Budapest Business Journal 2912 by Business Publishing Services Kft.

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BUSINESS JOURNAL BUDAPEST

VOL. 29. NUMBER 12

JUNE 18 – JULY 1, 2021

SPECIAL REPORT

Telecoms & ICT

SPECIAL REPORT

Hungary Eying big ROI From 5G Investments

From autonomous driving to automation in manufacturing and agriculture to the widespread use of AI in industry: all rely on the fast and stable internet coverage that is promised by 5G. 12

SPECIAL REPORT

Telecoms Take Center Stage in Digital Transformation The effect of the COVID-19 pandemic has given a shakeup to the digital economy. Local telecom services providers have played a pivotal role amid changing consumer habits, enabling businesses to accommodate the new normal. 14

Looking to Tower Above

SOCIALITE

Somló: a Tiny Volcanic gem of a Wine Region Wine columnist Robert Smyth says he never gets bored of visiting Somló, and there’s plenty going on here to keep enticing oenophiles back. It’s hard not to feel the magnetic pull of the hill’s basaltic rock, especially when you taste the wines made by a remarkable cast of characters. 19

NEWS

Industrial Production Jumps, as Does Inflation While industrial output showed a significant increase year-on-year in April, the month-on-month decrease surprised analysts and is also a warning sign that downside risks persist. 3

IAL S PEC

R E PO

Gergő Budai, the head of Vantage Towers Hungary, speaks with the Budapest Business Journal about the company’s demerger from Vodafone, its first six months of business, how 5G will affect it, sustainability, and plans for future growth. 11

BUSINESS

COVID-19 Challenges Need Flexible Solutions

The COVID-19 pandemic has changed how Hungarian companies operate and think about the future of work. The AmCham virtual Competitive Workforce Conference investigated the depth of the challenges leaders must solve. 7

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News THE EDITOR SAYS

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

Kester Eddy, Bence Gaál, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Gergely Sebestyén, Robert Smyth, Bálint Szőnyi, Zsófia Végh. LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

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BBJ-PARTNERS

Monday, June 14, was an important date for us, for it marked our first in-person event since the start of the pandemic. Our Expat CEO Boardroom series launch was intimate rather than large-scale, but that was exactly as we planned it. It was a chance to meet over a specially prepared breakfast with a dozen or so of our most significant partners from the BBJ Expat CEO of the Year awards and gala. The venue was the magnificently elegant surroundings of the Matild Palace, a Luxury Collection Hotel, before it had even opened to the public. The very act of entering a room containing other people, of shaking hands or bumping fists with partners we have only seen in their parallel universe Zoom form (other video meeting service providers are available) was truly something to savor. We wanted to tick off several items on our to-do list that morning, but none were more important than announcing the date of our 2021 Expat CEO gala. Originally due to be held in late January, it will now take place on Friday, September 24, in its usual venue, the Grand Ballroom of the Corinthia Hotel Budapest. We also brought our partners up to date with some of our recent news. Despite the challenging economic environment triggered by the fight against COVID-19, we have already launched two new titles this year (Top Legal Executives and Top Healthcare Executives), with a third under preparation (Top Real Estate Executives). All three are sister titles of the annual Top Expat CEOs in Hungary magazine, which will be published for the third time this year to coincide with the gala

in September. Collectively, they, the award, the gala, and the new Expat CEO Boardroom are part of the glue we provide that helps bind this business leaders’ community together. We also wanted to draw attention to a project we gave a soft launch to last year: Support the Budapest Business Journal. The idea of this is to provide our readers with a direct opportunity to support our journalism at three different levels, a form of crowdfunding if you like. It is a model that is being increasingly widely adopted by media outlets internationally, though we believe we are one of the first to have brought it to Hungary, If you are interested in knowing more, you can find plenty of information about the Support the Budapest Business Journal program on our website (bbj.hu or budapestbusinessjournal.com); simply look for the Support BBJ button on the top lefthand corner of the menu bar. Budapest was beginning to feel busier even before the Chain Bridge was closed on June 16 for 18 months for much-needed (and long overdue) renovations. Now the congestion is really going to start to kick in. But never mind that; Budapest is coming back to life, and so is the economy. I look forward to celebrating those facts, and possibly even some summer travel, with many of you at the Top Expat CEO Gala on September 24. Robin Marshall Editor-in-chief

Photo by Fortepan.hu / Bálint Magyar

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IN PRAISE OF MEETING IN PERSON

THEN & NOW

A cyclist passes over the uneven road surface of the iconic Széchenyi Lánchíd (Chain Bridge) before it was closed on June 16, 2021, for more than 18 months for large-scale restoration works. Road traffic is expected to restart in December 2022; pedestrians, however, will only be allowed back on the bridge once the renovation work is finished in August 2023. In the striking black and white image from the Fortepan public archive, renovation works take place on the Lánchíd in 1914 to update and strengthen the bridge’s cast-iron structure.

Photo by MTI / Márton Mónus

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Budapest Business Journal | June 18 – July 1, 2021

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News///macroscope

Industrial Production Jumps, as Does Inflation Producer Price Index

While industrial output showed a significant increase year-on-year in April, the monthon-month decrease surprised analysts and is also a warning sign that downside risks persist.

of Hungarian Construction Industry (2008-2020)

59.2%.

On a monthly basis, however, according to seasonally and working-day adjusted data, industrial output was 3.2% lower than in March 2021. All in all, the production volume slightly surpassed the pre-pandemic April 2019 level. In January-April 2021, compared to the same period of the previous year, industrial production increased by 13.8%. According to KSH, the volume of export sales (representing 65% of all sales) grew by 18.4%, and domestic sales (accounting for 35% of all sales) rose by 7.9%. In the regions, volume increases of between 5.7% and 22% were recorded, the highest growth being observed in Northern Hungary. Detailed data shows that all segments were catching up: the volume of industrial export was above the previous year’s level by 84%. Transport equipment exports, representing a 33% weight within export sales in manufacturing, went up more than fourfold, while exports of computer, electronic and optical products, accounting for a 14% weight, grew by 51%.

Sales Soar

Industrial domestic sales rose by 24.5%, while domestic sales in manufacturing were 27% higher compared to the same month of the previous year. Within industry, production increased by 63% in manufacturing

5.1% higher

on average in May 2021 than a year earlier. In one month, compared to April 2021, consumer prices increased by 0.5% on average. It was a positive surprise, as analysts expected a further acceleration in the consumer price index. However, they do not expect inflation to return to the 3% plus or minus 1% tolerance band set by the National Bank of Hungary (MNB) anytime soon.

ZSÓFIA CZIFRA

Benefiting from an extremely low base effect, Hungary’s unadjusted industrial output grew by an annual 58.8% in April, according to a second reading of data published by the Central Statistical Office (KSH) on June 14. Adjusted for workday effects, output was up

The KSH also published inflation figures for May. Consumer prices were

Source:

(representing the decisive weight of 96%), while it declined by 2% in the much smaller weighted mining and quarrying segment. The output of the energy industry (electricity, gas, steam, and air-conditioning supply) grew by 10.4%, primarily due to the colder weather compared with the previous year. Transport equipment, representing the greatest weight within manufacturing output at 27%, grew the most, nearly four and a half times year-on-year. The outstanding performance is primarily the result of the low base value caused by factory shutdowns in the April of the previous year. The production value of the manufacture of motor vehicles increased almost

times,

while that of the manufacture of parts and accessories for motor vehicles more than tripled. While the year-on-year growth was massive, the fact that industrial production fell back by 3.2% from the previous months was a negative surprise for analysts. “It seems that the ‘Ever Given’ accident in the Suez Canal in March showed its effects on supply chains and in factories in April. As industrial data in Germany were also disappointing, we can say that there are global tendencies behind Hungary’s weak performance,” ING Bank senior analyst Péter Virovácz said, commenting on the data. Virovácz expects stable but moderate growth in the coming months, but this could be modified if supply chains

break or if difficulties in purchasing raw materials intensify. As for the full year, he forecasts double-digit growth. Industry would have picked up again in May, following a month-on-month decrease in April, said Takarékbank analyst Gergely Suppan. According to him, the sector had already left the crisis behind last October. The extremely high purchasing managers’ indices in Germany in March and in the Euro area in May also validate the belief that Hungary’s industrial production will perform a notable month-on-month growth in the near future, he added.

Mixed Picture

April industrial data showed a mixed picture according to Gábor Regős, head of macroeconomics at Századvég Zrt. The significant year-on-year increase is mainly caused by the extremely low base effect; even so, its extent is still below expectations. “As for the decrease in month-onmonth production, it is still a question whether it was caused by the shortage of [micro]chips in the automotive industry, by the intensifying pandemic, or whether it was persistent,” he noted. However, he expects that industrial production will contribute positively to economic growth this year. K&H Bank head analyst Dávid Németh thinks that, similarly to the April data, May will also show a massive increase, still due to the low base effect. According to the analyst, the sector might close the year with a 10% annual expansion, as opposed to the 6% setback it suffered last year.

“It seems that the ‘Ever Given’ accident in the Suez Canal in March showed its effects on supply chains and in factories in April. As industrial data in Germany were also disappointing, we can say that there are global tendencies behind Hungary’s weak performance.” As for the remainder of the year, the inflation rate might stay above 4%, putting the annual CPI at around 4.4%, according to ING’s Virovácz. Gergely Suppan noted that core inflation jumped to 3.4% from 3.1%, which shows a forming inflationary pressure. All this might force the MNB to tighten monetary policy. This was reinforced by the central bank’s Governor György Matolcsy, who said that the MNB could raise its key interest rate in June at a recent conference. He emphasized that a prolonged rise in inflation could put the economic recovery at risk and said the economy could weather a rate rise.

Numbers to Watch in the Coming Weeks With no significant macroeconomic data expected in the next two weeks, all eyes are on the next rate-setting meeting of the Monetary Council on June 22. The base rate, which was lowered to 0.6% nearly a year ago, is expected to be lifted due to the mounting inflationary pressure.

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News

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Hungary Nears Herd Immunity, Starts Vaccine Diplomacy Hungary is “close to reaching community immunity” against the coronavirus, Gergely Gulyás, the head of the Prime Minister’s Office, said at a recent weekly press briefing, according to state news agency MTI. Gulyás noted “about 54%” of Hungary’s population has been inoculated against the coronavirus, but the rate including Hungarians who are immune after recovering from COVID is “certainly over 60%, and could be around 65-70%.” NICHOLAS PONGRATZ

In light of the advancing vaccination campaign and the burgeoning economic recovery in the wake of the coronavirus pandemic, Prime Minister Viktor Orbán outlined measures that could support the rebound, including a tax rebate for lower

Coronavirus ///roundup BioNTech COVID vaccine to the Czech Republic on June 4. Czech government spokesperson Jana Adamcová said the same volume of vaccine would be returned to Hungary when the Czech Republic has enough of its own. Finally, Hungary donated an additional 100,000 doses of the AstraZeneca COVID vaccine to Cape Verde on June 8.

