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Compete and Develop: Telco Companies Finding Ways to Grow

The telecommunications sector is famous for its procompetitive attitudes, which can be seen in the market’s shrinking prices in the past years. Great offers and creativity are needed to find ways to grow when the less than 10 million Hungarian citizens already possess more than 11 million SIM cards. 

While there are several millions of residential clients who speak little on their phone and pay late, as a market insider who wishing to remain anonymous explained to the Budapest Business Journal, business clients speak a lot and keep due dates. Therefore, business subscribers are much more precious for telco providers and so the competition on the telco market will increasingly focus on them, our source predicts.

At the same time, there is simply no room left to further lower prices, market players report. As such, new opportunities can be only found in providing convergent services, meaning that landlines, mobile phones and IT systems all come from the same supplier.

Magyar Telekom, as the descendent of the formerly state-owned monopoly Matáv, leads this market at the moment, but “Vodafone is on the rise with currently about a hundred clients with convergent services,” Vodafone Hungary’s communications director János Suba tells the BBJ.

Meanwhile, the road to residential clients, especially to high value customers, leads mostly through mobile internet. The three biggest telecom companies, Telekom, Telenor and Vodafone, already offer limitless internet packages, as an increase in data traffic has already been a trend for a while. Involving the clients’ family members in one package is another strategy.

Vodafone even offers a “Kid” prepaid package that enables the child to call their parents even when there is no money left on the account. “People love it,” Suba notes.

In addition to the race for subscribers, there is also a competition for workforce. Hungary’s deepening labor shortage has not left the telco sector untouched, although market experts describe the situation as not being as dramatic as in other sectors. Still, it is not unusual for telcos to cooperate with universities and colleges to make sure they can find the best staff in time.

Engineering professionals are the most often sought for category. Employer branding also becomes of increased importance in order to retain workers. “We try to be attractive not only as a brand, but also as an employer,” Suba says, adding that Vodafone works using a mobile office system, meaning that no one has a fixed place to sit at in the big, spacious office, while home office work is also strongly supported at least one day a week.

Ahead of Regulation 

A market is regulated either from above, or spurred by the competition itself. In the telecom sector, it is usually the latter case, as market players typically have a procompetitive approach. This is clearly shown in, for example, the mandatory reduction of the length of loyalty contracts.

The regulation comes into effect just now, on October 24, but the changes it facilitates have already appeared on the market, as contracts without a loyalty period have already been available. Competition has forced sector players to stay attractive for their clients through lower rates and better services instead of legal ties.

Something similar applies to the elimination of roaming fees. Even before the European Union removed the extra charge for making phone calls to the mother country from any EU member state by June, most of the big telco companies already offered packages with very low roaming charges or, in the case of Vodafone, without any extra fee at all.

As such, Vodafone does not expect major changes in its regular business as a result of the EU decision, while Telekom also predicts only a slight increase in the amount of cross-border calls. At the same time Telenor, as it said in a previous interview, looks ahead to a rise not so much in the number of spoken minutes or sent messages, but in data traffic.

Increasing “Internet of Things” (IoT) services are also expected. IoT, referring to a network of devices that are connected to the internet, is hoped to make everyday life easier very soon. “This is not 5G yet, but we are getting close,” Suba says when telling about a freezer that counts the number of ice creams being taken out of it, and so takes care of the new procurement automatically.

And while parking lots with an integrated SIM card and a sensor can already send data about whether the lot is free or not, in a few years’ time cars will also be able to park without anyone driving them. Vodafone is objectively leading the worldwide IoT market, Suba says. “Due to our R&D, we have an advantage that is impossible to catch up with.” (For more about 5G and Hungary’s digital strategy, see our article “The Faster the Better: Hungary’s 5G Coalition on page 15.)

To make society ready for the changes, Vodafone created its vision called Gigabit Hungary. “The future will start around 2020,” Suba says explaining that by the end of the decade, data transformation capacity will allow users to send gigabits per second. In order to let everyone enjoy the benefits of such developments, the company cooperates with 25 schools, mostly in disadvantaged regions such as Borsod or Csongrád County. 

“We want to see a social gap as narrow as possible in the matter of internet access,” Suba explains. The 6,000-7,000 kids involved in the program got tablets and training about safe internet usage and are now motivated to not only use Google and Facebook but to start generating creative content such as blogs and vlogs because ‘this is the future’.”

The BBJ contacted all five major players of the telecommunication sector, but as companies were very busy getting prepared for the new regulation coming into effect on October 24, only Vodafone was able to give us an interview. For this reason, the company may appear overrepresented in our article.