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Analysis of the Hungarian Mobile Market

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Introduction

INDUSTRIAL ORGANIZATIONS (ECO 431) Analysis of the Hungarian Mobile Market Introduction The mobile market is still one of the most rapidly expanding business sectors in Hungary. Openness to new technologies and society's need for swift communication, have elevated current statistics to show that the number of mobile telephones in Hungary exceed that of landlines. And it appears that the balance continues to shift more in favor of mobiles. This is characterized by the occurances of the previous years. At the end of 1999 the proportion of landline to mobile use was two to one, by the end of 2000 the number of landlines was only 25% higher than that of mobiles. Recently, over the course of the past few years dramatic changes have taken place. The country's leading mobile provider, Westel Mobile Rt., reached 2 million subscribers by June 12, 2001; at the same time Pannon GSM reported 1.5 million subscribers, while the number of Vodafone subscribers was around 260,000.According to a recent report of the Telecommunications Supervisory Office, the number of operational mobile telephones in October 2003 amounted to 7,614,256. Given the tendencies of previous years, this number is expected to increase. Therefore, we can observe that mobile penetration has increased by nearly 100% over the course of the last few years. Growth shows no sign of slowing with the market. This makes it one of the highest growing markets in eastern Europe. But how will the Hungarian mobile-market develop further? Can the sharp increase of recent years be maintained, and when can we expect signs of market saturation? ...read more.

Middle

In the intersection point of the two lines is the point where the customer is indifferent between the two. The market had witnessed unprecedented growth during 2000. At the end of the year it was home to 3.1 million users, this constitutes a 92.5% increase on the previous year end of 1999. This also beat the government's forecast of a target of 2.5 million by a considerable margin. Also noteworthy is that mobile penetration reached an impressive 30.7% in December 2000, up from just 15.9% twelve months earlier. The market is growing indeed. according to analysts, 2002's tendencies were easy to predict. The fast growth continued in the mobile market. However, it seems harder to foresee the development of the market later on. The only fact evident is that in the long run, there will be more mobile terminals in the country than the number of people living in it. Hungary's new telecommunications act, which is currently being debated in Parliament, is also expected to further boost competition in the mobile phone market. With three competing mobile phone operators the Hungarian market is probably the toughest in the entire region. Mobile Penetration Development in Hungary The second year of liberalized telecommunications in Hungary was marked by a decline in the number of fixed-line subscribers, but a persistently growing mobile market. In the first quarter of 2003, the number of mobile subscriptions (including active SIM cards and analogue subscription) rose to over 7 million for the first time, says a telecommunication market quarterly report compiled by the National Communications Authority (HIF). ...read more.

Conclusion

We have just recently perused in the latest issue of the Budapest Times that the new telecoms legislation has just been officially approved in Parliament. The new telecom act will come into force January 1, 2004 for fixed-lines and May 1, 2004 for mobile networks, just in time for the EU entry. We are yet to see what real effects this law will have on market competition, and if predatory and limit pricing attempts will be detected and penalized by the GVH. Also of note for future developments is Hungary's ensuing EU absorption. Although it is expected that new fixed-line operators will enter the Hungarian market after EU integration, in the mobile market, the situation is quite different. Given the considerable number of active mobile phone users in the Hungarian population, it seems inconceivable that a potential new entrant firm could operate efficiently next to the incumbents. They would need a lot of resources and a good financial background, since return on the investment would probably take a good number of years. The fact that the number of mobile providers is not bound to increase in the future is one issue that all three firms seem to agree on. However, we believe that eventual new entrants will or should make their way on the market, since this would further promote competition which is an obvious goal of the Hungarian Competition Office (GVH). What we, consumers can do is to hope that at some point in time prices and minimum average costs will tend to meet, setting an end to the presence of dead weight loss. This way welfare as well as consumer surplus will be maximized on the Hungarian mobile market. ...read more.

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