High-stake battle for the ownership of Hungary’s TV2

I have waited more than a week before tackling the extremely complicated, contested sale of TV2, Hungary’s second largest commercial station. Initially there were just too many questions about this bizarre affair, but in the last few days more documents have become available and a more or less comprehensible story has emerged.

People not familiar with the Hungarian political scene could justifiably ask why the sale of a commercial television station, which airs a lot of soap operas, is such a significant, controversial event. The answer, of course, is that the Orbán government considers the mass media to be of the utmost political importance. Ever since 2002, when Viktor Orbán narrowly lost the election, he has been diligently building, through his oligarchs, a network of pro-government media outlets. From the point of view of the government, TV is critical because this is how most people get their news.

The three biggest stations, the only ones that can be received in the whole country without a cable connection, are MTV, RTL Klub, and TV2. After 2010 the state-financed MTV became a government propaganda station, pure and simple. The two commercial stations were initially “persuaded” to provide as little political news as possible and to concentrate instead on tabloid items. But when the Orbán government came out with a steep advertising tax in the summer of 2014, RTL Klub decided not to play ball. Its fairly lengthy evening newscast now devotes more time to political news, including stories critical of the government. Moreover, RTL Klub’s viewership soared. And it has successfully taken up a fight with the government over the advertising tax.

Already by 2013 RTL Klub was starting to look like a lost cause, which left only TV2 in play for the government. In 2013 TV2’s German owner, ProSiebenSat.1, decided to sell its Hungarian company, which had accrued heavy losses in the previous few years. To everybody’s amazement the station, at least on paper, was sold in December 2013 to CEO Zsolt János Simon and Yvonne Perla Dederick, the financial director. The two executives announced at the time that ProSiebenSat.1 had given them a loan that they were supposed to pay back in five years. The news of the purchase immediately raised questions. Surely, a loan of about 25 billion forints–that was the estimated price of the station–had to be guaranteed by somebody with deep pockets. Although at the time there was no proof, some people suspected that Lajos Simicska, who was still friends with Viktor Orbán, was behind the deal.

The suspicion was pretty accurate. Károly Fonyó, a close business associate of Simicska and owner of Megapolis Média Zrt., was the one who signed the contract with Zsolt Simon and Yvonne Dederick. One of its clauses stated that Fonyó’s Megapolis Média Zrt. had an option to purchase TV2 at any time Fonyó desired.

At this point Simon and Dederick established two companies of their own: D6D Kft. and CCA Vízió Kft. These two companies then created a third (CCA-D6D Kft), which was supposed to run all companies related to TV2. In March 2014 they decided on a new business model: all these companies were merged into one called TV2 Média Csoport Kft. By the time this new company was registered it was July 2014.

Let’s pause for a second and recall what happened in and around July 2014. This was the beginning of Lajos Simicska’s dispute with his old friend Viktor Orbán over the advertising tax. Critical articles appeared in Magyar Nemzet, Simicska’s paper, and Cink.hu described Magyar Nemzet as the new RTL Klub. Most likely it was at that time that Orbán decided to go after Simicska. He no longer trusted his old friend, and he wanted to make sure that Simicska would not, sometime in the future, be able to do with TV2 what he was doing with Magyar Nemzet.

To achieve his aim, he needed the help of Zsolt Simon and Yvonne Dederick, the nominal owners of the station. In addition, he needed someone willing to buy the television station. His choice was his new friend and confidant, Andy Vajna, the former Hollywood producer. During the summer of 2014 Vajna, who already owned a Budapest casino, was in the process of negotiating with the government concerning the ownership of the largest and most profitable casino in the country, which until then had been owned by the Hungarian state. He didn’t seem to have any difficulty convincing the government to part with its casino. The Orbán government was ready to pass on this business venture to Vajna under the most favorable conditions: unlike other businesses, Vajna’s casino is not wired to the Hungarian Tax Office. The price for this fantastic business opportunity may well have been Vajna’s agreement to purchase TV2.

