4 Jul 2011Hungary Broadband Overview

After the end of the Communist era, the Hungarian telecommunications market was gradually liberalised and Magyar Telekom (formerly the Matáv Hungarian Telecommunications Company) was privatised in 1993. The country’s telecoms sector has attracted a number of international investors such as Deutsche Telekom, Telenor, Vodafone, Tele Danmark and UPC, which have contributed to the development of the telecommunications infrastructure. However, the market became truly dynamic only after Hungary’s accession to the European Union in May 2004. Despite this, competition is still limited to several major players in different market segments. For example, Magyar Telekom controls about three quarters of the fixed line market and over a half of the Internet market.

In October 2010, the government imposed a new “special tax” on the telecommunications sector. It is feared that the tax - which is 2 per cent on net revenue under HUF 500 million, 4 per cent on the part of net revenue between HUF 500 million and HUF 5 billion and 6.5 per cent of net revenue over HUF 5 billion - could erase the entire profit of some telecoms companies. It is also claimed that this will delay the launch of 4G networks beyond 2012. In March 2011, the European Commission launched an infringement procedure against Hungary over the tax which, according to the EC, is levied to cover costs other than administrative and regulatory costs related to the telecoms sector and is therefore incompatible with EU telecom rules. The government has two months to reply.