Telenor Hungary

Telenor Hungary was established in 1993 under the name Pannon and is wholly owned by Telenor. Pannon was rebranded as Telenor Hungary in May 2010. Telenor Hungary offers voice and non-voice services to subscribers on both prepaid and contract bases. Voice services include closed user group offers for both residential and business customers. Non-voice services include Short Messaging Services (SMS), Multimedia Messaging Services (MMS), mobile content services and Internet service provider services via Internet Protocol (IP) and Wireless Application Protocol (WAP). Enhanced Data GSM Environment (EDGE) based broadband services were launched in February 2005, reaching full coverage by the end of 2006. UMTS-based broadband services were launched in October 2005, reaching 92% population coverage as at 31 March 2011. As a next evolutional step, Pannon launched High-speed Downlink Packet Access (HSDPA) in April 2007 and High Speed Uplink Packet Access (HSUPA) during 2008. As at 31 March 2011, Telenor Hungary had 3.4 million mobile subscriptions. As at 31 March 2011, the mobile penetration and number of inhabitants in Hungary were 110% and 10 million, respectively.

Network and licences

Telenor Hungary holds a licence for GSM 900 MHz band, which was renewed in 2007. Telenor Hungary’s 900 MHz GSM licence is valid until May 2016, and its 1800 MHz GSM licence is valid until October 2014. The UMTS licence was awarded in December 2004, and is valid until 2019. For licences in both the 1800 MHz band and the UMTS band, Telenor Hungary has an extension option for an additional 7.5 years. Although the GSM 900 MHz licence has already been extended, the Minister of National Development is entitled to harmonise the expiry date of this licence with the expiry date of the 1800 MHz band licence. The same will also apply if the 1800 MHz band licence is extended by a further 7.5 years in 2014.

Competition

In addition to Telenor, there are two other mobile operators in Hungary: T-Mobile and Vodafone. Both T-Mobile and Vodafone hold GSM and UMTS licences. According to the National Communications Authority of Hungary (NCAH) data, as at 31 March 2011 Telenor had a market share of 32.4%, the market leader, T-Mobile, had a market share of 44.9% and Vodafone had a market share of 22.74%. There are no service providers or MVNOs operating in the Hungarian market for mobile telecommunication services. All three operators offer GPRS and broadband Internet services, and the popularity of mobile Internet is growing rapidly. In January 2009, the total number of subscriptions was 508,000, while at 31 March 2011 this number had increased to 1,350,000. As at 31 March 2011, Telenor Hungary had a 26.3% market share in mobile Internet.

Regulatory matters

In November 2003, the NCAH identified Telenor Hungary as an operator having SMP in the wholesale market for call termination on mobile networks. In January 2005, the NCAH determined that all operators (Telenor Hungary, T-Mobile and Vodafone) were required to reduce their interconnection charges (mobile termination rate). In December 2008, NCAH made a new resolution requiring a further reduction in the interconnection charges. The latest step in the reduction-glide path is HUF 11.86 per minute from 1 December 2010. The mobile termination rates (MTRs) in Hungary are symmetrical for all three operators. In March 2011 the regulatory authority published a draft resolution, maintaining Telenor Hungary’s SMP status in the call termination market, and suggesting a further 20% reduction in MTRs from January 2012 (HUF 9.46 per minute) and another 25% reduction from January 2013 (HUF 7.06 per minute).

In October 2010 a “crisis tax” was introduced on Hungarian telecommunication, energy and retail companies, following an expedited legislative procedure, with no prior consultation with the affected sectors. The purpose of the new tax is to bring the national budget deficit within EU targets, and the tax is expected to raise HUF 61 billion from the telecom sector for the national budget each year from 2010 to 2012 (inclusive). Telenor Hungary was required to pay HUF 9.9 billion in crisis tax liability for the 2010 financial year. On 14 March 2011, the European Commission launched an infringement procedure against Hungary due to non-compliance of the “crisis tax” with the EU’s regulatory framework on telecoms.

As a result of a change in the method of calculation of frequency fees, effective as of 1 April 2011, no further significant increase in fees is expected in respect of Telenor Hungary’s currently used frequency bands as a result of 3G roll-out.

Due to the obligation to implement EU Directive 2009/114/EC, mobile operators are expecting to be able to use existing spectrum holdings in a technology neutral manner later in 2011.

Following several failed attempts to attract a fourth operator to the Hungarian market, the Ministry of Development announced a spectrum assignment process for the third quarter of 2011. The frequency auction covers 11 MHz of vacant spectrum in the GSM band, and possibly the remaining blocks in the 1800 MHz and 2100 MHz bands.