Self-made

In addition to providing these vaccine exports, Hungary is also giving more thought to its own vaccine production capabilities. According to Szijjártó, talks have started on strategic cooperation between Minister of Foreign Affairs and Trade Péter Szijjártó (left) meets with Rui Hungary’s national vaccine center and Figueiredo, Minister of Foreign Affairs of the Republic of Cape Verde, in Praia, the Russian Direct Investment Fund the capital of Cape Verde, on June 8, 2021. Hungary is donating 100,000 (RDIF), which is in charge of vaccine doses of the AstraZeneca COVID vaccine to the Atlantic Ocean archipelago. production in Russia. Photo by MTI / Ministry of Foreign Affairs and Trade / Mátyás Borsos. Szijjártó said an agreement “in principle” had been reached on Russia allowing Hungary to produce its Sputnik income families, state-subsidized credit V COVID vaccine or other Russian With the mass vaccination phase now for SMEs, and a higher minimum wage, vaccines. passed and Hungary being so flushed at a conference organized by leading In the meantime, for those already with vaccines, it has started loaning or business daily Világgazdaság (Global vaccinated, the question of where their donating large quantities of vaccines to Economy). Orbán later stated that these immunity certificates will be accepted other countries. measures would be included in a national is at hand. Earlier, Gulyás said For instance, Hungary lent consultation to gauge people’s views on Hungary’s digital COVID immunity these proposals. certificate would comply with rules doses Since the vaccination campaign that apply to the European Union’s of the AstraZeneca COVID vaccine to has reached such an advanced stage, green certificate by June 15. In line Slovenia on June 2. Slovenian Minister Hungary has switched its mass COVID with EU rules, the digital version of of Health Janez Poklukar thanked vaccination rollout to “standby” mode, the immunity certificate will contain Hungary for the loan of the jabs and said the inoculation dates and the type of Orbán said in a weekly interview on Slovenia would like to return the same Kossuth Rádió. vaccination, he added. volume of vaccine to Hungary “by the “Maintaining the inoculation system Gulyás added that the EU rules come end of summer or autumn at the latest, we have at present, one that poses an into force from July 1. Meanwhile, as we get the chance.” extraordinary burden for doctors and Hungary’s immunity certificates have Additionally, Minister of Foreign hospitals, is not reasonable, which is why been accepted in over a dozen countries, Affairs and Trade Péter Szijjártó we’ll switch over from mass inoculation the latest additions to the list including loaned 41,000 doses of the Pfizer/ to standby inoculation,” he said. Albania, Cyprus, and Slovakia.

300,000

Top Legal

EXECUTIVES In Hungary

2021 The most influential legal executives in the Hungarian economy

The Top Legal Executives magazine is a special annual publication of the Budapest Business Journal. It forms part of our “Top” brand, and is a sister publication to Top Expat CEOs in Hungary. Like Top Expat CEOs, the magazine has a focus on people rather than policy. It presents the profiles of the most influential legal executives working in the Hungarian economy, focusing on outstanding achievements and how the Hungarian legal market is developing. Those profiles of Hungary’s top “legal eagles” are set against a review of how the Hungarian legal system operates, including the functioning of the Curia (the Supreme Court of Hungary) and the Constitutional Court, as well as the Budapest and national bar associations, among other things.

Why Should I Subscribe? • Provides an essential overview of how Hungary’s legal system operates. • Get an insight into the biggest cases of 2020, and likely legal developments in 2021. • Get to know the personalities behind the legal business. • Read personal accounts from the country’s top lawyers, detailing how they got into law in the first place and what prompted their choice of specialty.

Please forward your subscription request to: circulation@bbj.hu, or order your copy in the webshop at bbj.hu

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Budapest Business Journal | June 18 – July 1, 2021

Hungary’s Indotek Group Agrees Purchase of Belgrade Office Portfolio The regional developer and investor GTC has agreed a deal to sell its Belgrade office portfolio to the Hungarian investor Indotek Group. The proposed acquisition price is EUR 267.6 million. GARY J. MORRELL

The agreement will cover the sale of 11 buildings within five business parks located in the New Belgrade business district and totaling 122,000 sqm: Green Heart, FortyOne, Belgrade Business Center, 19 Avenue, and GTC House. Once completed in the third quarter of 2021, the sale will become one of the most significant real estate transactions in the last five years on the CEE market, according to GTC. “The sale of 11 premium class office buildings in Belgrade is a bold move which will allow us to complete our development cycle in Serbia and start a fundamentally different chapter on this market,” comments Yovav Carmi, president of the management board of GTC. “The sale of the Serbian portfolio could not be timelier as we are currently in the process of redefining market strategy and advancing our

The GTC FortyOne II building, part of the Belgrade office portfolio acquired by the Xxxxxxxxxxxxxx Hungarian-American Indotek Group. operations to be more sustainable and futureproof. This is a benchmark transaction in Belgrade demonstrating liquidity post-COVID,” he continues. “We will be selling some of our assets and relocating the free cash flow for the development of brand-new, ambitious projects in Serbia and other markets of CEE,” Carmi adds.

Pioneer

GTC was a pioneer developer in entering Belgrade, which is now seen as a major emerging CEE development market.

“GTC will become one of the first companies to complete the development circle in Serbia, from land acquisition and construction, through years of enjoying the high rent levels and free cash flow, to the exit on respectable terms,” the company notes. “This opportunity will help re-balance the company’s portfolio towards higherrated countries including Poland and Hungary while the buyer, a Hungarian investor, the Indotek Group, is happy to enter the Serbian market with such a strong portfolio,” adds GTC. Indotek Group sees the acquisition deal as a way of diversifying its portfolio, heavily weighted towards the Hungarian market. “Indotek Group has been present in its domestic market for almost 25 years. In the last decade, the company also started

News | 5

to expand outside of Hungary, resulting in Indotek Group being active in 10 countries today,” says Dániel Jellinek, founder and CEO of Indotek Group “We have been looking for the opportunity to enter the Serbian market for a long time, and with the current transaction, we are able to strengthen our position in the region significantly. I am particularly proud that our first transaction in Serbia makes us one of the most dominant participants in the Belgrade office market,” he adds. GTC has recently invested EUR 160 million acquiring the Ericsson Headquarters and the Siemens Evosoft Headquarters in Budapest. In addition, the developer is planning GTC X and Blaze in Belgrade. GTC says it has a development pipeline of 325,000 sqm of office and retail properties in CEE capital cities.

“This opportunity will help re-balance the company’s portfolio towards higherrated countries including Poland and Hungary, while the buyer, a Hungarian investor, the Indotek Group, is happy to enter the Serbian market with such a strong portfolio.” As with other Hungarian developerinvestors, the Hungarian-American Indotek Group is also increasingly active in the region, with a portfolio of 300 properties, including office buildings, shopping centers, hotels, industrial/ logistic, and residential properties. The group is seeking further investment opportunities in the Central, Eastern, and Southern European markets.

Top Healthcare Executives in Hungary 2021 A behind-the-scenes look at some of the most influential Healthcare Executives in Hungary, their leadership, philosophies and successes. Top Healtcare Executives in Hungary 2021 is a Budapest Business Journal publication Please forward your subscription request to: circulation@bbj.hu, or order your copy in the webshop at www.budapestbusinessjournal.com

• Provides an essential overview of how Hungary’s healthcare market operates. • Get an insight into the most significant developments in 2020, and a look at what is in store for 2021. • Get to know the key personalities in the Hungarian healthcare sector. • Read personal accounts from the country’s top healthcare executives detailing how they got into the business and some of their proudest achievements, among other things.

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WHO’S NEWS

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HBLF Elects new President Andrea Istenesné Solti, chair of the board of directors of Shell Hungary, has been elected as the new president of the Hungarian Business Leaders Forum. In 2020, Istenesné Solti was named Hungary’s fourth “Most Influential Female Business Leader” by Forbes. She has been a member of the HBLF Women’s Forum for 13 years and has been a committed supporter of the Diversity Charter initiative and the HBLF Romaster program.

Andrea Istenesné Solti Outgoing President Borbála Czakó will continue to support the activities of the HBLF as honorary president. She has been a member of the HBLF Board since almost the beginning and president since 2003. The organization was set up after the change of regime at the initiative of Prince Charles of Wales. Its primary goal was to promote

widespread acceptance of corporate social responsibility, building on the work of its members. “I aim to drive value-added programs that provide effective responses to current social issues. The HBLF Romaster and Xmentor programs are important initiatives. Thought leadership and dialogue on economic and sustainability issues as important enablers. I would like to approach this with the mindset of ‘we are stronger together,’ actively involving our member companies, and partner with organizations who share our vision. HBLF’s social standing and recognition are very strong, our programs are attractive, and I am pleased to see our membership growing. These provide an excellent foundation on which to build,” the new HBLF president said. Zsolt Jamniczky, chairman, and Ákos Janza, board member, will continue their work in the organization’s leadership. The HBLF also elected a new treasurer in Beáta Juvancz. Teodóra Bodó is in charge of the communication activities, and András Bácsfalvi has been appointed head of the ethics working group. HBLF’s HR workshop is headed by Ibolya Gothárdi. The board has also been enlarged with three new members, Judit Zolnay, András Furák, and Zsuzsa Gárdus. HBLF’s online general assembly unanimously elected Czakó honorary president, thanking her for decades of meaningful work. “As president of the HBLF, I have always been committed to promoting a set of values whose pillars should serve as a benchmark for Hungarian business leaders in the areas of humanity, social responsibility, sustainability, and all the areas where we can make a positive difference to individuals, society and our environment,” she said. “To quote Kennedy: ‘Ask not what your country can do for you, ask what you can do for your country.’ Today’s business leader must be open-minded, socially

John William Waterhouse: The Lady of Shalott, 1888 © Tate

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sensitive, and achieve business success without compromising values,” Czakó said.

Deloitte Hungary Announces Head Balázs Bíró became the new head of Deloitte Hungary on June 1, according to a press release sent to the Budapest Business Journal.

