ICT Sector in Hungary

Sectoral Analysis

Autumn 2005

 

Executive summary

EU – slow down? The performance of the European ICT market in 2004 was better than

that of the US and Japan, but this tendency has changed in 2005. The

expected annual growth in Europe is 2,9%, which is less than the

growth of the global ICT market (4,2%, driven by China and the Far-

East), and it’s far behind the dynamic US market (4%). The 2006

forecasts predict further fall for Europe in market growth, however the

European ICT sector’s contribution to the performance of the global

ICT markets is still a bit above than 20%.

Hungary – growing market

After a stagnation period, the Hungarian market started to grow and

became lively again in 2004. The telecommunication remained the

fastest-growing sector within the ICT sector, but the IT market also

succeeded to over-perform the growth of the GDP. The state is still

one of the biggest costumers in the info-communication market, which

makes a major contribution to the overall boom of the sector.

The market actors expect further improvements

The size of the IT sector has been growing since 2003 (2003 – 9,5%;

2004 – 9,6%), but this trend of prosperity broke this year. However

the expected 7% annual growth for 2005 is still better than the EU

average, but already lagging behind the performance of the countries

in the Central-European region. Nevertheless the actors of the sector

are satisfied with the year 2005, which brought nice results for the

members of the telecommunication and IT services markets.

Regulation

The upcoming elections may have an impact on the Hungarian economy,

so the ICT sector may face some challenges as well. One of the

key ICT-related campaign topics is coordination of the ICT markets. It

is still unclear how the changes will affect on the market processes

and what benefits will arise from these actions. 1st of November 2005

is an important episode for the Hungarian public administration, as the

so called "e-government" legislation come into force. This law creates

the framework of the electronic governmental services with integrating

the personal, written and electronical administration procedures

into a common domain.

What to expect? Hungary still performs well in the trade of ICT related goods. The export

is still booming dynamically, which is supported by the continuous

infrastructural investments and the expansion of the Research and

Development activities. This trend is not expected to be broken in the

nearest future, as further investments target the knowledge economy

based sectors.

 

1. Trends in the European Union and in the region

European ICT sector

The growth of the European ICT market in 2004 was 3,4%, according

to the EITO, which was less than the 3,7% global rate, but still better

than that of the US and Japan. This tendency has changed in 2005.

The expected annual growth in Europe is 2,9%, which is less than the

growth of the global ICT market (4,2%, mainly driven by China and

the Far-East), and it is far behind the dynamic growth of the US market

(4%). The 2006 forecasts predict a further fall for Europe in market

growth. In 2006 the expected value is 2,8% which is very low

compared to the US, and also 1,6%-points less than the global market

growth.

According to the EITO and the IDC, Europe is the world’s largest ICT

market. Its share in the global market is 30,1%, with the size of EUR

614 billion. The USA, which is the second on this list, is only 0,8%-

point behind Europe. Among the EU Member States, Germany has

the biggest market (21,5% share) preceding the United Kingdom

(19,1%) and France (15,2%). In average the EU member countries

spend 6,4 % of their GDP for the ICT sector, which increases the productivity

of the Unioins’s economy by 20% and generates 40% of the

EU’s economic growth. Above this, the European ICT sector’s contribution

to the performance of the global ICT markets is still a bit above

20%.

Improving IT services

Also according to the EITO, IT services grew spectacularly in 2005.

The top three market-segments within the ICT sector were the software-

market (4,4% growth, compared to data of the previous year),

the market of the telecommunication services (3,7%) and the market

of the IT services (3,6%) in 2004. These three markets are still on the

top in 2005, but the growth of the telecommunication-services (2,2%)

lagged behind that of the IT services (4,6%) and the software markets

(4,8%). We expect this trend will continue in 2006 as well.

Namely the growth of telecommunication segment will slow down

(1,4% growth), and the ICT hardware market, which produced a stable

2-2,1% annual growth in the last few years, gets its place among

the leaders. The EU still has the leader position in the world, when it

comes to industries of telecommunication devices, semiconductors

and the productions of embedded systems.

