, although demand is lower for them too. But Hungarians, including those who would be traveling to fancy places for vacations and long weekends are stuck here now. If they can’t go to their favorite place in Italy, they’ll spend their time and money in Budapest.

Now local demand is high, and it would be great if it could stay like this. It’s the places that mainly depended on tourists that are in huge trouble.”

The lack of tourists has led to the closure of three of the restaurants Taste Hungary worked with. Gettó Gulyás, Centrál kávéház and Borbíróság, for example, have been closed since mid-March. “Some are planning to reopen when tourism returns but others might be closed for good,” Bánfalvi said.

It has also devastated Taste Hungary’s business. “We lost 100% of our business from one day to the next. We had to lay off 90% of our staff and have just two part time sommeliers left to serve the demand in our new wine store on Bródy Sándor and web shop selling wine to European clients.

This was unimaginable before and is devastating. Fortunately, we own all of the properties that the businesses are in, so we have a chance to come back when things are back to normal.”

I’ve been told that, despite all of this, new restaurants and bars are opening up, which suggests that some people feel optimistic, or at least like a challenge.

“I’ve heard of one restaurant that just opened,” Bánfalvi said. “This is Szék on Andrássy út. And there’s Múzsa, the new cocktail bar at the Gresham Palace, which oozes confidence.”

And would Bánfalvi care to make any predictions as to the future of the Budapest restaurant scene? “At this point, I can no longer make any,” he told me.

4

www.bbj.hu

Budapest Business Journal | October 30 – November 12, 2020

Borjour: A Tale of Two Hungarian Reds While Hungary is blessed with a broad palette of indigenous white grape varieties, there are much slimmer pickings when it comes to black (red) grapes, although Kadarka and Kékfrankos are capable of providing plenty of pleasure to the palate. These two grapes were the subject of Borjour’s Kékfrankos and Kadarka tasting held at Hotel Nemzeti Budapest MGallery by Sofitel, on October 16.

Szekszárd is the Hungarian epicenter of the Kadarka grape, which came to Hungary from the Balkans (it is the same variety as Bulgaria’s Gamza), supposedly brought by Rascians (as Serbs were commonly known in the Kingdom of Hungary) fleeing from Ottoman invaders in present-day Serbia.

After years of wines that were either underwhelming (too watery and slight) or overwhelming (too much oak and extraction), plenty of deliciously spicy Kadarka with light tannins and playful acidity is coming through that typically exude a distinctively aromatic rose hip/red fruit scent.

It is a fragile and tricky grape to cultivate and prone to uneven ripening, while this thin-skinned grape (hence the light tannins) is also late to ripen, making it at risk from rot.

János Németh Kadarka 2018, which is set to be unveiled as the 2020 Országház bora (Hungarian Parliament wine, which will be served to visiting foreign leaders and dignitaries) in the Kadarka category, really ticked all of the key boxes, with that tasty spiciness, crispy cranberry and rosehip with a delightful lightness of touch on the palate.

As I mentioned last week, it is great to see lots of exciting small producers emerging from the Mátra wine region, which is Hungary’s second biggest according to land under vine and has some very fine, often volcanic terroir in ideallysituated cooler sites that are the place to grow grapes as the planet warms up.

The latest I encountered at the Borjour event was Hoop Wines, whose darkpink and cloudy Pét-Nat, called Pink Kékfrankos 2019 (HUF 4,500 from borfalu. hu), was both balanced and delightfully bubbly. Ultra-trendy Pét-Nat is short for Pétillant-naturel, and uses the méthode ancestrale, whereby natural bubbles are retained when the still-fermenting wine is bottled (hence also the sediment).

Wine Tourism

Gábor and Carolyn Bánfalvi

ROBERT SMYTH

Socialite | 23

It comes from the fruit of nine new clones of Kadarka. Németh explained that the classic P9 clone makes spicy wines, but its compact bunches can be too tight and make it highly susceptible to disease, meaning that good wine can only be made in very good, disease-free vintages. The clones that Németh works with have looser bunches than P9. This wine costs HUF 3,500 from Bortársaság.