Balázs Bíró Bíró started his career at the company in 2003, became a partner in 2015, has been head of the Hungarian financial advisory business since 2017, and the leader of the Central European financial advisory operation since 2018. He has managed several M&A and corporate capital transactions, strategic advisory, and corporate restructuring projects, mainly in the banking sector in Hungary and Central Europe. Under his leadership, Deloitte has been awarded “Financial Advisor of the Year” in Central and Eastern Europe every year by Mergermarket. According to Bíró, the focus for Deloitte Hungary in the near future is to continue the strategy it has been pursued so far, one of the main elements of which is to grow organically but also to strengthen the company through further acquisitions. A particular focus will be on data asset services, as well as technology and digital consulting. “Deloitte is the world’s largest business services and advisory firm, so our number one goal is to clearly become the country’s leading auditor and advisor in all the areas we work in (be it tax and legal advisory, financial advisory, management consulting, risk management advisory or even IT advisory),” Bíró said. “From a business perspective, a key objective is to further build on the existing close cooperation with the countries in the region, and it is

important to implement cross-border business and industry cooperation. Our goal is to make Deloitte the clear choice not only for our clients in Hungary but also for junior and senior colleagues when starting or changing careers,” he added.

Duncan Graham Re-elected BCCH President The British Chamber of Commerce in Hungary (BCCH) re-elected Duncan Graham as chairman at its 30th annual general meeting. Graham, who has been president of the BCCH since June 2019, is managing director of G&G Wealth Limited, a financial and investment advisory firm he founded in 2012. Before that, he worked as a senior adviser at Newton Barr Financial Advisory and Alliance in the United Kingdom. Graham is also the chairman of St Andrew’s Association in Hungary, which promotes Scottish culture, and is also involved in charitable work, primarily helping disadvantaged and sick children. The re-elected BCCH chairman said, “Thank you to our members for persevering through the difficult times behind us, and with the improvement of the epidemic situation, we can look forward not only to new council members but also to new strength and new momentum in the tasks ahead.” Graham said that the BCCH had closed last year with a positive result despite the epidemic and that the additional resources available would allow the chamber to invest in its activities.

Duncan Graham Other elected members of the BCCH council are Douglas Arnott, EDMF Language Services; Michael Glover, Taxually; Kinga Málnási, FirstMed; András Módos, EY; Kinga Kalocsai, PAV Hungary; Károly Oelberg, AACM Central Europe Ltd.; and Tamás Simonyi, KPMG.

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Business

Key Priorities

Looking forward, the HIPA CEO outlined some key goals. The number one priority is the focus on relaunching the economy instead of protecting jobs. Further priorities are to move away from safeguarding liquidity to enhancing productivity and continuing to be competitive in reallocating of corporate capacities. “These are the guiding priorities from an economic development perspective,” the HIPA CEO added. As resiliency has emerged as a critical notion over the last year in business planning, its importance has been amplified by the environment. “The COVID-19 pandemic was a wake-up call for all of us. [...] We cannot afford to be inflexible, to think only in the short or middle term. […] To me, resiliency is the power of foresight, flexibility, preparedness, and efficiency, translated to all parts of the business, from leadership and operations to finance and organization,” AmCham President Szabó said.

COVID-19 Challenges Demand Flexible, Resilient Solutions

The COVID-19 pandemic has changed how Hungarian companies operate and think about the future of work. The American Chamber of Commerce in Hungary’s (AmCham) virtual Competitive Workforce Conference: Recovery Playbook for Resilient Organizations looked at the depth of the challenges leaders must solve. CHRISTIAN KESZTHELYI

“The competitiveness of our workforce has always been high on AmCham’s agenda, it is one of the most important criteria for all potential and existing investors,” Írisz Lippai-Nagy, chief executive officer of AmCham, said at the event on June 1. “But the disruption caused by COVID-19 changed our way of working, accelerated existing trends such as remote work, reskilling, automation, digital transformation and put issues such as work optimization, remote management, adaptability and resilience to the forefront,” she added. In its long history, AmCham Hungary has always been focused on providing a forum for knowledge and best practice sharing, allowing members to work together and come up with solutions on issues of common interest. In conjunction with the Hungarian Investment Promotion Agency (HIPA), regular forums such as the Business Meets Government Summit and the Competitive Education Conference series have

From left: Írisz Lippai-Nagy, CEO of AmCham; Róbert Ésik, CEO of HIPA; and Zoltán Szabó, president of AmCham. Photo by Lázár Todoroff been established around the most pressing challenges businesses face. “In the last 14-15 months we have faced an unprecedented challenge, and from the onset, AmCham has worked with the members to facilitate the exchange of information and best practices, and we also proposed countless recommendations to the government regarding the labor law, flexible working, kurzarbeit program, R&D subsidies, training and more to help businesses endure. And we endured,” AmCham president Zoltán Szabó said. According to Szabó, the pandemic created an extraordinary environment that will catalyze reinvented structures, protocols, processes, and for the way people work. “It is an opportunity to think and lead differently, to use our innate ability to change and move away from prescribed approaches and standardized solutions. We at AmCham want to provide a forum for these ideas and collaboration and support efforts to reignite the economy and the business community,” he added.

Last Hybrid Event?

Róbert Ésik, chief executive officer of HIPA, noted his hope that this AmCham conference would be the last hybrid event before people can, once again, start meeting each other face to face. “Where do we stand, and what are our priorities before we start opening our economy again?” he asked. “First of all, the pandemic has been a challenge both from a healthcare and

an economic point of view. I would like to highlight that, at the moment, based on recent data, 53% of the Hungarian population is vaccinated, versus the European average

37%.

This is relevant from an economic perspective as the vaccination rate enables us to open up the economy,” Ésik said. The HIPA CEO referred to the government’s economic action plan, which amounts to 18-20% of Hungary’s gross domestic product. It relies on four main pillars: protecting existing jobs, supporting company investments, introducing sector-specific measures to aid the hardest hit verticals, and ensuring liquidity to companies by providing loans and additional guarantees. Where do we stand now? “We have 4.5 million people at work and paying taxes. It is the same amount as pre-COVID. Just yesterday [May 31], the OECD [Organization for Economic Cooperation and Development] increased its GDP forecast for Hungary from 2.6% in December to 4.6%, which shows that all the actors are now expecting the Hungarian GDP to perform between 4-6% until the end of 2021,” Ésik said. He added that the investment rate in the Hungarian economy in the first quarter of 2021 amounted to +27%, which puts Hungary on the leaderboard of the European Union.

“In 2020, FDI was shrinking by 42% globally. In this context, in Hungary we had our third most successful year: We accumulated investments of more than EUR 4 billion. In terms of corporate decisions, companies start to take into account the stability of supply chains more.” Has the pandemic changed the approach to foreign direct investment? Do investors think differently with resilience in mind in terms of FDI? “In 2020, FDI was shrinking by 42% globally. In this context, in Hungary we had our third most successful year: We accumulated investments of

more than

EUR 4 billion.

In terms of corporate decisions, companies start to take into account the stability of supply chains more,” HIPA’s Ésik said. Today, proximity to customers and suppliers are factors that beat cheaper sourcing from the Far East. This attitude is opening up opportunities in Central Eastern Europe, the HIPA CEO added. “From the workforce perspective, companies are not willing to make a compromise on the quality of the labor pool. Companies are looking forward to extending the addressable labor pool as a result of the pandemic, as remote working has become more of a standard. They see this as an opportunity for hiring individuals not just locally, but potentially from a wider geographical area,” Ésik concluded.

8|2

Business

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Budapest Business Journal | June 18 – July 1, 2021

Is Current Inflation Temporary? Today’s Most Consequential Economic Debate In his latest corporate finance column, Les Nemethy examines the use of the word “temporary” by U.S. Government officials, market reaction to the June 10 inflation announcement, and the risks going forward. On March 4, 2021, Fed Chair Jerome Powell announced “inflation will pick up in the coming months, but it would likely prove temporary and not enough for the Fed to alter its record-low interest rate policies.” Sure enough, on June 10, the U.S. Department of Labor announced that Consumer Price Inflation (CPI) had reached 5% in May, the highest rate since 2008, as noted by the Wall Street Journal. However, the U.S. Fed maintains that this inflation spike is “temporary” in nature. Milton Friedman, the storied American economist and proponent of the Chicago School of Economics, once said, “Nothing is so permanent as a temporary government program.” His cynicism is not without foundation. Here are just two of the most blatant and consequential misuses of the word “temporary.” • On August 15, 1971, Nixon announced the “temporary suspension” of gold convertibility, ending the Bretton Woods agreement. To this day, gold convertibility remains suspended. By any definition, that is a rather long “temporary.” • To combat the Great Financial Crisis of 2008, the U.S. Fed announced a quantitative easing program, known

Real 10 year U.S. Treasury Yields 10 8 6 4 2 0 -2 -4 -6

from 1952 to 2021

1952

1962

1972

1982

1992

2002

2012 Source: GFD, Deutsche Bank

The Corporate Finance Column • We are experiencing bottlenecks in many areas, from computer chips to shipping containers, resulting in price pressures. • The world breaking down into separate U.S., Chinese, and perhaps European supply chains diminish efficiency and contribute to inflation. • The goal to become carbon neutral has strained mineral resources, causing dramatic spikes in commodities, from copper to nickel. According to The Economist, the top five minerals used in green vehicle production have enjoyed a 139% price surge over the past year, despite

less than

10%

of the required investments having been made to date. • Savings are at a historic high, with many economists predicting a postpandemic purchasing binge, increasing the velocity of money. Moment of Truth However, it is the combination of massive In other words, there could come a monetary and fiscal stimulus that is the moment of truth or an inflection point factor most likely to tip the scale in favor of mark; when markets suddenly react to the past inflation. In 2020 and H1 2021, the money the amount has doubled since January accumulation of data. This could make supply has increased by more than 30% and 2020, according to figures on the market reactions all the more sudden and U.S. Federal spending by some 50%, with federalreserve.gov website in the extreme, damaging to everything from trillions in additional stimulus spending monetary policy section. bond and equity valuations to mortgage likely to come this year (infrastructure, It seems that the markets, for the time rates housing starts. social welfare expansion, etc.) being, are taking Chairman Powell’s Meanwhile, the debate among As former U.S. Secretary of the comments at face value; in other words, economists about whether today’s Treasury Larry Summers recently said on they seem to believe that inflation will inflation is temporary rages on. Influential a coindesk.com video: “We’re taking very subside. In support of this thesis, here economists, such as David Rosenberg, substantial risks on the inflation side. are two economic indicators. argue very persuasively that deflation The sense of [...] complacency being After the June 10 announcement, is a much bigger risk than inflation. projected by the economic policymakers 10-year treasuries notched lower by Nevertheless, as I have stated in an that this is all something that can easily more than 10 basis points, to 1.43%; not earlier column, “What’s in our Future, be managed is misplaced.” the behavior of a market expecting a rise Inflation or Deflation?” (December 11, in inflation. Secondly, the price of gold 2020 issue of the Budapest Business has moved down by more than 2%. Gold Journal), I believe, on balance, that Les Nemethy is CEO of Euro-Phoenix prices typically go up when inflation inflation is the larger risk. There are a Financial Advisers Ltd. expectations arise, especially when real number of powerful structural changes (www.europhoenix.com), a Central yields are negative, and the real yield is occurring in the world economy. European corporate finance firm. now lower than it has been in a long time. • China is no longer the pool of He is a former World Banker, author To my mind, the only plausible almost infinite cheap labor. It is facing of Business Exit Planning explanation for why Treasury yields a demographic implosion of its (www.businessexitplanningbook.com) and gold prices have declined is that own. (Some of my Central European and a past president of the American markets believe that the inflation spike clients tell me that their labor costs Chamber of Commerce in Hungary. announced on June 10 is temporary. are less than those in China.) as QE1, in November 2008 as a temporary measure. Since then, there has been a QE2 and a QE3; we now seem to be in a “QE permanent” mode, with the Fed constantly adding USD 80 billion-120 bln per month to its balance sheet. It just recently surpassed the

The announcement of a new statistic or an article by an influential economist could change market sentiment suddenly, and everything from Treasury yields to the price of gold could swing very rapidly.