Offshore Outsourcing– heading toEastern Europe

Offshore outsourcing is gaining more and more attention in IT related

industries, which means that companies place their ICT service provider

departments outside their countries of origin or countries of operation.

Eastern Europe has abilities to become attractive in the field

of hosting offshore IT service providers. The workforce is cheaper,

well educated employees speak languages, the region is in the heart

of Europe, and the infrastructure is developed enough to serve the

needs of the business actors. The fact that Central- and Eastern

Europe is in the same time zone as the Western European countries

makes these countries more attractive for Western European companies.

According to a recent study, the leader of the offshore outsourcing

is the Czech Republic, Poland is the second and Hungary is on the

third place. Besides these three countries Romania and the former

Soviet states, such as Ukraine may have the chance to utilize their

advantages, and become a poplar target for the investors, however

the 10 New Member States try to exploit the advantages of their

membership and take up as many new outsourcing centers as they

can.

Telecommunication– consolidation

After the 3,7% percent growth in 2004 the European telecommunication

segment seems to slow down. The EUR 314 billion market is expected

to increase by 2% at the end of the year. The outlook for 2006

is not better, as the experts of the EITO and IDC forecast only 1,4%

growth. The intensive competition between the service providers in

the landline and mobile communication markets pushes the prices

down continuously. The broadband technology is spreading fast across

Europe both in the corporate and the public sector, but the differences

between the Member States are still significant. The data communication

using the third generation mobile networks (3G) are

also booming. This service is already available in most of the Member

States, or the network building is under progress. Right now 30 service

providers offer data-communication services through their 3G

networks and 21 build the infrastructure to do so out of 75 network

providers in the continent. Altogether 2,6 million 3G subscribers used

the voice and data transmitting services of these companies in 2004.

This mobile broadband market will be one of the engines of the further

growth of the whole telecommunication segment.

Mobile sector – decreasing advantages on the leaders side

The mobile sector was booming in 2004. Besides the 7% annual

growth, the market penetration was over 83% in the EU-25 (EU-15 :

86%). This penetration covers 534 million subscribers within the Union,

which may grow to 574 million by the end of this year. The competition

between the market actors is getting bigger, which is indicated

by the decreasing market share of the leading provider in every

country. (In average from 46,6% to 46,2%). According to the Datamonitor,

the mobile device producers did not experience the same

boom in their segment, but they expect that the market will grow.

Just like in 2004, the improvement of this year will be around 1,8%.

Broadband acceleration

2004 was the year of the significant development of the broadband

infrastructure. According to the surveys of the EU, there are 28 296

million broadband connections in the 25 Member States, which are

used for communication by 6,5% of the EU population. Among the EU-

15 the growth was 7,6 percent compared with the last year data. This

sector really shows the ICT infrastructural differences between the

new and the old Member States, as the value of the market growth is

only 2,2% in the recently joined countries. However these countries

mostly started to formalize and also to execute their national broadband

strategy, so the large gap between the EU-15 and EU-10 countries

is expected to decrease in the forthcoming years. According to

the Datamonitor, the cable-tv and the broadcasting market, which is

one of the main drivers of the broadband sectors, may grow with

2,7% in 2005 after the 2,5% value in 2004. The number of the

broadband users by the end of this year will be around 40 million,

says the EITO.

What is in the cable?

The landline market, despite its narrowing, is still popular among the

investors, as the number of the market participants is more than last

year. The consumers choose alternative service providers instead of

the telecommunication-giants more frequently. The competition is not

very strong on the market of local calls (the share of the alternative

service providers is only 20%), but in case of long-distance calls this

number grows up to 31%. The calling rates will continue to fall not

only between landline stations, but also between landline and mobile

devices.

2. Evolution of the sector in Hungary

The Hungarian market

According to the estimations, the size of the complete Hungarian ICT

market will be close to the EUR 7 billion by the end of 2005. The biggest

segment of the whole sector is the telecommunication (57%),

then comes the ICT device production (25%), the IT services and the

software development (8%). The expected growth for 2005 is 6,5 –

7%, which is far above the EU average, but less then the Central- and

Eastern European average (8%).

