Hungary tightens state telecoms control with Yettel share swap

The Hungarian government has increased its holding in mobile operator Yettel as part of an ongoing strategy to tighten state control over its telecoms sector.

It’s a complex share swap deal, but the key takeaway is that the Hungarian state has picked up a 25% indirect stake in the country’s second-biggest mobile operator in exchange for some of its holding in Vodafone Hungary. And that enables it to have a bigger presence in telecoms.

“The transaction will further increase the Hungarian State’s assets and role in the strategically important telecommunications sector, and thanks to the share exchange, it will acquire a minority stake in two of the market leaders in the domestic telecommunications sector,” Hungary’s Ministry of Economic Development said, translation courtesy of Google.

There’s clearly no antitrust hurdle here, since the deal seems to have already gone through, but the state having a foot in the door at both Yettel and Vodafone certainly sets alarm bells ringing. It also has a small number of shares in majority Deutsche Telekom-owned incumbent Magyar Telekom, incidentally, albeit amounting to just over 4% as of mid-2022.

“With the transaction, in addition to further diversifying its investment portfolio in the telecommunications sector, the State will be able to contribute to the development of the sector more forcefully and efficiently – from the ownership side,” the ministry added.

Admittedly, this is a translated statement. Nonetheless, the government does not seem to be attempting to hide its intention to involve itself in telecoms. It is making the right noises about benefits to customers and the national economy, but it is hard to see past this being another example of the Viktor Orbán administration flexing its muscles in key sectors.

The state’s involvement in telecoms has been building in recent months. In January Vodafone closed the 660 billion forints (US$1.7 billion) sale of its Hungarian unit to 4iG’s Antenna Hungaria and state-owned Corvinus International Investment, the former taking a 51% stake and the latter 49%.

“This combination establishes a scaled converged operator across mobile and fixed communications and supports the Hungarian government’s goal of creating a national Information and Communications Technology champion,” said Vodafone Group’s interim Chief Executive Margherita Della Valle, at the time. The 4iG group includes companies in the IT, infrastructure, broadband and pay TV spaces.

As a result of the share swap, the state’s stake in Vodafone – via Corvinus – falls to 29.5%, it having swapped part of its holding for the 25% Yettel stake. Antenna Hungaria, meanwhile, raises its Vodafone stake to 70.5% and ceases involvement in Yettel.

“The increase [in] our stake in Vodafone Hungary with the swap of financial investment Yettel and CETIN shares strengthen the efficiency of the integration of the telecommunications companies into the 4iG Group portfolio,” said Péter Fekete, Group CEO of 4iG.

Vodafone – as it is still known, despite the exit of its erstwhile parent and namesake – is the third of three mobile network operators in Hungary, reporting just over 3 million customers as of the end of 2022. However, 4iG’s efforts to bulk up over the past year or so, with the acquisitions of pay TV and broadband firm Digi, Antenna Hungaria, and Vodafone, amongst others, arguably put it in a stronger position than its slightly larger mobile rival Yettel.

According to PPF Group, the private equity firm that acquired Yettel as part of a broader acquisition of Telenor’s Central and Eastern European assets in 2018, Yettel had 3.6 million customers at the end of 2021. It has not provided more recent figures. Market leader Magyar Telekom has a mobile base of close to 6 million.

Looking at the figures and the recent M&A activity, the stage looks set for 4iG and its various assets to mount a competitive challenge in Hungary. But with the government planning a ‘forceful’ contribution to the sector, all bets are off.

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