USD 8 trillion

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Company ///news Agrosprint Spending HUF 14.5 bln to Boost Capacity Frozen vegetable company Agrosprint will spend HUF 14.5 billion to boost its annual capacity to 25,000 tonnes, Minister of Foreign Affairs and Trade Péter Szijjártó said on June 10, according to origo.hu. The government is supporting the investment, which will create 110 jobs at Agrosprint’s bases in Karcag (165 km east of Budapest) and Nyírlugos (265 km east), with a HUF 6 bln grant, Szijjártó said. Agrosprint’s frozen veg capacity will become the largest in Hungary, and its frozen sweet corn capacity will become the biggest in Europe, he added.

Alteo Building 5 MW Energy Storage Facility According to an announcement on the website of the Budapest Stock Exchange, listed alternative energy company Alteo said on June 14 that it would build a 5 MW energy storage facility at the Kazincbarcika Heating Power Plant (180 km northeast of Budapest).

The company said it had been granted a HUF 228 million EU grant and a HUF 250 mln reimbursable loan for the project. The facility differs from current standard market solutions because, in addition to high-performance batteries optimized for energy storage, batteries manufactured for electric cars will also be built into its system, the company said. The research will focus on the development of standardized energy management of batteries with various parameters. Results could open the way for further use of batteries that cannot perform adequately in other areas but still possess the relevant capacity. They can contribute to turning the re-use of electric car batteries in electricity storage systems into a more developed process. Alteo Group established its first 6 MW energy storage facility in Budapest in 2018.

Duna Auto Consortium Launches Aftermarket Electric Motor Project Duna Auto is leading a consortium in a HUF 1.5 billion project to develop an electric motor that can be used

to upgrade vehicles with internal combustion engines into hybrids, the car dealer told state news agency MTI. The firm is partnering with Budapest’s Óbuda University and Trigon Electronica on the project, which is supported by a HUF 975 million grant from the National Research, Development, and Innovation Office (NKFI). The motor is expected to reduce fuel consumption by 5-10%.

Scope Rates Waberer’s ‘B+’ for HUF 60 bln BGS Bond Listed Hungarian hauler Waberer’s said on June 10 it was assigned a “B+” rating by Scope Ratings for a planned HUF 60 billion issue under the Bond Funding for Growth Scheme (BGS) of the National Bank of Hungary (MNB), according to an announcement on the website of the Budapest Stock Exchange. The “B+” rating is the bottom threshold for participation in the BGS. In its rating rationale, Scope said Waberer’s plans to issue the HUF 60 bln bond with a term of 10 or 15 years, with amortization starting in the fifth year and a 50% bullet repayment at maturity. “Proceeds are earmarked for the acquisition of trucks, for infrastructure-related investments at the core logistics segments, potential M&A, and the refinancing of debt,” it added.

Business | 9

Beer Industry Performance Fell 12.7% in 2020 The performance of the beer industry fell by 12.7% to HUF 100.3 billion during 2020 because of the coronavirus pandemic, while the food industry’s performance overall managed to edge up by 1%, the Central Statistical Office (KSH) said on June 14. As a result of restrictions in the spring and again in the late fall months, catering establishments closed or received only a limited number of guests, and cultural and sports events, festivals, city and village fairs were mostly canceled, restricting demand. Domestic sales, which account for around 94-96% of annual revenue in the sector, dropped by 13.5%. The price of beer has been rising since 2017, but the rate slowed last year, also because of the pandemic. Beer prices in 2020 were on average 25% higher than in 2010. Image by m3ron / Shutterstock.com

ROSÉ AND SPARKLING PARK www.rosalia.hu July 2-4

Rosé is the most beautiful color!

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Budapest Business Journal | June 18 – July 1, 2021

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Telecoms & ICT

The COVID-19 pandemic moved the telecoms and ICT sector firmly into the spotlight. Their solutions kept business connected while staff worked from home, even as their engineers had to remain in the field. What comes next?

Hungary Eying big ROI From 5G Network Investments

12

Rising to the Infrastructure Challenge

13

Market Talk: Telecoms Take Center Stage in Digital Transformation Boosted by COVID-19

14

Digi Moves Forward with Mobile and Fixed-line

16

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Budapest Business Journal | June 18 – July 1, 2021

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Special Report | 11

Vantage Towers Taking Advantage of Network The Budapest Business Journal spoke with Gergő Budai, the head of Vantage Towers Hungary, about its demerger from Vodafone, its first six months of business, and its plans for the future. ROBIN MARSHALL

BBJ: Let’s start with a recap. Why was Vantage Towers founded? Gergő Budai: Vodafone Group outsourced its passive base station elements, including towers, building-mounted stations, and distributed antenna systems, to a standalone corporate group last year to make more efficient use of the equipment. Vantage Towers Group covers 10 countries with about 82,000 base stations across Europe. Vodafone Hungary also joined this group initiative: Vantage Towers was established in Hungary on November 1, 2020. Vantage Towers Hungary has taken over the ownership and operation of the network and is responsible for building, installing, and operating new towers, stations, and antennas. These elements have been made available to others in the telecommunications industry as well as players from different sectors so that not only Vodafone can utilize this passive network infrastructure. The availability of high-quality, secure network infrastructure enables the rapid development of customer-focused digital services, with particular regard to 5G technology and its roll-out in business and retail services, all of which combined contribute to the digital development of Hungary and Europe. Simply put, it is much more cost-effective for mobile operators and other market players to share an antenna structure or a distributed antenna system than each building their own. It is better in other ways too; for example, for the city landscape. BBJ: How many employees and towers does Vantage Towers Hungary have, and how does this compare to your competitors? GB: We currently have more than 2,000 base stations, approximately 800 towers, 1,200 building-mounted stations, and about 100 indoor unit systems (i.e., distributed antenna systems). Vantage Towers is the second largest tower company in the country. The number of base stations is increasing all the time; since the company’s launch in November, we have deployed about 30

Gergő Budai (second left) with collegues on a tower site visit. completely new base stations, and there is continuous growth in the number of tenants (third-party partners) on each site. Apart from third-party contractors, we currently employ 33 people, but we are expanding. However, it is important that our organization doesn’t grow too big and remains flexible, efficient, and agile. BBJ: How were the last six months since establishment? GB: It’s definitely been a very busy couple of months. Vantage Towers Group (of which Vantage Towers Hungary is a member) debuted on the DAX Frankfurt stock exchange this spring, indicating our independence from Vodafone. We are proud to join the SDAX index as of 21 June – so quite shortly after our IPO. I am proud to say that Vantage Towers started its Hungarian operations with a successful first six months. Cooperation Agreements have been signed with several major players in the ICT market, including Antenna Hungária and Delta Systems. We cooperate with Antenna Hungária to improve the network coverage of Hungary with the efficient use of base stations, while our partnership with Delta Systems is important because of the development of 5G, internet of things, Industry 4.0, and smart building solutions. It is a great pleasure for us that these partnerships can benefit both industry and society. BBJ: How did your colleagues and clients react to the change? GB: We have been through an eventful period, both at the company level and personally, too. I get to manage a newly formed company in an up-andcoming industry. Telecommunications infrastructure is currently being outsourced to tower companies in our country and also in other European

states. As a result, I expect that an innovative and very competitive market will be created, and I am proud to be a part of it, as we are now shaping it. I will, of course, try to maintain good relations with current and former clients as well as former Vodafone colleagues and those from other industry players; after all, we are now working in a specialized area, separated from Vodafone. One of the main reasons behind the demerger was to strengthen synergies by cooperating and using our base stations and antennas with as many industry players as possible. That can even enable players from other industries to utilize them, for example, to build private networks, to achieve better indoor coverage, for meteorological measurements, for various atmospheric tests, for drone charging or installation; the list goes on. BBJ: How will the introduction of 5G affect your business? GB: Developing 5G networks and ensuring adequate coverage will require constructing many new small cell microsites. These are mainly distributed antenna systems providing indoor coverage and lamp post-mounted small cell antennas. The shared use in these cases is even more reasonable, so that tower companies will have a crucial role in this area. With 5G, the outsourcing of base stations is particularly beneficial because the new generation mobile network requires a different approach to the previous operating models. With earlier generations, service providers bought the frequency, set up a network, turned it on, customers bought a SIM card, turned on their phones, and the service worked. This will be different with 5G because we are talking not only about telecommunications but also about infocommunications, which requires strong partnership and cooperation.

BBJ: What are your plans for the future? GB: We have been working from the outset to make the necessary infrastructure available in a sustainable manner for the digital transformation of Europe and Hungary. To achieve this goal as soon as possible, we are constantly trying to develop our infrastructure. Our plans include the construction and deployment of additional base stations and establishing partnerships with further key players in the ICT market and other industries so that as many people can use our infrastructure as possible. Additionally, we will continue strengthening indoor network coverage, its installation and development, focusing, for example, on office buildings, industrial buildings, underground car parks, and event halls. BBJ: What about the company’s carbon footprint? How can this be improved? GB: Operating towers consumes a lot of energy. Therefore, 100% of our base stations and sites in Hungary have been running on electricity purchased from renewable energy sources since last November. In several of our stations, we test local alternative power generation solutions, which in most cases means installing solar systems. We aim to increase the efficiency of our energy use by 15% by 2023. Furthermore, by 2025, we want to reuse, resell or recycle 100% of network equipment that will have become redundant. To give a specific example, we currently have several base stations that are no longer powered by a diesel generator but by solar panels in the event of a power outage. The aim is to make solar panels the primary source of energy for these stations, and only in the event of persistent bad weather should mains power be used.