Foreign trade – slightly drop in imports

The statistics of the Hungarian Central Statistical Office indicate that

in the period between January and August 2005 the foreign trade of

the ICT related goods improved compared to the same period of the

previous year. Hungary is more like a producer country than a host

country since more products were transported to abroad than vica

versa (in average the export increased by 8%, while the import decreased

by 2%). The import of office machines and automatic data

processing machines reached the value of 323 349,1 million Ft, the

export of these products valued at 533 901,2 million Ft between January

and August 2005. These values were 13% and 7,7% higher than

in the same period of 2004. If we take a look at the trade of the

 telecommunications

and sound recording and reproducing apparatus and

equipments than the values were HUF 608 894,4 million (which represents

a 16% growth) in case of import, and HUF 1 277 767,5 million

(which is a 3% decrease) in case of export. The import is also quite

high in case of the electrical machinery, apparatus and appliances

(2,4% drop, HUF 1 345 480,8 million), but export remained on a

growing path (8,2% growth, HUF 857 335,6 million).

The destinations of the ICT products are mostly in EU countries. The

main export markets of Hungary are: Germany, the Netherlands, Austria

and France. In case of import Hungary receives goods - besides

the European countries – mainly from the Far-East of Asia (China),

USA, and Russia.

Important comparative advantages

The actors of the Hungarian ICT industry and its submarkets still have

comparative advantages, which make the products and services of the

Hungarian ICT companies marketable, not only on the highly competitive

Hungarian, but also on the international markets. These advantages

are the cheaper workforce (compared to Western Europe), the

high quality of education, the creative workforce and the management

experiences from the competitive Hungarian market. But the improving

management skills are not enough on the international market, as

the lack of language knowledge, the ignored marketing tools and the

shortage of capital (which might support the ICT R&D) hold back the

expansion of the Hungarian companies in the international market.

Booming investments

The post, telecommunications and storage sector received HUF 264

564 million investments until August 2005, which was 40,6% more

than last year. The majority of these investments aimed the improvement

of the telecommunication infrastructure (broadband Internet,

3G mobile networks).

More and more companies locate their knowledge-intensive, R&D activities

to Hungary (e.g. IBM, SAP). One of the most important initiatives

is the Mobile Innovation Centre, which is responsible for the research

and development of the 4th generation mobile-communication

systems. Besides the support of the Hungarian state (HUF 2 billion)

the private sector also joined this research consortium through the

biggest telecommunication companies.

Not only the big companies, but also the SMEs decided to invest more

into ICT sector in 2005. According to estimations the investments

structure of the companies is the following: hardware (49,9%), software

(24,4%), IT services (13,7%), Telecommunications (12%). It is

worth comparing these values to the operative ICT expenditures:

Telecommunications (97,8%), hardware (1,7%), IT services (0,8%),

software (0,6%).

The role of the state

The Hungarian state is still one of the biggest consumers on the informatics

and telecommunications markets, which results in boosting

the whole sector. The infrastructural improvement of the state organisations

is continuous, but there are still big differences between certain

kinds of organizations in ICT device penetration. On the one

hand, the organisations, which belong to the central administration,

generally use the latest technology, but on the other hand, public

schools and hospitals have still basic problems with their old equipment,

and telecommunication connections.

In average 36% of the public institutions bought IT services in 2004.

The ‘best’ consumer was the central administration and its institutions

(54%), while the worst were the educational institutions (31%). The

most popular services were the software installation and support

(59%), hardware support (52%) and the application development

(33%). The market has fallen a bit since 2003, but according to the

experience of the biggest suppliers, like HP, a growing need is expected

from the budgetary organizations for integrated, quality IT

services. So the prospects of the market are quite good. Another

promising field is the IT supported organizational process management.

According to the Bell research, 37% of the institutions thinks

that their processes need to be reengineered.

