Vodafone To Sell Hungarian Operation For $1.8bn

Vodafone, is to sell-off its Hungarian business, in a move that should tighten President Viktor Orban’s government’s hold of the local telecoms market.

Vodafone of course is one of the world’s largest mobile operators, and Vodafone Hungary is the third largest mobile operator in that country, after starting operations back in 1999.

The Newbury-UK operator announced the decision to sell Vodafone Magyarország Távközlési Zrt (Vodafone Hungary), after it agreed non-binding terms with the buyers, namely Hungarian 4iG and state-run Corvinus Zrt.

Deal terms

Vodafone is selling its Hungarian business for 715 billion forints ($1.8 billion) in cash, and the deal that will create a locally-owned ‘telecoms leader’ in the central European country.

The deal does not include Vodafone’s shared services business VOIS, but it is expected to create Hungary’s second largest telecoms operator.

“Vodafone Hungary is one of the leading converged network operators in Hungary and a combination with 4iG will create a clear #2 operator across mobile and fixed communications with broader ICT (Information and Communications Technology) capabilities,” said the UK operator. “It also supports the Hungarian state’s goal of creating a national ICT champion.”

It added that the combination with 4iG is complementary, with limited overlaps and the addition of Vodafone Hungary’s infrastructure to the 4iG group will create a stronger competitor to the incumbent operator.

And Vodafone’s chief executive, Nick Read, acknowledged the deal would strengthen the state’s control of the sector.

“The Hungarian Government has a clear strategy to build a Hungarian owned national champion in the ICT sector,” noted Read. “This combination with 4iG will allow Vodafone Hungary, which has a proud history of success and innovation in the country, to play a major role in the future growth and development of the sector as a much stronger scaled and fully converged operator.”

“The combined entity will increase competition and have greater access to investment to further the digitalisation of Hungary,” Read added.

The sale is expected to be completed by the end of 2022.

Nationalist agenda

The sale comes amid EU concerns about Prime Minister Viktor Orban’s government and his nationalist agenda.

President Orban has been in power 2010 and has sought to increase his government’s influence in areas such as energy, banking and the media, which it considers strategic.

President Orban reportedly has long harboured plans to tighten its grip over the telecoms sector, and the deal will see 4iG holding a majority 51 percent stake, while the Hungarian state will hold 49 percent.

Notable player

Vodafone was – at one time – the world’s biggest mobile operator, before it sold off its hugely valuable 45 percent stake in Verizon Wireless in the United States.

But it has struggled in its traditional strongholds of Europe, amid intense competition, difficult regulatory environments and falling legacy revenue.

In February this year CEO Nick Read reportedly said the operator was pursuing mergers with rivals in multiple European markets, spurred on by more favourable signals from regulators who have realised the value of network investment during the Covid-19 pandemic.

In May this year, there were reports that Vodafone was in talks merge its UK operations with Three UK.

There has been no development since then, but in July Vodafone CEO Nick Read was quoted as saying the UK mobile market was very fragmented, and the industry was ripe for consolidation.

There has already been some consolidation.

EE was acquired by former UK telecoms incumbent BT Group in January 2016, uniting the UK’s biggest fixed line and mobile providers.

Then in 2021 O2 merged with Virgin Media, that saw the combination of Virgin Media’s broadband, TV, mobile and landline services with the mobile operations of O2.