12 | 3

Special Report

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Budapest Business Journal | June 18 – July 1, 2021

Hungary Eying big ROI From 5G Network Investments From autonomous driving to automation in manufacturing or agriculture to the widespread use of AI in industry: all rely on the fast and stable internet coverage that is promised by 5G. ZSÓFIA VÉGH

The 5G mobile network is currently being rolled out across the country. As you would expect, technically, it surpasses the existing 4G network and offers a leap forward in terms of speed and a significant reduction in response time. Overall, this allows many more devices to work together within the new industry standard. With home office and even homeschooling likely here to stay (at least in part), a fast and stable internet connection and indoor coverage have become more crucial to people than before. Restrictions during the coronavirus pandemic played a significant role in the fact that the implementation of the technology has slowed down somewhat. All three major providers are involved in

network

development in Hungary. The most advanced data transmission technology is now available in Budapest and several large cities, including Debrecen, Kecskemét, Szeged, and certain parts of Szombathely as well as at and in the vicinity of the ZalaZone automotive test track in Zalaegerszeg. Magyar Telekom (MTel) was the first Hungarian service provider to launch its 5G service and is also the first in Hungary to use Ericsson Spektrum Sharing technology in its live network. Thanks to this, it can offer significant capacity expansion to customers using the 4G network in the affected locations, in addition to 5G coverage. (Multiple devices can connect without degrading service quality). As the data traffic is huge during the peak summer holiday period, MTel has also been deploying 5G networks around Lake Balaton.

Outdoor Service

Although MTel introduced the first operating 5G station, it was Vodafone that was the first to launch an outdoor service in late 2019 in some parts of downtown Budapest. By March 2021, the service provider’s 5G network

One of the big beneficiaries of the developing 5G network is expected to be smart agriculture. Photo by Budimir Jevtic / Shutterstock.com covered almost the whole of Budapest and several county seats. Telenor obtained the frequency required for the commissioning of 5G at the 2020 NMHH frequency auction, and in 2021 it also successfully bid in several frequency ranges at another frequency auction. As a result, the company says that hundreds of 5G stations will be available countrywide by the end of this year. The implementation of 5G is crucial as it can be used to create much more efficient, faster, and more secure processes. Several projects have been launched in Hungary to test the potential of the system. Following a six-month test period which ended this month, the country’s first industrial 5G private network will continue to operate live at Taiwanese multinational electronics contract manufacturer Foxconn’s factory in Komárom (93 km northwest of Budapest by road). Solutions specifically tailored to the company’s needs and the construction of the 5G infrastructure were implemented with the help of Ericsson and Vodafone Hungary. The private LTE and 5G market grew

30%

last year, according to information by Ericsson. This trend is expected to continue in the future, with ever more market players choosing to deploy private 5G networks. By 2030, the number of wireless modules in factories could reach 4.7

billion, and this connectivity will usher in a new era in manufacturing, the Swedish-based multinational networking and telecommunications company says.

Research Potential

Researchers at the Budapest University of Technology and Economics (BME) are exploring the potential of 5G in partnership with Ericsson and Magyar Telekom on a purpose-built network the partners set up on campus at the end of last year. This will operate both indoors and outdoors in the BME I building, as well as in the research laboratory of Ericsson’s R&D center.

Huge benefits and returns are also expected in the field of smart industry, where an investment of HUF 154.1 bln could result in a return of HUF 416.5 bln, and in smart cities, where analysts predict HUF 91.4 bln in added value. It means that research engineers can try applications, use cases, and features that are not yet available on a live network. Testing of software under development can thus be started at an early stage, which significantly speeds up the market entry of an application.

According to a recent study commissioned by Ericsson, one of the most important players in the field of 5G technology developments, this technology could make a net contribution of

EUR 2.3 billion to the

Hungarian economy in the coming years, significantly supporting reconstruction after the coronavirus crisis. The analysis identified four main areas where the use of 5G will bring about significant benefits. One field that will most likely benefit enormously from the introduction of 5G in Hungary is agriculture. Here, an added value of HUF 585.4 billion could be realized from an investment of about HUF 109.1 bln with a return of more than five times, the Ericsson survey finds. This will come primarily from precision agriculture through gridconnected drones and sensors and from the proliferation of fixed wireless internet access (FWA); 5G can also be used to build broadband internet access in more remote rural areas in a cost- and energy-efficient way, the study says. Huge benefits and returns are also expected in the field of smart industry, where an investment of HUF 154.1 bln could result in a return of HUF 416.5 bln, and in smart cities, where analysts predict HUF 91.4 bln in added value. The latter will come from, among other things, smart mobility solutions with networked vehicles or smart stadiums equipped with 5G networks and virtual or augmented reality.

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Rising to the Infrastructure Challenge

Invitech may not be into bitcoin mining, but its data centers do require a lot of resources.

Power Efficiency

“ESG is becoming more important for the whole world, but especially for data centers because of the big power consumption,” Kis points out. “We have a lot of servers; they require a lot of cooling and uninterrupted power supply; we are always looking for the best power efficiency,” he says. “This is a metric that demands lots of attention; we need the lowest possible amount of wasted power. We believe we have one of the best power efficiency utilization rates for data centers in Hungary.” Another focus area is fiber optics, where Kis says the expansion is “significant” and where Invitech with its 10,450 km fiber-optic network “has a special focus on connecting buildings, mobile towers and upgrading the backbone infrastructure.”

The frontline heroes of the coronavirus crisis, first and foremost the healthcare workers, have worked wonders in the past 15 months or so. While they have safeguarded our health, others, such as IT professionals, have kept our economy on life support and seen their status enhanced.

“It was a difficult time, and also a brave time. We, not just my team but the whole industry, understood how important it was that we provide that connectivity for business and society so that life could move ahead.”

ROBIN MARSHALL

“The very first impact on us was that we had many customers asking for new connectivity and IT solution upgrades overnight,” recalls Invitech COO for Infrastructure and Carrier Services Albert Kis. “The technicians and engineers were in a different situation from most people during the lockdown, supporting those who were self-isolating. My teams were not doing less but much more work and could not stay at home,” says the man who heads Invitech’s Infrastructure Business Unit (IBU). “It was a difficult time, and also a brave time. We, not just my team but the whole industry, understood how important it was that we provide that connectivity for business and society so that life could move ahead.” Kis talks about his colleagues’ “determination and pride” out in the field and the public response to that. “We did not know if it would last one month or one year. Certainly, I did not think we would still be dealing with it now,” Kis says. “I think our people felt a responsibility. The feedback we have from our customers is that they are really happy with how we processed their needs and helped them in this critical period. We are proud; this was the industry’s contribution to overcoming the pandemic.” Kis, who describes himself as a telecom engineer by profession, has headed Invitech’s IBU since its creation in 2019, though he had

Special Report | 13

Albert Kis part of the business, engineering teams and the like; a smaller part is involved with domestic wholesale, and just a handful in international wholesale.” Kis says business is encouraging across the board, but there is sizable growth in data centers, a trend that started 10 years ago. “We are operating altogether 4,000 sqm of data center facilities, including a pretty big data center area capable of holding 10,000 servers that we handed Responsibilities over in one of our facilities just two The IBU is in charge of the development, months ago. There is a lot of demand management and operations of all coming in that area.” communications infrastructure. It is The COO says Invitech has a Tier also responsible for the wholesale 3 rating from the globally accepted relationship, selling services to other certifying body Uptime Institute, which telecom service providers domestically he describes as “the highest level and and internationally. unique in the region.” While the former role is essentially An important consideration here is a technical operation, the wholesale the growth of environmental, social, business is more commercial. “It is hard and government (ESG) criteria. Elon to make direct comparisons because one Musk recently sparked a minor run generates money and the other spends it,” on Bitcoin when he said his business Kis says with a laugh. would no longer use it because of the “From a people perspective, the high power load required for “mining” majority are in the infrastructure the digital currency. been performing similar duties under a different structure since he rejoined the company in 2017. He has more than 20 years of technical, operational and business development leadership experience and acquired international business unit expertise most recently in a similar position with Türk Telekom International from 20102016. From 1998-2010 he worked for Invitech’s predecessors in Hungary, Novacom, Pantel and then Invitel.

Does his role require an element of being a futurologist? Kis says not. A fiber-optic network, for example, will take a couple of years to build and has an asset life of at least 20-30 years, he says. “With digital transformation, broadband requirements, 5G, machineto-machine communication, it is a very clear direction that means the density of the fiber network will need to be increased. We do not have to be too clever here,” he laughs. “We believe that with the fiber network, there is demand today, and there will be demand in the future. We only need to find the right priorities and the best possible way to deploy greater density.” The switch to home office work required a sudden leap in bandwidth, something Invitech and other players proved they could handle. Is there a concern that the return to the office will now create an oversupply, or a diminution of the sector’s importance? “I guess that companies have realized how important telecom and IT is to their business, as many survived only because of these services. What has changed significantly is the range of services we use, such as video conferencing,” Kis suggests. “I believe these habits will not disappear; users are much greater believers in this technology than before. They no longer question whether it is a proper solution, and they will continue to use them, even in the office. And the digitization of the whole economy will also drive demand and use.”