Digital divide is still a problem

The digital analphabetism is still a controversial discussion within the

Hungarian society. The DIDIX index, which measures the digital divide

(ICT device penetration among the citizens), was 47% in 2004, which

is far behind the leader states in the EU. The indicator of the internet

penetration in 2004 was 30,2%, which ranks Hungary to the 23rd

place in the EU-25. The government promised to improve these conditions

in 2006, which includes the training of the support staff of the e-

Hungary and Public-Net points and the development of the national

broadband infrastructure. In 2005 80% of the population lives in regions

covered by broadband telecommunication infrastructure. The

digital divide exists between Budapest and the rest of the country as

well. The internet access rate is three times higher in the capital, than

in other regions. Further improvement in the ICT penetration of the

society is also crucial for the whole ICT industry as well. Unfortunately

the numbers of the PC penetration are also stagnant. The growth between

the 2nd half of 2004 and the 2nd half of 2005 was only 1%-point

(it increased to 36%).

 

Reform in the higher education

Although the Court of Constitution declined the new act on higher

education, the institutions start their educational activities next year

according to the structure of the Bologna process. The number of the

applicants for the Informatics faculties and majors is rising. In 2005

more than 27 000 people study IT related curriculum in the Hungarian

higher education. The experts of the government and the private

companies are concerned that the number of the graduates in the ICT

relevant fields will cover the needs of the markets in the future. The

quality of the education is supposed to be improved with the introduction

of the latest quality assurance systems. The new system has a

good chance to establish domains to attract more knowledge-intensive

activities to Hungary.

 

3. Market Structure

Market size

Market actors

The leaders

SMEs

The Hungarian IT market is a very competitive market. The number of

companies, which deal with products and services, related to computer

industry is more than 10 000. The share of SMEs is more than

90%. Between 1998 and 2002 the number of employed workforce in

this sector increased from 13 000 to 25 000.

The biggest companies on the market of ICT devices are the Hewlett

Packard, the IBM, which is planning to establish more than 700 workplaces

in its R&D centre in Budapest in 2005, and the SUN. On the

market of IT services the share of KFKI and Synergon is above the

average of the Hungarian companies, the SMEs cover almost the half

of the whole market. New members on this field are the outsourcing

companies, which support IT processes for companies within and outside

the national borders. (Gedos, EDS, Accenture)

If we try to rank the companies according to their income, then the

biggest turnover goes to the computer-producer companies, but the

IT service providers are also coming up to the top in the last few

years. The market is dominated by the big multinational companies,

but Hungarian actors have growing reputation, however there are

several foreign investors among their owners. The dominant actor of

the ERP market is still the SAP, but there are 20-30 other companies

on the market. The majority of their turnovers are coming from consultancy,

which is expected to remian in 2006 as well.

The SMEs’ ERP consumption is a relatively new market for the software

suppliers. According the estimations, only 56% of the PC user

companies, which employ more than 5 people, use any kind of software

support for the administrational and business processes. The ICT

device penetration and the ICT infrastructure among the SMEs at this

moment are good enough for the basic operational needs, but further

development is essential. These developments (integration and optimization)

should target the processes of the sales, procurement, executive

information support, production and marketing.

Telecommunication– no borders

The telecommunication market (landline and mobile communication,

Internet service providing, cable-tv, the expected, cumulated turnover

in 2005 is HUF 700 billion) stepped one stage higher on its maturity in

2005. The merge of the market leader companies started to remove

the borders between the submarkets, which will lead to different market

segmentation. The infrastructural segmentation (landline, mobile,

cable) is turning into user segmentation (public, corporate, governmental

users), where the service providers will introduce customized,

and integrated services for the consumers.

Landline Communication

2005 was a very busy year in the sector of landline communication.

On the one hand, the market leader finally changed its name from

Matáv to Hungarian Telecom (Magyar Telekom). The result is a complete

company portfolio, which followed the patterns of the German

owner, called Telecom group (T-Com, T-Online, T-Mobile, T-Cable, TSystems).