"Will the real owner of TV2 please stand up?" / Budapest Beacon

“Will the real owner of TV2 please stand up?” / Budapest Beacon

On October 15, 2015 Vajna fulfilled his end of the bargain and purchased TV2 Media Group from Simon and Dederick. Simon and Dederick presumably figured that they had structured the new company in such a way that it had nothing to do with the company that Károly Fonyó had an option to purchase.

The only problem was that Fonyó’s company had already exercised its option on October 13, two days earlier. Fonyó therefore announced that Vajna’s contract was null and void since his company had not authorized Simon and Dederick to sell TV2. He also announced that the two executives had been fired and that he was anticipating lengthy litigation.

Meanwhile the politicians of the opposition don’t seem to realize that the fight over TV2 might have political consequences for them. They look upon the struggle between Orbán and Fonyó/Simicska over the station as irrelevant. Who cares, they said (at least initially), which oligarch becomes the owner of TV2, Simicska or Vajna? But as things stand now, if Simicska wins the fight, TV2’s news will most likely become more like RTL Klub’s. Magyar Nemzet and HírTV have already become much better. They are moderate right-of-center and critical of the government.

By the way, Magyar Idők, the new slavishly pro-government paper, was financed in pretty much the same way that Orbán designed Vajna’s purchase of TV2. First the government gave János Sánta’s Continental Tobacco Co., together with BAT’s Hungarian subsidiary, the exclusive wholesale rights to all tobacco products in the country. Shortly after Sánta received the government’s gift of a very profitable concession, he was “persuaded” to buy a 49% stake in the new pro-government paper.

Orbán’s stranglehold on Hungarian TV seems to be weakening. Although by definition he still has MTV, he has lost RTL Klub and seems to be in the processing of losing TV2. Fonyó’s case looks pretty strong, although it will probably not be decided in his favor in the Hungarian courts.

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exTor
Guest

When you describe Magyar Nemzet and HírTV (both owned by Lajos Simicska) as “moderate right-of-center and critical of the government”, does that put those two entities to the left of Fidesz in your estimation, Éva? Didn’t you once describe Simicska as having moved further to the right of Fidesz?

If the Simicska ownership pans out as you’ve laid out the scenario, then that will be an antiOrbán boon. Both RTL Klub (which I like to watch) and HírTV would become rivals in scooping Orbán.

Nobody has yet explained what’s in it for the government to sell its money-making casino operation to Vajna. Hungary cannot afford to forgo the capital that the casino will bring in.

MAGYARKOZÓ

Webber
Guest

Hír TV is already critical of govt., though some of the reporters there seem to have a hard time understanding what it means to be r-wing and critical of Fidesz.
I don’t think Hír TV will, in the short term, compete with RTL Klub, because RTL is so much more watchable. Hír TV is stuck in the pre-1989 model of lots of roundtable discussions by “experts” (very boring, and cheap), with very little, if any, investigative reporting (exciting, but not cheap).

Webber
Guest

2 paragraphs after the picture – “Vajda” (2x) should be changed to “Vajna”

Guest

After reading so much about this issue in the Hungarian Press I can still find your summary amazingly sharp and and value added. Thank you.

Guest

London Calling!

It is amazing to this Westerner as to how media companies can change allegiance at the drop of a hat.

HirTV are allegeded to have adopted (now) ‘The BBC Principals’ of reporting. And no doubt others will.

Having run with the pack – and having now ‘discovered religion’ – their integrity is shot to pieces.

Who would ever trust them not to ‘turn’ again for the Orban shilling?

Trusted news outlets stick to their last and evolve over many years.

Not many indigenous Hungarians understand this.

Regards

Charlie

bimbi
Guest
There is some consolation in this story of the continuation of the falling-out between Orban and Simicska in so far as it appears that the latter seems to own TV2 – although the corrupt court system in Hungary could change that view. However, should one cheer because of Simicska’s “victory”? Probably not since it was he who was largely responsible for “engineering” the financial side of Fidesz’s (and his own) rise to power in earlier days. Be that as it may one sentence here should really touch a nerve, namely that …”Vajna’s casino is not wired to the Hungarian Tax Office”. This is a flagrant, open invitation to tax avoidance on a massive scale. Are we to accept that the Prime Minister of Hungary has now openly allowed, encouraged and facilitated tax avoidance for what he sees as his personal advantage? I fear the answer is a resounding, “YES!”. (Seems the US got it exactly right with corruption in the Tex Office.) I expressed this sentiment to my wife who responded that all governments do that and did I think it is any different in Britain or the USA? Goodness knows Hungary is poor enough with 4 million living in… Read more »
Istvan
Guest