14 | 3

Special Report

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Budapest Business Journal | June 18 – July 1, 2021

Market Talk: Telecoms Take Center Stage in Digital Transformation Boosted by COVID-19 The effect of the COVID-19 pandemic has given a longneeded shakeup to the digital economy. Local telecommunications services providers have played a pivotal role amid changing consumer habits, enabling businesses to accommodate the new normal. The three market leaders discuss industry sentiment with the Budapest Business Journal. CHRISTIAN KESZTHELYI

The Hungarian telecoms market has three big players. Telenor and Vodafone have a roughly equal distribution of customers versus Magyar Telekom, the market leader in terms of subscriber numbers, and also one of Hungary’s four blue chip companies on the Budapest Stock Exchange. These three players had been granted spectrum for fifth-generation (5G) connectivity, which will be crucial in the coming years for businesses, even if everyday users may not experience much of a difference when switching from 4G. The pandemic changed five main pillars for customers, in all of which telecoms played an important role, especially in ensuring that businesses could connect with customers in an arena that needed new solutions. “First, it changed digital adoption in general: people started using more digital platforms to satisfy their needs. Second, it changed mobility. People would commute less and stay at home more,” Christoph Häuser, director of the consumer marketing department at Telenor Hungary explains to the Budapest Business Journal. “This also changed purchase behavior; the prominence of online shopping

grew with a focus on value purchases. People also became more health aware and sustainability-conscious, while interpersonal behavior also changed,” Häuser adds. Vodafone has experienced similar changes. “We have seen a marked move towards online sales channels among our customers. [...] The main driver was an increase in the number of online transactions that customers could initiate through the MyVodafone application,” says Anita Orbán, external affairs director at Vodafone Hungary. The general experience is that data usage has been growing year-overyear, and it only increased further during the pandemic, so the upsurge is not surprising, Orbán says. She adds that a less drastic rise in voice calls has also been noted.

collaboration software/applications. As a result, the ratio of larger bandwidth packages increased, as did the ratio of gigabit packages,” Magyar Telekom notes.

Strong Impact

“The pandemic has had a strong impact on our network traffic this past year,” Magyar Telekom’s corporate communications directorate tells the BBJ. “Mobile and fixed data traffic is continuously increasing even under normal circumstances, but naturally, it can be felt in the traffic, when many people are working or learning from home at the same time. We experienced a significant surge in fixed traffic recently in streaming services and, last year, it was clearly visible in online TV usage,” Magyar Telekom says. This changing behavior has resulted in altered demands. The stability of home internet became more valuable, as well as good access to it at all points of dwelling units.

to interact and send data to each other, as well as humans. “Running on big data, we see changes as artificial intelligence is evolving; it can make decisions and actions on our behalf. All this Anita Orbán, Vodafone. is maturing. Some markets have seen more activity; here in Hungary, things are moving a bit more slowly, but certain industries and Vodafone made public interest factories have already onboarded websites, such as central information, with this disruption. IoT is seeing job searches, and industry pages, an exponentially expanding area,” available without charging data traffic. Telenor’s Häuser tells the BBJ. It also offered free data use for various educational portals enabled to help teachers and students. By the time schools reopened, such websites had

generated

42,000 GB

of traffic. Traffic on education websites quadrupled, according to data from Vodafone. As life flows by in an increasingly digital world, 5G connectivity will be a gamechanger. “The 5G introduction in the market is one of the key substantial points that has happened here recently. The three main operators got the spectrum for 5G. We are taking it seriously to launch 5G commercially: Hungary is the third most ready country for 5G in the world,” claims Häuser of Telenor. Orbán says Vodafone’s primary goal remains to ensure reliable and highquality mobile and fixed networks for its customers with a strong focus on the development of the next-generation mobile network. “In the last few days, we have also reached a milestone in the industrial deployment of 5G: After a successful six-month trial period, our industrial 5G Christoph Häuser, Telenor. network is now live, meaning that we are pioneering its industrial launch,” she said. “Our answer is the smart Wi-Fi concept. [.…] Great bandwidth and upload speed became important thanks to the increased usage of

and Economics was announced, Tibor Rékasi, CEO of Magyar Telekom, said, “5G as a driving force for digitalization will soon emerge in other areas of production and services: automotive industry, agriculture, healthcare, education, transportation, and power.” He added that 5G “opens up completely new perspectives everywhere and raises economic development and competitiveness to a higher level. “That is why we find it crucial to provide the best possible network background for the use of digital technologies and to support local innovation actively.” One of the most significant users of 5G will be the internet of things (IoT) in the commercial space; interconnected IoT sensors rely

Driving Force

Speaking at the end of May when a joint transportation project with the Budapest University of Technology

“5G opens up completely new perspectives everywhere and raises economic development and competitiveness to a higher level. That is why we find it crucial to provide the best possible network background for the use of digital technologies and to support local innovation actively.”

Today, people predominantly consume content on smaller screens. And they do not want to be disconnected, ever. As users flit between devices, from smart TVs to tablets and phones, they want seamless transitions and undisrupted connectivity. In this brave new world, fast 5G and fixed-line connectivity have become a must; telecoms face challenges and ample opportunities in this quickly evolving vertical.

News///in brief Telco / ICT

4iG Expects Revenue Growth ‘Above 25%’ Listed IT company 4iG said it expects revenue growth to “be above 25%” in 2021 in an investor presentation released on the website of the Budapest Stock Exchange on June 8. The company noted that it has a backlog of around HUF 36 billion worth of orders on top of sales completed by the end of May. 4iG earlier said its first-quarter revenue rose 77% year-on-year to HUF 15.3 bln. In the investor presentation, it said that it expects annual sales growth to be over 10% after 2021. The firm is targeting an 8-10% EBITDA margin in the coming 2-3 years. In the meantime, 4iG has announced in recent weeks two acquisitions: Poli Computer PC and a 75% stake in satellite communications company Hungaro DigiTel. In an announcement made on the website of the Budapest Stock Exchange after the deal was cleared by the Competition Office (GVH), 4iG noted that Poli Computer was

one of the first players in the IT outsourcing market in Hungary, entering the business in 1997. In 2020, the company’s annual revenue reached HUF 2.5 billion. With the acquisition, 4iG will become the biggest Hungarian-owned company in the local outsourced and managed IT services market. 4iG had first announced plans to acquire Poli Computer early in February.

managed by Alpac Capital - Sociedade de Capital de Risco, transferred to 4iG as an in-kind contribution its 100% stake in Portuguese Telecommunication Investments Kft. At the same time, Bartolomeu Investments Kft. became a stakeholder in 4iG. Portuguese Telecommunication Investments Kft. then acquired a 25% stake in Hungaro DigiTel from Antenna Hungaria to give 4iG a 75% stake in the satellite communications company. 4iG signed a preliminary deal to acquire the controlling stake in Hungary DigiTel in February. Hungaro DigiTel provides VSAT and satellite broadcasting services through its satellite communication system. Its customers include major private sector companies, such as banks and television companies, as well as public sector partners. Hungaro DigiTel had revenue of more than HUF 5.2 billion in 2020.

Digi Revenue Falls 8%

The stake in Hungaro DigiTel came in a transaction involving a number of steps that was cleared by the Competition Office (GVH). Bartolomeu Investments Kft., a company indirectly

Revenue in Hungary of internet service provider, telecommunications, and TV company Digi fell 8% to EUR 199.6 million last year, according to an earnings report released on June 8, writes napi.hu (Daily). Eliminating the impact of exchange rate changes, revenue was practically flat, Digi said in the report. The company’s pay-TV subscriber numbers fell 3% to 933,000, while its fixed-line internet subscriber numbers were little changed at 749,000.

Special Report | 15 Photo by V.stock / Shutterstock.com

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Budapest Business Journal | June 18 – July 1, 2021

Fixed-line telephony subscriber numbers dropped 5% to 650,000, but mobile subscribers jumped 75% to 173,000.

Telenor Network Traffic up 30% Last Year Telenor’s network traffic grew by about 30% last year as more people started working and learning from home, many on mobile internet, writes business daily Világgazdaság (Global Economy). The company’s sales of HUF 191.9 billion were coupled with a profit of HUF 29.3 bln last year. While in 2019, it achieved a turnover of HUF 182.6 bln, in 2020, it reached HUF 191.9 bln. However, its after-tax profit fell this year to HUF 29.3 bln, compared to HUF 34.9 bln in 2019.

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Telenor Readies Services to Offer Customer Experiences in Swift-Changing Market In a fast-moving world, Telenor Hungary is working on offering personalized services to its customers while keeping a finger on the pulse of big data to ensure that they understand their clients’ needs. The Budapest Business Journal talks to Mohamed ElSayad, chief commercial officer at Telenor Hungary. CHRISTIAN KESZTHELYI

A few years ago, technology such as artificial intelligence (AI), the internet of things (IoT), and big data would have been considered futuristic; today, they are a reality to which telecommunications service providers must accommodate their ecosystems. “In terms of growth, the market had been very stable until some huge market acquisitions, which have been favorable for Telenor Hungary,” Mohamed ElSayad, CCO at Telenor Hungary, tells the BBJ. “In the past few months, Telenor has been growing significantly.”

He believes this growth helps Telenor operate in a way that gives the company every possibility to offer a good customer experience through all its touchpoints, as well as the modernization of its network. In the context of rapid technological development, this is being boosted by the gradual introduction of 5G connectivity. Hungary’s three main operators have been moving slowly up the chain to machine-to-machine (M2M) communications in the past few years. “We want to take a bigger stake by investing in IoT services,” ElSayad says. “We have done some pilots in the agricultural sector where we see that is the

Mohamed ElSayad biggest business area for commercial IoT. We have done some with an agricultural firm and a meat producer, tracking animals to maximize production,” he adds.

Uninterrupted Connections Nowadays, customers pay little attention to the nitty-gritty of tech development. They simply want to be connected without interruption.

“A decade ago, we started a discussion on why people should go online. Then it evolved into how to go online. Today, we think that being online is an inalienable right, like clean air or freshwater. It is essential. The type of connectivity is not important anymore. Being connected is what matters,” ElSayad says. Although Telenor is primarily a mobile operator, the company is working hard on getting into homes. Whatever type of connectivity people have, they will use it, whether fixed line or 5G. Convenience, speed, reliability, and availability are the most important factors for residential and business users alike. “At Telenor, we are looking at how we can serve our customers in a way that they do not have to worry about knowing if it is a mobile or fixed connectivity they are using,” ElSayad says. The commercial chief adds that the most important thing is to understand user behavior. Telenor claims that it understands its customers best, utilizing its access to big data. Most of the firm’s investments go beyond network development into data development. This allows it to understand possible failures and anticipate customer behavior in order to prepare the company for a better tariff or a better service. “We use a lot of data to anticipate trends and changes, but we also have a lot of dialogue with our customers to ensure that we clearly understand their real needs,” ElSayad explains.