Besides that, the Hungarian Telecom decided to abolish the

administrative independency of the T-Mobile, so the two companies

are expected to merge this year and the T-Mobile will be one of the

divisions of the Hungarian Telecom. With this step the T-Com might

have a great advantage on the market compared to its competitors in

the mobile and in the landline market since the possibility of developing

and introducing new, complex and combined services (packages of

cable-tv, broadband internet, and mobile communication services,

putting all of them on the same bill) is such an advantage, which is

hard to be followed by other market actors.

Another reason of the strong competition is the narrowing market.

The National Telecommunication Authority (NHH) reported 3,4 million

subscribers in August 2005, which reflects a 140 000 decrease in the

number of subscribers compared to the beginning of this year. This

tendency is continuous, according to the NHH, the market lost more

than 6 000 consumers in October 2004. The situation of the market

leader (T-Com) is stable, but the number of its pubic and corporate

subscribers is decreasing. This loss was 0,1% in the public sector, and

2,5% in the corporate sector. The difference in decrease rate is a result

of the fact that the competitors concentrate more on the corporate

users than the public ones. Nevertheless, the actions of UPC and

Tele2 made the public segment also a bit more competitive. After the

liberalisation of the market of the local calls, the calling rates are decreasing.

Gradient

UMTS

The mobile communication market is still booming in 2005. Until the

end of August, the number of calls increased by 8,5% compared to

the same period in 2004. Altogether 9 02 623 subscriptions were in

use, which means that among 100 people in Hungary 89,4 had a mobile

subscription. If we compare this figure to those of other European

countries, then Hungary has a reasonable advantage (EU-10: 67%,

EU-15: 83%, EU-25: 83%). 70,79% of the mobile contracts was prepaid

type. The market share of the three big mobile service providers

is the following: T-Mobile (45,29%), Pannon GSM (34,11%) and Vodafone

(20,6%). The market is still dominated by the infrastructure

based competition, which is driven by development of the 3G – UMTS

networks, although none of the providers are willing to cover the

whole country with their mobile broadband service.

The test of the UMTS networks have started during the summer of

2005 and in September the two biggest providers (T-Mobile, Pannon

GSM) entered the market with their 3G service. These mobile broadband

services, which are mainly based on mobile-datacommunication,

are expected to extrude the traditional voice based services.

A new market gap will be filled up soon, as the commerce of the mobile

minutes for other companies will be possible. This will help the

competitors of the market leader to develop integrated mobilelandline

products and services, and new, budget service providers will

appear on the market. (e.g. Tesco plans to introduce its value mobile

service)

VoIP, WiFi The IP based voice services (VoIP) are emerging quite fast. The first

network based phone devices appeared on the market this year, and

the T-Com will introduce its public VoIP service, called Klip, at the end

of this year. The mobility will be a key factor in this segment as well.

The combination of different technologies (3G, WiFi, VoIP) and the us-

age of the appropriate devices will enable the users to find the cheapest

way of voice and data communication anytime. An existing mobile

and landline network is quite important in developing these services

and provides advantages for the network owners.

Broadband services

Almost all the network actors grew in course of 2005. Since January

2005 the number of ADSL subscribers increased from 249 000 to

320 000, according to the NHH. The leader of the Cable-tv – market,

the UPC Hungary presented its cable-tv and internet service in more

than 720 000 households. UPC also introduced its VoIP service, which

is only accessible in limited areas (the capital, and some bigger cities

in the country). The UPC Direct Cable-tv network and the Chello

Broadband internet service have altogether more than 1 million subscribers,

but the performance of the company is stagnating. The

HTCC, which is behind the Hungarotel Corp. and Pantel Corp., wants

to be the 2nd biggest telecommunication service provider in Hungary,

throughout M&A acquisitions, however the Invitel Corp., which is the

2nd biggest company on the market at the moment with its 480 000

clients, wants to keep its position as well.

