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Hungary: MATAV Emerges As Model For Telephone Service

Budapest, 20 October 1998 (RFE/RL) -- Just five years ago, one million Hungarians --a tenth of the country's population-- had languished on waiting lists for as long as 25 years, dreaming of someday getting their own telephones.

With fewer than 10 phones per 100 inhabitants in 1993, Hungary had emerged from communism with practically the worst phone service in Europe. Only in Stalinist Albania was the situation worse.

It is a whole new world in Hungary today, with mobile phones widely available and the state telephone monopoly, MATAV, trying to convince customers they need two or even three phone lines at home.

From being a laggard, Hungary has become Central and Eastern Europe's telecommunications pioneer. Its experiences offer a model for other ex-communist countries that have not yet reformed their telecommunications industries.

Imre Bolcskei, Hungary's deputy state secretary for communications, calls his country's improvements since 1993 "radical."

"We have reached a level where we can totally meet the demand, so if anybody anywhere at any time wants a telephone line, we can give him a telephone."

Between 1993 and this year, the number of Hungarians with fixed land lines --the traditional form of phone service-- tripled to three million. The density is now 34 fixed phone lines per 100 population. This is impressive compared to Hungary's recent past, but still distant from the level of 94 (lines per 100 population) in the United States, where many households have more than one line. In addition to fixed lines, 10 percent of Hungarians now own mobile phones.

In 1993, Hungary overcame its long waiting lists and moved to the front of the region's telecoms market by taking the step of privatizing the state monopoly on phone service. At the time, Hungary was only the second ex-communist country to do so (after Estonia).

In the same year, new telecommunications legislation put Hungary on the road to West European standards for the industry. Foreign companies were invited to provide local phone service in poorly serviced areas, particularly in rural Hungary. While provision of basic service remains a government monopoly until 2002, free competition was allowed for many more sophisticated services.

MATAV, the state telephone monopoly, was largely sold off (67 percent) to two Western companies, Deutsche Telecom and the U.S.'s Ameritech. Otto Gecser, chief marketing officer for MATAV, says foreign investment quickly brought MATAV into shape, introducing Western business practices as well as Western technology.

Last year, MATAV also became the first telecom firm from Central or East Europe to be traded on the New York Stock Exchange, thereby exposing it to the rigorous demands of investors all over the world.

Although Hungary had been a magnet for foreign investment since the 1980s, poor phone service was a handicap in the first years of a free-market system. Western businesses often cited inability to get phone service as a big drawback to their operations in Hungary.

The dramatic improvements in phone service over the past five years have been a tremendous boost to the Hungarian economy in general. As Gecser puts it, "Anything which is good for the communications industry will surely be good for the country."

Andras Sugar, chief executive officer of Westel 900, Hungary's biggest provider of mobile phone service, says the improvement in phone services has attracted many new businesses to the country.

"Very much so. Earlier, it was always a headache to communicate, even getting a land line for the business or private use. Now it takes only 30 minutes to get a line on the mobile and maybe one or two months on the landline network. So it has improved a lot, thanks to the privatization of MATAV. This has helped investors a lot."

If anything, Hungarians are now spoiled by the improvement in their telephone service. Marketing chief Gecser says that MATAV's biggest current problem is its old reputation as, in his phrase, "the company that kept me waiting for 25 years." He also says that Hungarians have quickly adapted to the vastly enlarged choices offered by the Hungarian economy in general, and want their phones installed in 24 hours. Sometimes this is possible, but a wait of up to one month is still normal.

Having satisfied basic demands for phone service, MATAV is now encouraging customers to use their phone more, or install additional lines at home. This means not only the usual "it's-good-to-talk-on-the-phone" type of television commercials common in the West.

"Promotion means persuading (customers) to buy a second line by giving them a good reason for doing so. Something like: If you have a fax, it might be a good idea to have a second line, because if (the main line) is busy you can still receive a fax. Another major reason is the Internet. If you have a teenager at home using the Internet for five hours, then surely nobody can call you at home between six and 10 in the evening. These are what we call normal approaches to the market, explaining to clients why they have to have another line."

MATAV, as well as the country's three mobile-phone suppliers, are already introducing services that did not exist just a few years ago.

For example, MATAV has created a Hungarian version of the Alta Vista search engine for the Internet. The aim is to increase Hungarians' use of the Internet, thereby creating more demand for phone time or phone lines.

Gecser notes MATAV has already launched a cable television network as well. He says that is part of the wave of the future, when communications, computers and consumer electronics will all converge.

Despite all the progress of the past five years, Hungary is still behind lesser-developed West European countries such as Portugal. Still, Gecser says confidently: "We expect to catch up by the time we join the European Union, which could be in the year 2002 or soon after."

(Second of three features on developments in the telecommunications sector in Central and Eastern Europe.)