Really Eva I have been reading the stories about TV 2, and the Hungarian language based reporting was so fragmented that I became confused at points on who was the front man for whom. Your short essay laid everything out in a very straight forward manner, the journalistic reports gave one bits and pieces of information that were based on information established in prior stories one may or may not have read.

Sometimes I find that Hungarian journalism requires one to follow it like a serial show almost on a daily basis. Often there is no summary like Eva provided that puts the parts into the whole. Possibly it’s because my Hungarian is at a very literal level and I often miss nuance used by journalists, but I also think sometimes that the media tries to build an audience story by story. Presenting bits and pieces as revelations and expects the totality of the situation to be often put together by the reader, listener, or viewer.

By the way has the TV2 story been covered at all by TV 2 itself? How have they presented it?

Guest

Not too much OT – re corruption:

We just heard from our visitors that the EU gave a lot of money for agriculture in Hungary – and this is almost totally disappearing, the stuff for which the money is supposed to be spent doesn’t exist!
I don’t know and can’t give any details of course but it involves people who are known for corruption …
Obviously many people and offices must be involved, to sign the papers, acknowledge what has been done (only on paper of course …) etc.
Doesn’t the EU check the projects that are given money and maybe visit the places where it is supposed to be spent?
You know, they might only find “Potemkin villages” …

Guest

wolfi (October 25, 2015 at 7:56 am):

“Obviously many people and offices must be involved, to sign the papers, acknowledge what has been done (only on paper of course …) etc.”

Wether they are defrauding EU or the Hungarian taxpayers alle the people involved in the production of forged papers are criminals. They know it and they are convinced that they will get away with it thanks to their “smart lawyers”.

I wouldn’t put my stock on it. When the present regime collapses under the weight of its unprecedented thievery, the next regime will have no choice but to sweep all the perverse laws thought out by the “smart lawyers” into the dust bin including time limits for prosecution.

I believe that there are many people who keep records so that nothing will be forgotten.

Istvan
Guest

By the way only thing I have ever watched on TV2 are reruns of Walker: Texas Ranger. Which are very funny in Hungarian. I watched them while in Hungary last year with my little cousins who wanted me to send them real cowboy boots from Texas, I didn’t have the heart to tell them most good non-custom cowboy boots are made in Mexico. The voice overs were making me laugh because at one point an attempt was made to mimic a Texas drawl, which is particular to East Texas. The word “y’all” as the second person plural or the word “fixen” (meaning preparing to do something) pronounced by the Hungarian dub was particularly funny. Having been stationed at Fort Hood Texas and during my off time going out four wheeling out in the county I heard some Texans that required a translator for a Midwesterner like myself.

Member

Test

Havelaar
Guest

Off topic, but anyway.

Orban is playing with fire, he will probably get burned.

Two interesting and very telling statements were made recently.
If this is predicting the future it can very well be possible that the EU will 
go on without those countries which are only a burden and using the 
EU as a milking cow to get lots of money…without anything in 
return.
This will be fine for countries like Germany, Belgium, Luxembourg, France and 
the Netherlands etc. We will deal with this. Without any doubt 
however, states like Hungary will suffer very much.
http://in.reuters.com/article/
“What was unimaginable before is possible today – that is the 
disintegration of the European project,” Frans Timmermans, the 
European Commission vice-president coordinating EU action on the migration crisis, told the Friends of Europe think-tank.
Mutual mistrust among EU governments has reached alarming levels, say old 
Brussels hands who are used to frequent past crises.
http://uk.reuters.com/article/
Mark Rutte:
“Eastern Europe has done too little to resist the refugee stream,” he was
 quoted by public television as saying. “We have invested a huge 
amount in them, and now they are doing too little.”