E-commerce 

In July 2005, according to estimations, the internet penetration

among the Hungarian Enterprises, which have more than 5 employees,

was 82% (approximately 51 000 companies) that represents a

9% growth compared to the same period of the previous year. The

Forester Research says that till the end of this year, the value of the

B2C segment might be around HUF 18 billion, which is 40% more

than the value of 2004 (HUF 12 bn). The size however is still very

tiny, if we consider the size of the whole retail sector. The most important

motivators to implement e-commerce, according to CEOs are

the more efficient customer relations, the competition on the given

market, corporate image improvement and the improvement of the

services of the company. Among the barriers the most important factor

is a legislation bug. Only those corporations are allowed to establish

an e-Shop which have a real Shop too. The specification of the

products and services could also be a barrier, as they might not be

appropriate for e-commerce, and the level of preparation of the consumers

for this new distribution channel is also a risk (only 6% of the

internet users buy goods regularly on the internet).

The costs to launch an e-Shop are quite high. The smaller part of

these costs is the technical implementation, which is not a problem for

the smaller companies, but the bigger part, the marketing communication

is quite problematic. Thus not surprisingly only 50 e-

Shops are managed to make a successful start out of approximately

1000 launches and they cover 80% of the whole market.

Marketplaces 

The leader of the Hungarian horizontal marketplaces is the Marketline

Corp, which is basically owned by the T-Com group. The turnover of

the marketleader was HUF 30 billion in 2004. The most important

transactions on this marketplace are the auctions (altogether 505

transactions so far), and this trend seems to be continue in the nearest

future. The competitors of Marketline are not strong enough yet.

The Eebid Ltd. managed to reach the HUF 40 billion income from 350

transactions in 2,5 years. The marketplace of the Hungarian Post was

established in 2002 and connected to a public e-procurement system

for governmental activities but it was only used for own transactions.

The market is uprising, more and more service providers (e.g.

Wanari) enter the market and the bigger companies also started to

develop their own auction solution (e.g. Egis, K&H Bank). There is

enough room to improve, as the market is still in an early stage. According

to estimations only 1% of the Hungarian market actors appeared

actively on marketplaces. It means 600 companies.

Financial services– growing popularity

Internet- and mobile banking services provided by financial institutions

are very popular among the corporate and public clients. In the

corporate sector more than 83 000 enterprises use internet banking

and 70 000 use mobile banking in 2005. In the public sector the number

of the individual users reached 520 000 (Internet) and 740 000

(Mobile) after the first quarter in 2005. The most popular services are

the electronic money transfer, buying/selling investment founds and

transaction control.

4. Regulation and policy measures

Elections 2006 The future of the ministry of the ICT sector is getting uncertain as the

elections come. The government wants to cut the size of the governmental

sector, and the Ministry of Informatics and Communications

(IHM) is one of the possible victims. One of the options is that the

Ministry of Economics would take over the tasks from the IHM (maybe

even before the elections). It is quite certain that a major reengineering

of coordination will take place after the elections (all parties are

willing to change the structure). On the one hand, this reengineering

is necessary since the ICT related coordination functions are shared

between the IHM and the Office of the Prime Minister (MeH). On the

other hand, there are doubts that the adequate importance of the ICT

industry will be ensured after the transformation of the structure,

which would be essential for the development of the Information Society

and for the elicitation of the digital divide.

E-Government boom

The first stage of the e-Hungary program has finished in course of the

summer of 2005. Now in 3032 e-Hungary points of 1500 municipalities

provide free or cheap internet access across the country. The program

continues with the development of a professional support network

for e-administration. The building of the Public-net (Közháló)

network is still an issue, right now 7500 access points were established,

which provide services for governmental and educational institutions.

1st of November 2005 is an important day for the Hungarian public

administration since the so called "e-government" legislation came

into force on that day. This law created the framework of the electronic

governmental services with integrating the personal, written

and electronical administration procedures into a common domain. In

this field Hungary is still among the less developed countries in

Europe. According to the EU initiatives 20 + 7 official public administrational

cases and processes will be available for the citizens on governmental

websites from the end of this year. The first two steps of

the 4 steps e-Government initiative (description of the cases, document

downloads) will be available in 2005. The complete electronic

process will be available only in case of the following three fields:

taxation, enterprise-administration and higher education application.

From the end of 2006 electronic payment transactions will be available

too. This field must be improved since according to the 5. annual

e-Government study of the Brown University (USA) Hungary is only

the 105th out of 198 countries in this respect.