16 | 3

Special Report

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Budapest Business Journal | June 18 – July 1, 2021

The mobile and the fixed broadband segment are significant sectors for the Romanianowned Digi, which has been keen to expand its market position in Hungary. However, losing out in the 5G tender was a blow to the telco, and recent debt problems involving the TV2 Media Group are also casting a shadow. GERGELY SEBESTYÉN

Digi started its operation in Hungary in the mid-1990s as a cable television provider. Shortly after its launch, the company was also providing broadband internet and telephone services to its subscribers. “The high quality, good value for money services quickly became popular on the market,” says Viktória Ruska, the company’s head of communications. “Ever since, Digi has been all about flexibility, innovation, improvement, and development,” she adds. Digi’s newest service is DigiMobil, launched in May 2019. It already provides outdoor coverage in

more than

70%

of the country. The company says it has considered subscribers’ convenience in its residential tariff packages announced on January 1 this year: DigiMobil Plusz, DigiMobil Max, and DigiMobil Junior Option. These include a free-of-charge calling function for Digi and Invitel’s domestic fixed networks and DigiMobile, provided the call is started through Voice over WiFi (VoWiFi). Assuming your smartphone has VoWiFi compatible technology, the system makes it possible to make and receive calls where WiFi with Internet access is available. Only 19 months after DigiMobil’s launch in May 2019, its 4G availability received the best scores from end-users

Photo by Radu Bercan / Shutterstock.com

Digi Moves Forward with Mobile and Fixed-line

on independent mobile analytics company Opensignal’s recently published customer experience-based report. Opensignal analyzed data on major Hungarian mobile services providers collected for 90 days starting in October 2020. The 4G availability category lists the proportion of time users were connected to a 4G network. In winning the category, DigiMobil received a score of 96.7 out of 100 from its customers. It also received “Good Experience” ratings in the Video category. Digi also intriduced monthly mobile tariffs for commercial services packages from January 1.

Heavy Investments

“Even though the company has been present on the Hungarian broadcasting market for years, the heavy investments started roughly 10 years ago,” Ruska tells the BBJ. She added that the shift from being a significant satellite operator took place in parallel with the deployment of Digi’s fiber-optic network first in the eastern part of Hungary but soon expanding towards the capital and then the rest of the country. The company grew in importance and size through its acquisition of Invitel’s retail and small business subscribers in Hungary for HUF 43 billion, a deal announced in July 2017 and initially approved in May 2018. Arguing that new information had come to light, the Hungarian Competition Authority (GVH) then withdrew its approval, launched a new procedure in November 2018, and finally approved the deal in March 2020. “In addition to that, with a brave move two years ago, Digi launched its own mobile services, first in test mode and then, from January 2021, commercial

packages with very favorable conditions appeared in the company’s portfolio. Now, more than

800

settlements

are covered by DigiMobil,” Ruska says. The company also has a fixed broadband market share of 22.6%, according to a March report by the National Media and Infocommunications Authority (NMHH). If that represents the positive news for Digi in the past few years, its attempts to join the rollout of 5G services have not gone so well. Digi’s bid to join the 5G tender was rejected in September 2019 by the NMHH under conditions strongly criticized by the company.

Disappointed

“We are very disappointed that the Authority has decided to proceed with this contentious auction procedure. The Digi Group has applied to the court to suspend the proceedings pending a final decision of the court, and no final decision on this application has been taken to date,” said Serghei Bulgac, CEO of DIGI Communications NV, at the time. “In our view, the Authority’s action in ignoring our appeal is inconsistent with its mission to ensure conditions of effective competition in the telecommunications market, which would ultimately benefit consumers and users,” Bulgac added. A different kind of problem became public on

June

“With a brave move two years ago, Digi launched its own mobile services, first in test mode and then, from January 2021, commercial packages with very favorable conditions appeared in the company’s portfolio. Now, more than 800 settlements are covered by DigiMobil.” Parent company Digi Communications NV said at the time that it considered the move unfair. It also contested the NMHH’s decision to accelerate the 5G spectrum auction procedure and disregard an appeal Digi filed against the rejection of its participation in the auction.

10,

when Media1 ran a story claiming that the TV2 Media Group had withdrawn the distribution rights of Izaura TV and Jocky TV from Digi, citing what it called a significant fee debt. As a result, Digi subscribers are now unable to watch the two soap opera channels. According to SorozatWiki, a wellknown Hungarian portal covering TV series, “This has never happened before in Hungary, and the move could affect millions of people.” The BBJ asked Ruska about the debts and whether the situation would be resolved any time soon. “We believe that short service outages can, and unfortunately do, occur in any industry for a variety of technical reasons,” she told the BBJ. “In all cases, whatever the nature of the failure, we work to ensure that subscribers experience as little of it as possible and that it is resolved as quickly as possible,” she said.

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Budapest Business Journal | June 18 – July 1, 2021

Special Report | 17

Telecom Service Providers Ranked by total net revenue (HUF mln) in 2020

landline TRanSmiSSion

mobile voiCe TRanSmiSSion

mobile inTeRneT

Cable inTeRneT

iPTv

Cable Tv

leaSed line

voiP

SaTelliTe Tv

oTHeR

mobile neTWoRk

oPTiCal Cable neTWoRk

analog WiRe neTWoRk

analog Cable neTWoRk

iSdn

oTHeR

TRiPle Play (inTeRneT, Tv, landline PHone)

QuadRuPle Play (inTeRneT, Tv, landline PHone, mobile)

ComPany PaCkageS

no. oF Full-Time emPloyeeS on may 1, 2021

oWneRSHiP (%) HungaRian nonHungaRian

xdSl

magyaR Telekom nyRT.

PaCkage TyPe Sold

no. oF aCTive SubSCRibeRS

ComPany WebSiTe

inFRaSTRuCTuRe TyPeS

ToTal neT Revenue in 2020 (HuF mln)

Rank

SeRviCeS

673,048

5,460,000

✓

–

4G, 4G+, 5G

✓

–

✓

7,132

Free float (38.68), own shares (2.11) Deutsche Telekom Europe B.V. (59.21)

Tibor Rékasi Daria Dodonova Melinda Szabó

1097 Budapest, Könyves Kálmán körút 36. (1) 457-4755 –

283,029

✓

–

✓

–

✓

– Vodafone Europe B.V. (100)

amanda nelson Cüneyt Avci Balázs Révész

1095 Budapest, Lechner Ödön fasor 6. (1) 288-4288 sajto@vodafone.com

191,942

3,550,000

–

✓

–

✓

–

✓

–

2G, 3G, 4G, 4G+, 5G

–

✓

1,367

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

Peter gažík Martin Oravec Mohamed ElSayad

2045 Törökbálint, Pannon út 1. (1) 464-6000 –

–

Microwave connection

– RCS&RDS S.A. (100)

dragos Spataru – –

1134 Budapest, Váci út 35. (1) 707-0005 ugyfelszolgalat@ digikabel.hu

–

531

Hungarian state (100) –

zsolt Sárecz Krisztián Rathmann Anita Fuzik

1119 Budapest, Petzvál József utca 31–33. (1) 464-2464 antennah@ahrt.hu

www.telekom.hu

vodaFone magyaRoRSzág TávközléSi zRT. www.vodafone.hu

TelenoR magyaRoRSzág zRT. www.telenor.hu

digi TávközléSi éS SzolgálTaTó kFT.

55,051

✓

–

✓

–

✓

–

✓

Broadcasting, telecom, multimedia, WiFi services, ICT solutions, event management

–

✓

–

DVB-T, VoIP, IP VPN, optical, satellite, microwave, wireless network

–

✓

–

✓

Microwave connection

–

✓

630

– China CEE Fund (100)

gerald grace Dániel Majubu Orsolya Hladics

2040 Budaörs, Edison utca 4. (80) 820-082 kapcsolat@invitech.hu

✓

www.digi.hu

inviTeCH iCT SeRviCeS kFT.

25,785 (2019)

6,000 (approx.)

✓

–

✓

–

✓

–

WiFi services, broadcast signal transmission, ICT solutions

inviTel TávközléSi zRT.

18,842

✓

–

✓

–

✓

–

✓

Microwave connection

✓

DIGI Távközlési és Szolgáltató Kft. (100) –

dragos Spataru – –

1134 Budapest, Váci út 37. (1) 801-1500 info@invitel.co.hu

TaRR kFT.

11,230

✓

–

✓

–

✓

–

✓

–

✓

–

✓

Individuals (100) –

János Tarr – –

7100 Szekszárd, Kadarka utca 18. (74) 416-000 info@tarr.hu

–

✓

–

✓

www.tarr.hu

HungaRo digiTel kFT.

4,896

–

Satellite data transmission, satellite broadcasting, WiFi central infrastructure

1,900

25,000

✓

–

✓

–

✓

Netfone Invest Kft (35) Scanwinavia AB (65)

lászló mészáros, istván kun Zsolt Racskó István Kun

8900 Zalaegerszeg, Nefeljcs utca 2/A (1) 878-1800 info@netfone.hu

–

Data center solutions, WiFi, virtual and physical subdirectories, domain regisztration, webhosting

–

✓

–

Microwave network

–

✓

Individuals (68), ThreeF Kft. (32) –

attila Farmosi, gábor varga Gábor Varga Péter Németh

1037 Budapest, Zay utca 3. (1) 999-1000 office@acetelecom.hu

www.hdt.hu

neTFone TeleCom

10 kFT. www.netfone.hu

aCe TeleCom kFT. www.acetelecom.hu

dRávaneT zRT. 12 www.dravanet.hu

✓

www.invitel.hu

✓

41,269

www.invitech.hu

✓

anTenna HungáRia zRT. www.ahrt.hu

addReSS PHone email

✓

–

ToP loCal exeCuTive CFo maRkeTing diReCToR

oPenneTWoRkS kFT. www.opennet.hu

1,607

✓

–

✓

–

✓

415

4,582

–

✓

–

✓

–

Server hosting

328

–

✓

–

✓

–

Virtual subdirectlory, call center

–

Satellite data transmission

–

✓

Péter Fekete, Portuguese Telegyöngyvér communication Papp-gerlei, Investment Kft. istván Sárhegyi, (75), Antenna lászló blénessy Hungária Zrt. (25) Éva Illés Csíkné – –

–

✓

–

✓

Pallas Office zsombor Kft. (48.73), attila Papp BusinessLink Kft. Rezső Dunay (41.01), individuCsaba Csizmadia als (10.26) –

–

✓

András Beliczay (100) –

andrás beliczay Katalin FejesUrbanics Judit Stark

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

7624 Pécs, Budai Nagy Antal utca 1. (80) 811-118 info@dravanet.hu 1117 Budapest, Fehérvári út 50–52. (1) 999-6000 info@opennet.hu

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Budapest Business Journal | June 18 – July 1, 2021

Socialite “Spaces of Intensity” is a book about 3h, a group of Budapest architects founded in 1994 by Katalin Csillag and Zsolt Gunther and is currently made up of 22 people. As I’ve long felt my understanding of Hungarian architecture is somewhat lacking, I welcomed the opportunity to review the book and speak to Csillag. DAVID HOLZER

Photo by Tamás Bujnovszky

Exploring ‘Spaces of Intensity’ by Budapest Architects 3h

modernism offered a certain cleanliness and invitation to create “self-evident spaces.” But, Hungary’s “local style” encouraged the country’s architects to deviate from the rules of modernism. 3h’s argument is that there are sometimes “inappropriate or unsuitable ways of thinking” in the Hungarian mentality that can be detected in the “irrational components smuggled into strict designs by local modernism.”