Istvan
Guest

I guess the EU politicans can claim to take a hard like with Hungary and virtually all Central European nations. But corporate interests will require that the lower wage production of these countries remain in place as will having foreign ownership enshrined in EU law. This reality will temper the bravo of politicans like Junker. I suspect that European bussiness interest have grown rather tired of refugees screwing up international commerece.

Webber
Guest

Fortunately corporate interests aren’t the only voice in democracies. Politicians must win votes. Lowering wages for the majority is not a sure way to win elections (and I’ve put that mildly).

Guest

And anyway corporations are doing business everywhere – from Hungary, Turkey, Russia to Vietnam and China.
Hungary cannot really compete with the real “low level wage countries” any more – only when subsidised by the government or under special conditions.
I know that Volkswagen is in some trouble right now, but still:
Did you know that VW/Audi sells more cars in China than in Germany?
So Hungary is for most companies just a fly speck …
My favourite point here:
When we buy something in the keszthely ldi or Lidl the description often is in twenty languages – now calculate how (un)important Hungary or any other country is for the producer.

fisher
Guest
One of the more important and less researched aspects is the questionable roles played by Weil, Gotshal & Manges, the lawyers to the Simon-Dederick team during the various transactions (eg, acquisition, ‘reorganization’, looting of the entity which Simicska had a legal entitlement to). It is now clear, for example, that Ms. Dederick and Mr. Simon brazenly lied on several occasions when asked about their roles at TV2. David Dederick – husband of Yvonne Dederick – is the managing partner at Weil, Gotshal’s Budapest office. It’s highly unusual, to say the least, that an international firm such as Weil, Gotshal would, first of all, allow the wife of a partner (having the same name as the partner) to participate for a prolonged duration in such a fronting operation for an oligarchs known to be one of the corrupt in the region. It’s also quite strange that Weil, Gotshal even has an office in Budapest as its local business, though successful, is not much more than rounding error in the global Weil, Gotshal income statement. But the possibility, even probability that a renowned firm like Weil, Gotshal most likely assisted Ms. Dederick (and Mr. Simon) in their attempts to deny Simicska’s ownership/option… Read more »
Guest

I would have been thoroughly surprised to learn that Mr. Dederick was not involved at all in this machinations. In my world it is just not imaginable. Even more I am more or less convinced that he was the mastermind behind all. He is the missing peace of the puzzle that fits so nicely.

Lajos Szabó
Guest
What’s really remarkable is the human side of it. Try to imagine it. There is Yvonne Dederick (whose mother is Hungarian, she, Yvonne is probably a Hungarian citizen too) and Zsolt Simon, CFO and CEO of TV2, resp. They go through a complex transaction, they agree to act as fronts for Simicska, get an option fee. Simicska’s side let it be known that they paid EUR 1m to Dederick and Simon as an option fee to be able to purchase the assets owned on paper by Dederick and Simon, ie. money most likely paid for their fronting services. Besides signing agreements with the sellers of TV2 (Prosieben Sat 1), they now have a deal with Lajos Simicska, a powerful oligarch. Try to be in their shoes: you concluded various legal agreement likely to be enforced as you remember that Simicska is a lawyer himself. The amounts involved are billions, the financing, the security agreements etc. And yet one day Mrs. Dederick and Mr. Simon get up and decide to move forward and strip the relevant company of its assets, thereby essentially attempting to obtain the assets of Simicska (from whom they even received 1m euros), so they could sell such… Read more »
Guest

Thanks, Lajos!
But as I’ve written before, corruption seems to be ingrained in the Hungarian economy/society – there’s always a “kis kapu” …

PS and totally OT:
It’s nice to read from a “real Hungarian” again – the small mistakes in the last sentence remind me of family members who have the same problem when translating from Hungarian to English or German:
It should be “her husband” and “her advisor” … 🙂

exTor
Guest

88-million dollars US !!! That is the worth of 25-billion forints.

I was gobsmacked when I read [paragraph 4] that that figure is the presumed price for TV2. How can any television station in Hungary be worth that much money?

The fact that Simicska scooped TV2 a mere 2 days before Vajna was going to buy it suggests that somebody tipped off Simicska that he had better act fast.