Also from Szekszárd, the Heimann winery has done a lot of work with Kadarka clones and was been covered in detail in our first wine column of 2020.

Just a few percent of aromatic Kadarka is needed to spice up Bikavér (considered a must in Szekszárd, it is now increasingly also added to the blend in Eger), which is dominated by Kékfrankos.

Kékfrankos Showcase

The Kékfrankos wines on show at the Borjour event showed the broad range that this pan-Central European grape is capable of producing when used alone.

From Szekszárd, an absolute bargain at around HUF 1,500 from supermarkets is Lajvér Kékfrankos 2018, which was aged for six months in large barrels, and is fresh, fruity and nicely balanced on the medium-bodied palate with smooth tannins and impressive length for the price. It won a silver

medal at AWC Vienna, which means it is a very decent wine.

With its vibrant acidity and juicy red fruit (think strawberry and raspberry), Kékfrankos makes killer rosé and another Szekszárd producer, Bodri Pincészet, already had its 2020 on the table, and it does everything that Kékfrankos rosé promises. It’s currently 10% off at HUF 1,467 at borkereskedes.hu.

The same winery also makes the single-vineyard Gurovica Kékfrankos, a big brooding red that is earthy, spicy and really complex; the 2016 version costs HUF 9,000 a bottle from Bodribor.hu.

Kékfrankos can greatly benefit from a few years of bottle ageing as its initially often rough tannins eventually turn fine grained and caress, rather than scrape, the palate.

Incidentally, the 2017 version of Bodri Gurovica made 85th place in the 2020 edition of Winelover’s 100 legjobb Magyar Bor (100 best Hungarian wines)

Meanwhile, in a year that has seen its core business decimated by COVIDinduced cancellations and shut borders, Taste Hungary has received some welcome cheer by scooping the Drinks Business award for Best Contribution to Wine and Spirits Tourism.

The company, which was founded by Carolyn and Gábor Bánfalvi in 2008, drew praise for the way it has responded to the pandemic from the U.K. magazine that has been recognizing achievements by the world’s top drinks companies for 18 years.

“This year’s award goes to an organization that was praised for harnessing the power of social media to build a loyal community at a time when travel is tricky,” said Patrick Schmitt, editor-in-chief of Drinks Business.

The award ceremony was streamed online, instead of being conducted at its usual setting at the London Wine Fair, in yet another casualty of COVID-19.

The award recognizes Taste Hungary’s achievements, since the pandemic changed the concept of tourism in 2020. These include launching tastehungary.eu, an online wine shop which ships to addresses both in Hungary and across the EU; opening a new wine shop at Bródy Sándor utca 22 in District VIII; and holding dozens of free Facebook live Hungarian wine tastings.

It has also launched a private virtual wine tasting experience for customers in the EU and United States, through which they receive a Hungarian wine shipment and a sommelierled Zoom tasting, and is growing Taste Hungary’s Hungarian wine clubs in America and the EU. “The best thing this year has been the growth in our U.S. import business: sales have been very good and have kept the brand alive,” Gábor Bánfalvi, told the Budapest Business Journal.

“The U.S. sales are a new gateway to tap local demand [for wine tourism], while the new shop in Budapest is something that other tourism companies don’t have. We also believe these are the foundations for the restarted version of Taste Hungary 2.0, once the pandemic is over.”

Let 8 be your destiny

Experience the Audi Triple Eight: A8L, Q8 and R8 Future is an attitude

Audi A8L: Combined fuel consumption in l/100 km: 5,8–11,1; combined CO₂ emissions in g/km: 152–254.

Audi Q8: Combined fuel consumption in l/100 km: 8,2–10,3; combined CO₂ emissions in g/km: 214–235.

Audi R8: Combined fuel consumption in l/100 km: 13,1 l; combined CO₂ emissions in g/km: 297.

Information on fuel consumption and CO₂ emissions given in ranges depends on the tyres/wheels used.