Deutsche Telekom pledges to invest 'billions' in Hungarian broadband network

BUDAPEST Fri Feb 21, 2014 9:19am EST

Hungarian Prime Minister Viktor Orban (R) and Chief Executive of Deutsche Telekom Timotheus Hottges (L) sign an agreement during a news conference in Budapest, February 21, 2014. REUTERS/Bernadett Szabo

Hungarian Prime Minister Viktor Orban (R) and Chief Executive of Deutsche Telekom Timotheus Hottges (L) sign an agreement during a news conference in Budapest, February 21, 2014.

Credit: Reuters/Bernadett Szabo

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BUDAPEST (Reuters) - Deutsche Telekom (DTEGn.DE) will invest at least a billion dollars in Hungary over the next few years on a nationwide high speed internet network, Chief Executive Timotheus Hottges said on Friday.

Hottges and Prime Minister Viktor Orban agreed on Friday to give every Hungarian household access to the broadband network by 2018, under a deal which also involves government and European Union support.

Deutsche Telekom owns 60 percent of national telecoms company Magyar Telekom MTEL.BU, which competes in mobile services with Britain's Vodafone Group (VOD.L), Norway's Telenor ASA (TEL.OL) as well as cable group Liberty Global's (LBTYA.O) unit UPC Holding LBTYAH.UL.

"Deutsche Telekom will invest several hundred billion forints in Hungary over the next few years," Hottges told a news conference.

"Within the right regulatory framework, a framework that also includes government and EU support for underdeveloped areas, we are willing and able to develop high-speed broadband internet access for all Hungarians."

A spokesman for Magyar Telekom later said that the investment plan covers both fixed and mobile broadband services, and that so far about 60 percent of Hungarian households have access to some kind of broadband connection.

Shares in Magyar Telekom were down 5 percent at 326 forints by 9.00 a.m. ET, valuing the company at around 339 billion forints ($1.5 billion), after traders said the company had dismissed a market rumor that it would increase its stake.

Telecommunications is one of several industries, along with energy and banking to be hit by special taxes since Orban swept into power in 2010 as part of his government's drive to cut the nation's budget deficit to European Union limits.

"In the last few years we sometimes felt that the setting was not as investment-friendly as we had wished and that the dialogue could be improved," Hottges said.

However, following "developments" last year and his talks with Orban on Friday, Hottges said Deutsche Telekom now looked ahead with "great optimism."

Last year Orban suggested telecoms firms might be able to reduce their tax bills by making investments that supported the economy.

In Deutsche Telekom's 20 years in Hungary, Magyar Telekom has invested 1.8 trillion forints ($8 billion) and with an annual tax bill of 140 billion forints it is among the top taxpayers, Orban said.

Magyar Telekom's capital expenditure totaled 117.4 billion forints in the first nine months of 2013, boosted by payments to renew its radio spectrum licenses both in Hungary and in Macedonia. Its net profit for the first nine months fell by 40 percent to 23.2 billion forints.

It employs 12,000 people directly and gives work to another 100,000 through suppliers.

Shares in Magyar Telekom were down 3 percent at 332 forints by 7.04 a.m. ET on Friday.

(Editing by Greg Mahlich)

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