MAGYARKOZÓ

Webber
Guest

OT – Orban has just been to a meeting in Brussels and came out saying “nobody listened to us.” Since he was alone at the meeting, I guess that was the royal We.
In modern, post-monarchical national terms, decoding that, Orban=Hungarian people (he believes).

Judging from what he said, Orban was surprised by how isolated he (=”Hungary”) now is.
So, great work Szijjarto…

Something really has changed.

Story here:

http://index.hu/kulfold/2015/10/25/orban_senki_nem_hallgatott_rank/

The results of the Polish elections could harden attitudes toward Hungary elsewhere (quarantine time – past that, actually), or…

Hard to say how the new Polish govt. will act toward Orban. There is a lot of overlap in ideology, BUT if Kaczynski is convinced Orban is pro-Russian, he could turn out to be one of Orban’s greatest critics.

Interesting times for Europe.

Webber
Guest

Another OT item – there is a video in the link below of policemen keeping Jobbik people away from the Soviet Memorial at Szabadsag square. The Jobbik fellows wanted to remove the hammer and sickle from the monument.

(esp. Istvan) While watching, please mentally compare how adult Jobbik men are treated by the police with how refugees – including children – at Roszke were treated:
http://index.hu/video/2015/10/25/lokdosodes_a_szovjet_emlekmunel/

Guest

Re: Magyarorszag’s ‘independent’ media..

If there’s any enterprising tv program producer willing to plug into the broadcast market they might try developing a new ‘edgy’ soap opera for the mass tv audience. I can see it now ‘As the Orban World Turns’. Could be unique! Perhaps a little audience research may hold the key to development of future ‘must-see’ programming within the Hungarian tv market.
And btw a test of VO’s new type of democracy within the airwaves. But alas perhaps too challenging for the fella.

buddy
Guest

Why did Fonyó/Simicska wait so long to exercise the option to buy the station? That’s what I don’t get.

polgári napilap
Guest

@buddy

Simicska/Fonyó used a “stróman” (ie. a front, actually two fronts) for a reason. They, SImicska/Fonyó (Fonyó himself is also a kind of stróman/sidekick to Simicska) did not want to own the property publicly.

They waited as long as they could, but had to move when they realized that Dederick and Simon were about to breach their agreement with Simicska/Fonyó and sell the assets to Vajna.

As one of the index.hu article said it “All the gossips turned out to be true” (gossips vehemently denied by Dederick and Simon).

But there are gossips about Népszabadsag and other titles (owned on paper by VCP a shady Austrian operation) too and about titles owned by Centrál Médiacsoport.

Moreover it’s been rumored for a while that FHB Bank owned by Zoltan Spéder (owner of index.hu) and VCP is also actually owned by Simicska. Note that FHB has been recently fined very severely (under Hungarian standards) by the regulator (Matolcsy). If this is true, index.hu (which is not a big profit generator) may also part of the deal. But the nature of fronting is such that you don’t reveal your position unless and until you are absolutely forced to do so.

buddy
Guest

“Simicska/Fonyó used a “stróman” (ie. a front, actually two fronts) for a reason. They, SImicska/Fonyó (Fonyó himself is also a kind of stróman/sidekick to Simicska) did not want to own the property publicly.”

Thanks for the response. I get this part, of course, but it would seem to me that after the Simicska/Orbán feud went public this past spring, it would have been more prudent for Simicska to take care of this right away, no? It seems inevitable that there would be an effort to strip Simicska of as many of his assets as possible. Oh well I guess these people are just so used to trying to remain secretive for as long as they possibly can…

polgárok
Guest

Well, I guess one shouldn’t fire one’s gun power right away. I don’t think anybody could’ve guessed in 2014 that Dederick and Simon would so blatantly try to do what they did.

It’s one thing for Orban to order the prosecution and the courts to seize Simicska’s assets on some real or trumped up charge (it couldn’t be too real since it would’ve fired back to Orban), but for well-known private individuals (who toured the Hungarian business media to claim that they are all legit) to pocket a smaller fortune and do it anyway like it was 1990’s Russia, it’s pretty unheard of and in a way unexpected.

Biz
Guest
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