Named for a particularly indelible degree of pencil hardness, 3h reflects the group’s intention to leave its mark on the world through designs and “The history of Budapest buildings that demonstrate a flair for imaginative concepts and cutting-edge and Hungary is therefore technical solutions. full of new beginnings 3h has designed office, residential, public, and ecclesiastical buildings and under radically different restored many historic structures. It conditions. In these has been invited to tender for numerous transitional periods, projects, taken part in exhibitions, produced publications, and won neither building clients Hungarian and international prizes. nor their architects knew The House of Hungarian Music and the restoration of Szeged Cathedral and quite what direction to the Esterházy Castle are three notable projects with which the architectural firm take. As a result, many has been involved. projects were not a great According to 3h, its architecture success, but there are a is “rooted in the past, but we aim to interpret it from a present and future few that are really charming perspective.” This emphasis on drawing and even inspiring.” from history, rural and urban, whether it be traditional Hungarian ornamentation or 1960s modernism, is particularly interesting to me because, on the face of Believe me, I’ll be looking for those it, these are two architectural styles that “irrational components” from now on. I can’t imagine being combined. But, more than anything else, 3h focuses The firm’s explanation of how on the “spatial solution of complex this happened is, in essence, that problems,” hence the title of the book.

Thematic Approach

“Spaces of Intensity” is concerned with the themes of context and typology, intervening space and light, and decoration. Each of the themes is covered in an essay that combines text and images. The book also contains essays about nine buildings and five designs, written by renowned experts on architectural theory and 3h co-founder, Zsolt Gunther. I have to confess that, while the book is beautifully produced, I did find myself looking at the pictures for the most part. Having said this, I enjoyed reading the interview with Csillag and Gunther conducted by Claus Käpplinger. In this, and in other parts of the book, I found myself most intrigued by the comments that referenced the irrationalism in architecture I touched on earlier, what 3h describes as “irrational situations.” This is something I see not only in Budapest but also in other Hungarian cities. According to 3h, these “irrational situations” where “many streets and squares are a collage of disparate buildings that make little attempt to interact with each other,” where beautiful, elegant buildings sit next to mediocre constructions, are a result of Hungary’s geographical location and history. Hungary is where East and West meet and Budapest, as the country’s capital, has often been the site of struggles between different cultures. “The history of Budapest and of Hungary is therefore full of new beginnings under radically different conditions. In these transitional periods, neither building clients nor their architects knew quite what direction to

take. As a result, many projects were not a great success, but there are a few that are really charming and even inspiring.” Essentially, then, it has historically been hard to plan for the long term in Hungary and, 3h believes, this is still the case. It means that there are no “pure” styles or concepts in Hungarian architecture. This has definitely influenced the firm’s outlook while giving it a greater freedom. Hungary and Budapest’s specific geographical and cultural situation has also led to a certain “intensity” in 3h’s work. “Spaces of Intensity” is published by Birkhäuser of Switzerland, the leading professional publisher for architecture, landscape architecture and design, which is impressive in itself.

Great Clarity

I spoke with Csillag via Zoom. She looks very much the architect and describes herself as “kind of omnipresent at 3h” in addition to her design activities. Fortunately for me, she answered my questions with great clarity, using none of the theoretical language of “Spaces of Intensity.” I began by asking her why 3h produced the book. “Most of all, we wanted to step out on the international stage,” she told me. “We wanted to summarize our work so far and get feedback from abroad. A contact of ours in Berlin approached Birkhäuser, the publishing house who embraced the idea and it went from there.” Apart from the fact that Csillag’s is the first Hungarian firm of architects to produce a book such as “Spaces of Intensity,” she is especially proud of its quality. “From the essays to the design to the paper quality and standards of printing,” she explains. Looking to the future, what does Csillag hope 3h will achieve? “We don’t want to get involved in an enormous number of projects, but we would like to do quality work for good investors who know the value of what we do. We would also like to be involved in more public projects. And we’d like to expand into Europe and beyond, which is why ‘Spaces of Intensity’ is written in English and published by one of the most reputable architectural publishers in the world.”

You can buy “Spaces of Intensity” at FUGA, the Budapest Architecture Center, ISBN Books and Gallery and the Vasarely Museum Shop, among other places. I’ve suggested these because they look like the most interesting to visit. You can also try Budapest’s very own bestsellers.hu, order from the publisher Birkhäuser, or Amazon.

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Budapest Business Journal | June 18 – July 1, 2021

Socialite | 19

Somló: a Tiny Volcanic gem of a Wine Region To say I never get bored of visiting Somló is an understatement, and there’s plenty going on here to keep enticing oenophiles back. It’s hard not to feel the magnetic pull of the hill’s basaltic rock, especially when you taste the wines made by a remarkable cast of characters. ROBERT SMYTH

Indeed, Somló, the smallest of Hungary’s 22 wine regions, makes some of the country’s biggest whites, the best of which are concentrated, pure, and entirely distinctive. Catching sight from a distance of the 435-meter-high Somló Hill, a flat-top volcanic peak, which rises dramatically out of the surrounding plain, is a magical moment in itself and never gets old. From there, it only gets better as you inch closer and can pick out the patchwork of tiny vineyard plots that pack the hill, with press-houses and wineries scattered around. Somló Hill was created when the surrounding land was carried away by erosion while the igneous basaltic tuff stood firm. The basalt had been formed from the result of volcanic activity under the Pannonian Sea. The region also comprises two other hills: named Kissomló (literally “Small Somló”) and Ság Hill. The soils are predominantly based on that prized volcanic basalt and tuff bedrock. Loess, Pannonian sand, ferrous clay, and black “nyirok” soils make up the topsoil. Somló Hill resembles the similarly-formed (and also basalt-based) Badacsony Hill, just half an hour’s drive away, but Somló doesn’t benefit from Central Europe’s largest lake strongly influencing its microclimate; Badacsony Hill overlooks Lake Balaton directly. Somló Hill does have a breeze that helps dry out the vines and prevents

fungal diseases from taking devastating hold and spoiling the grapes, but the recent hot spell that followed weeks of rain provided ripe conditions for the dreaded downy mildew to thrive. The winemakers and grape growers were out in force, spraying the vines in defense against the mildew during my visit earlier this month. Károly Kolonics, fresh from claiming positions one and three in the U.K.-based Decanter magazine’s list of Hungary’s best value wines, drove straight in from the vineyard on his tractor to meet me. He had been spraying his vines organically with a combination of sulfur, copper, and orange oil. A high proportion of Somló’s grape growers use only organic treatments, yet another positive attribute of this tiny terroir. The non-interventionist natural wine movement is well represented on the hill by the Abeles and Tomcsányi cellars.

Novelty Sparkler

A novelty from the Kolonics Winery is Juhsecco, a lively, fruity summer sparkler created by adding carbon dioxide via the “bicycle pump” method to still wine made from the region’s signature Juhfark grape. Talking of which, Kolonics’ spontaneously fermented Juhfark 2018 received 6-12 hours of skin contact and is full-bodied, spicy, and herbal with a waxy texture. Master of Wine Jancis Robinson named it as one of her desert-island wines. Juhfark (literally translated as “Sheep’s Tail”) currently accounts for around 12% of Somló’s total plantings. It was once prized for its supposed knack of aiding female imbibers in conceiving male offspring; Queen Victoria a great fan and frequent Juhfark drinker.

When under-ripe, Juhfark can be rustic and aggressively acidic, but a growing number of winemakers are now getting this grape very right, making wines with impressive body, structure, and substance, revealing distinctive notes of rhubarb, banana, and pineapple and a stony character. Tomi Kis of Somlói Vándor feels he has found special plots on the hill’s western side that nicely collect the heat to counterbalance the grape’s natural searing acidity and yield the most complex wines: Somlói Vándor’s 2019 has everything going for it, both in abundance and balance. While Somló has the Furmint and Hárslevelű grapes in common with Tokaj, there’s also Olaszrizling, which on its day can undoubtedly match the more illustrious aforementioned pair for quality in this terrific terroir. While being undoubtedly Somló, the wines from these grapes also retain their varietal character in spades.

Take a Hike

It is a pleasure to walk up Somló Hill, checking out its funky basaltic rock formations. These include the Barát Szikla (Monk’s Rock), which actually does resemble a monk. Uphill and to the right of it, the Kőkonyha (Stone kitchen) is where the local hill dwellers where once said to cook. Located right below these remarkable basalt “organ pipes,” Bálint Barcza’s tasting terrace was taking shape on my visit, and he took time out from supervising the building of a stage for live music to show me his wines. I’d previously tasted a few wines from him that were spot on, but others less so; now, there isn’t a weak link in his fully organic range. An fantastic

add-on to tasting here is to walk up between the organ pipes and savor the view back down the hill. Heading a few hundred meters east of here, just below St. Margit Chapel (Szent Margit kápolna), the marvelously maverick István ‘Stefan’ Spiegelberg, who is half-German and half-Hungarian and used to regularly visit family on the hill on summer holidays while growing up in Berlin, has recently opened his new wine terrace. Its tastefully eclectic design provides the ideal setting for sipping his intense yet über tasty wines. A great place to gain an overview of Somló wines and of wines from the wider volcanic world in general (and anything else that takes the owners’ fancy) is the Somlói Borok Boltja. Located in the middle of the south side of the hill, it is run by the inimitable Eva Cartwright. She is hosting her popular Midsummer Night tastings this weekend (June 19-20); search for Somlói Napforduló Szombat Éjjel Somlói Borok Boltja on Facebbok events for more information. Another good starting point is Tornai Pince, located towards the bottom of the hill, which has a fabulous museum that charts the development of local winemaking, and award-winning wines to match. For the finest traditional sparkling wines in the country, head to Kreinbacher, which has successfully brought in French know-how and technology to craft elegant sparklers with a local touch, placing the Furmint grape at the core. Other hidden gems to uncover, such as Imre Györgykovács’ Nagy-Somlói Tramini, smash the assumption that you can’t make high-quality wine from this aromatic grape.