Over at the day job, i.e. senior editor of a weekly entitled the Business Budapest Journal, this blogger got to run an interview with one György Beck, a big-league player in the Hungarian IT market. Formerly CEO of Hewlett-Packard Hungary, CEO/co-founder of Digital Hungary (and subsequently CEO of Compaq Central Eastern Europe), and software developer at Hungary’s Computer Application Research Institute, Beck just recently joined Vodafone Hungary, where he’ll be interested in pumping up the local telephony systems and more.
Below run a few excerpts from the interview, which features Beck’s takes on Vodafone’s competition in the region, the future of 3G, HSDPA, and outsourcing to Eastern Europe.
Q: Vodafone is seeking to be more than a mobile telephony company, but an overall provider of telecom solutions, as seen in products such as Vodafone Otthon. What revenue share do you expect non-mobile services to deliver to Vodafone in future?
A: We’ve had a long debate about whether it is sufficient to be simply the best mobile operator going forward. For a long time, as the global market leader, it was ample to focus on being the best mobile company but at the beginning of last year, corporate management realized this was not enough. Since then, we’re focusing on becoming an overall communication and telecommunication company evolved from the new segment “mobile plus” which incorporates everything beyond mobile voice. We’ve started to focus on this element worldwide, and in Hungary we’ve realized that if we want to grow we have to focus on mobile plus, of which Vodafone Otthon is a flagship product, although there are several other services that we’re planning to roll out in future.
Q: Such as regular broadband internet?
A: The Otthon offering will be extended to some other areas like ADSL. We’d like to offer a complete telecommunications solution, either alone or through some kind of strategic agreement with fixed-line players.
Q: Will you offer carbon copies of solutions originating from the UK market or will you tailor them to local needs?
A: One of our potential competitive advantages is that we have the opportunity to learn a lot from best practices from all over the world. As worldwide market leader, we have the highest revenue base from which we can invest the largest amount in central development and any new innovation available to us. In many countries, the local Vodafone is the leader or close to the top – as in the U.K., Spain, Italy and Germany – and we can easily adopt best practices and innovations. We are also in daily contact with Vodafone operations in other countries, such as Czech Republic, Greece, Romania and Portugal, where Vodafone is in a position similar to ours and facing the same kind of challenges: We can learn from what works for them, and vice versa.
Q: Do you consider Vodafone to be a serious player in the internet market here?
A: With GPRS nationwide and 3G coverage in Budapest we have reached a quite wide internet user group who are using the internet quite actively. We have another layer on top of regular internet access in the form of Vodafone Live! which is a worldwide brand that contains lots of content and exclusive agreements. We can generate more use from this. The latest version of Vodafone Live! actually made its world debut in Hungary. The long-term solution for the entire internet phenomenon will be solved by mobile internet. With fixed-line internet, you are limited to your location, but with mobile internet an extra dimension appears. Without the internet, access to data was limited by time factors. With the internet, the time dimension has disappeared, and with mobile internet, you are neither limited by time and location: You can do anything anywhere.
Q: T-Mobile Hungary is putting a lot of emphasis on its HSDPA rollout. What’s your approach to this advanced 3G technology, and do you think the market is ready?
A: We’re facing a similar chicken-and-egg scenario to the one we faced in the IT industry several years ago in which we [on the hardware provision side] claimed that the reason there were not many PCs on the market was because there were insufficient services and solutions available for PCs. Meanwhile, solution providers thought that, so long as there were not enough PCs, investment in solutions wasn’t worthwhile. Here again, I have the feeling that 3G and HSDPA use is currently very limited since there isn’t enough content available, while perhaps the content providers are thinking that generating content or services isn’t worth it, since presently there are very few 3G users out there. Sooner or later, I think this standoff will end and I feel there will be a turnaround later this year or next year...
Q: Which pricing model do you expect to work for 3G services in future: Flat fee or sliding prices based on total data use? Will overall prices come down?
A: We’re comparing different pricing models in our different markets and showing some flexibility according to demand. Frequency fees [the charge that the mobile operators pay for using 3G frequencies] are extremely high here, much higher than anywhere else in Europe. A potential danger is that if we’re successful with 3G in terms of use, the cost could be much higher and I think this should be readdressed from a regulatory standpoint. On one hand, we’re saying “let’s go in the direction of mobile broadband and internet, as this is the future,” but if there are more charges placed on us this could get problematic. This is a challenge for the whole Hungarian mobile industry.
Q: Do you think the demand for 3G could be enhanced if the roaming between countries is made simpler and less costly?
A: My answer is definitely “yes,” but on the other hand Vodafone is already a pioneer in this with Vodafone Passport whereby via one connection fee you can use your local tariff.
Q: Do you see 3G services as targeting early innovators or the mass market?
A: We are on the border at the moment. Early innovators have taken them up already and now it’s started to spread to the mass market. This can be seen in our bundled offering of laptop with 3G data card for a month’s free trial period which targets the overall market. We feel that we’ve taken the first step onto the mass market. We also have global agreements in place with the likes of Yahoo! and MySpace to tailor their solutions for mobile users.
Q: When can we expect mobile advertising to take off?
A: I think this is the next big step and is something the whole industry is working on. The early results should come through later this year or early next year.
Q: You’ve already worked with Invitel in delivering Vodafone Otthon. Could cooperation with this company, which is being acquired by HTCC, lead to the creation of a Mobile Virtual Network Operator [MVNO]? Is this on the agenda?
A: When they get the green light for the merger, they’ll sit down and develop their joint strategy. There are two different factors at play here. As mobile tariffs are already very low in Hungary there is limited room for maneuvering for new players. Despite this, the mobile industry is still growing quite rapidly, but it won’t be easy for anyone to find a place on this market.
Q: How far are you toward seeing a payback on the investment into 3G?
A: It’s a huge investment. It’s still early, and I have to admit that the investment has not been paid back yet. However, this is an issue in the whole mobile industry, especially in the countries adopting 3G early, where operators paid a fortune for 3G licenses and made initial plans too aggressive or unrealistic. It’s also an issue in Hungary where the 3G boom hasn’t been quite as big as initially expected for all players.
Q: Also on Vodafone’s overall investment in Hungary?
A: This industry requires heavy initial investment, but we have been delivering profit on operations for a few years now.
Q: Do you see the so-called killer application of 3G telephony emerging?
A: If I had seen it, I’d be pushing it. Some are talking about mobile TV but I’m not 100% convinced. I think it works in Asia but not so much in our culture. One thing which would help a lot is if some e-government services [whereby users can use their phones to carry out administration tasks and information gathering that previously required queuing up] could be made available but e-government hasn’t really come yet to regular internet use.
Q: Vodafone has been offloading some of its less successful operations around the globe while it has gone into the huge emerging market of India by acquiring the fourth-largest Indian mobile operator. What level of performance do you have to realize in order to convince the owners to stay committed to Hungary?
A: When we defined our long-term strategy, which included the new focus on “mobile plus,” we also decided to be more flexible with our financial assets. Vodafone operates two different kinds of models with subsidiaries either 100% owned by Vodafone, or we are part of a joint venture. In some countries where we had a smaller share and didn’t see the chance of being the driving force in the company or problems with dominant companies and regulators, we decided to withdraw. The countries we closed down are those where we had less than a 50% share and the feeling that we were unable to progress. In Hungary we’re clearly going for growth rather than closing down the operation, and I can say that we’re progressing well with that growth.
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