Following complaints by third parties the European Commission (EC) is now examining Hungary’s recent spectrum auction, TelecomFinance has learned.
A spokesperson for the EC confirmed that the Brussels based regulator is following up on concerns…
Following complaints by third parties the European Commission (EC) is now examining Hungary’s recent spectrum auction, TelecomFinance has learned.
A spokesperson for the EC confirmed that the Brussels based regulator is following up on concerns raised by unnamed third parties to do with the January auction, which awarded the largest and most valuable block of available spectrum to a consortium of state-owned companies.
Earlier this month the National Media and Infocommunications Authority (NMHH) had granted a licence for its A block 5MHz band to the new state consortium, effectively introducing a fourth player to the mobile market.
Established players Magyar Telekom, Vodafone Hungary and Telenor Hungary all won spectrum in the less valualabe B block.
“Some concerns have been expressed concerning the recent assignment procedure for part of the 900 MHz band in Hungary, which we are currently examining,” the EC spokesperson told TelecomFinance, while also noting that this early stage investigation would not necessarily imply that any particular action will be taken.
According to legal experts the EC’s early stage investigation could result in more serious consequences for Hungary. Norbert Balint, associate at the Hungarian chambers of law firm Wolf Theiss, said the EC could very well decide to intervene.
“There is great global concern about the increasing state involvement in commercial markets and the EC has been scrutinising Hungary for a long time,” he said.
Titusz Puskar, a lawyer with the Hungarian chambers of law firm Bird & Bird, concurred:
“The EC may [get] involved if … they find any discrepancy between the decision of the authority and the [European] Community Law.” With reference to other infringement proceeding launched against Hungary under EU rules earlier this year, he added: “As you could see recently, they are very active in interfering in Hungarian domestic matters.”
Balint said that the EC could also intervene if it finds the Hungarian regulator did not act impartially when conducting the auction, showing favouritism to any of the participants.
The EC spokesperson summed up the EU rules on the matter as follows:
“[R]ights to use radio frequencies must be granted on the basis of open, objective, transparent, non-discriminatory and proportionate procedures. There is no obstacle under EU law for a State owned consortium to participate in such procedures and to operate a spectrum license, but of course the national authorities must in those cases also ensure that the requirements of EU law regarding state aids and regarding regulatory independence are fully respected.”
Chances of success of appeal to NMHH low
Earlier this month, the nation’s three incumbent operators filed an appeal with the Hungarian NMHH, contesting the state consortium’s right to participate in the tender as well as a new requirement to provide domestic roaming services to the consortium. The NMHH has 45 days to reach a decision, before which the state consortium – which consists of national post service Magyar Posta, power company Magyar Villamosmuvek and development bank unit MFB Invest – cannot commence operations.
Commenting on the pending appeal by the three incumbents in Hungary, the lawyers were cautious about its chances for success.
Balint explained that, while the grounds of the appeal have not been made public, the tender document was altered in October to allow the state consortium to participate.
“It has been argued that it would not have had time to participate otherwise,” he said.
He added that while the state had advocated a new market entrant for some time, bids from two other candidates were rejected for failing to meet certain formal requirements.
Balint said he expects the regulator’s initial decision will be upheld and, while the incumbents have the right to contest the matter in court, this would not automatically prevent the state consortium from commencing operations.
Overall, Balint said, the current appeal is unlikely to succeed.
“The general opinion is that they [the incumbents] can only delay the decision, not reverse it.”
Titusz Puskar agreed, saying “it is most probable that the president will reject the appeal and confirm the first instance decision in its entirety.”
At the same time it remains to be seen whether the decision, if upheld, will have an ultimately positive or negative impact upon the market.
On the one hand a new market entrant could raise overall standards, Balint said. “But the fears of the current incumbents are that the state will change legislation so that it favours the consortium. [The state] could provide a guaranteed and easy market for it which, of course, would have a negative effect on competition.
“I expect a bit of a combination of both, although we’ll have a much clearer picture in a few years time.”
Magyar Telekom confirmed it had filed an appeal with the NMHH. Spokespeople declined to comment further, other than to say the appeal does not affect the price the company has agreed to pay to the state for the 900MHz frequencies awarded. “Magyar Telekom will pay this amount to the state budget after the decision becomes final and binding,” they said.
Vodafone Hungary and Telenor Hungary also confirmed they had filed an appeal but declined to comment further.