Intellectual Rights

In 2005 the Creative Commons (CC) intellectual rights license system

was implemented in Hungary, which is supposed to be more flexible

than the traditional license system. By means of the CC, authors are

able to manage the copyrights of their works in line with their needs.

This system makes it available to copy legally the works protected by

this license. There are still doubts though – mostly from the defenders

of the traditional intellectual rights system (Artisjus) – which say that

the old and the new system will not work together properly.

5. Short and long term prospects

In short term In short term the election will have the biggest impact on the Hungarian

ICT sector. The biggest issues regarding the elections are the distribution

of the informatics coordination and the way the new government

serves the improvement of this industry. The country still

performs well in the foreign trade of ICT products; the export grows

dynamically, which is driven by the continuous investments into the

infrastructure and R&D sector. This trend is expected to continue in

the nearest future, especially the investments into the capacities of

the knowledge based industries.

On the field of telecommunication the strong competition, which is

driven by the infrastructure demand, will continue. At the end of this

year the first integrated mobile-landline products and services may

appear. The market will be still leaded by the T-Com group, but the

competitors will be also very active. New budget service providers

might enter the market soon since the trade of mobile minutes between

the possible providers starts.

With the spreading of the high speed, broadband internet infrastructure

the citizens of the rural areas will also be able to reach the latest

e-Government applications which will start up from the end of 2005.

The companies on the IT services market will close a prosperous year

in 2005, and this hype will probably continue in 2006 as well. There

are several possible consumers on the market, which are planning to

invest into their IT infrastructure (hardware and software development,

process reengineering, IT consultation).

In long term In longer term Hungary will also feel that the European ICT market

slows down. However the re-announced Lisbon strategy may have the

chance to change this trend, which would also have an impact on

Hungary. If the EU accepts its budget, then from 2007 the amount of

subsidies that Hungary can get from Brussels will be remarkably larger

than before. Handling the extra money will be a challenge for the

governmental coordination institutions since the current structure is

not capable to utilize these subsidies without reforms. The political

leaders have to find a solution for clarifying the institutional settings

and processes and also for decreasing the high level of corruption.

On the field of telecommunications the IP based technology will push

the old, regular technology out from the market. New business applications

will appear for the users, which are based on the existing VoIP

technology. Another emerging technology is the triplay, which includes

an integrated platform of voice, image, and data communication.

Companies, which have good position on at least two of the

triplay’s submarket, may have great advantages on this new segment.

 

6. Sectoral SWOT analysis

Strenghts Weaknesses

• Increasing competition on the

telecommunication market, high

mobile-penetration, broad service

scope

• Strong competition on the field of

data-communication

• Increasing internet-penetration,

broadband penetration and computer

usage

• Demand driven market on the

market of hardware devices and

services, with great amount of

market actors

• Good R&D sector improvement on

the basis of Hungarian professionals

• The public ICT penetration grows

dynamically, (Public-Net, e-

Government)

• Weak public internet-penetration

in international comparison

• There is no efficient answer for

the problem of the digital analphabetism

in the society

• Small Hungarian ICT market,

small Hungarian purchasing

power compared to the price of

the ICT products and services

• The main investors are the big

companies, the SME sector is not

active enough

• The ICT infrastructure (especially

broadband) is not distributed

equally in the country

• The efficiency of the political coordination

is getting worse, because

of the elections

Opportunities Threats

• The increasing telecommunication

competition decreases the prices,

which increases the ICT penetration

• R&D investments may grow in

case of an appropriate infrastructural

background

• Improving company competitiveness,

based on infrastructure and

education

• Spreading ICT services in the

whole economy

• State services might cover the

public administration with egovernment

services

• Better integration chances for the

rural areas

• The European ICT slow down may

have an affect on Hungary as well

• The decreasing cost competitiveness

results in attracting

less outsourcing activities

• Widening digital divide between

the rural areas and the capital

 

 

 

 

 


(c) 2001Copyrights, Hungarian Trade Office, Taipei   
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