Tag Archives: Deutsche Telekom

Fidesz now has another way to rig elections: the sale of T-Systems to 4iG

The outside world learned on July 9, via a Reuters report, that the tiny information technology company 4iG had signed a preliminary agreement to buy its much larger rival, T-Systems. T-Systems is owned by Magyar Telekom, daughter of Deutsche Telekom, the largest telecommunications company in Europe.

4iG’s largest shareholder and CEO, Gellért Jászai, announced the deal, prompting a jump of more than 7.5% in its stock price. 4iG’s CEO is the closest business partner of the legendary Lőrinc Mészáros, who, thanks to his childhood friend Prime Minister Viktor Orbán, became the richest man in Hungary within a few short years. The close connection between Jászai and Mészáros gave rise to the quip in Budapest that by now even Mészáros needs a front man.

A year ago Mészáros purchased more than 50% of 4iG’s shares when the company started getting lucrative business deals from the Hungarian government. But soon enough, presumably when the idea was hatched for 4iG to purchase the giant T-Systems with its 1,600 employees, he divested himself of much of his stake in the company and Jászai, who is not directly connected to the prime minister, became the CEO. Currently, Jászai owns 40% of the shares, Mészáros 12%, and Mészáros’s Opus Global about 10%.

This change in company control made it easier for Deutsche Telekom, in which the German government has a 30% stake, to deal with the relatively unknown Jászai instead of Mészáros, who by now is widely regarded as Viktor Orbán’s front man. This way, as Index put it, “Deutsche Telekom was spared from directly dealing with Orbán’s closest ally.”

The deal was negotiated at the highest possible level, not between the CEO of 4iG and the head of Magyar Telekom. On September 17, 2018, Viktor Orbán received Timotheus Höttgest, Deutsche Telekom’s CEO, and Srini Gopalan, his deputy who is responsible for the firm’s European holdings. According to the press release, nothing of importance was discussed at that meeting. The men praised each other’s activities and emphasized the importance of IT technology for Hungary and Europe.

A similar seemingly meaningless encounter of the same business leaders and politicians took place on March 29, this time in the new office of the prime minister. By that time, László Palkovics, the minister of innovation and technology, was also present. Surely, no one can believe that two top German businessmen came to Budapest to discuss the state of IT technology in Europe at large and in Hungary in particular.

Meeting between Viktor Orbán and Timotheus Höttges of Deutsche Telekom, March 29, 2019 / MTI

According to Zoltán Jandó and Bálint Fabók, who wrote a detailed article about the background of the sale of T-Systems, Deutsche Telekom didn’t really want to sell the firm, so, I assume, the German firm needed a bit of encouragement. Until recently, T-Systems had conducted a brisk business with the Hungarian government. According to Bisnode, the European data and analytics company, since the beginning of 2016 T-Systems received 400 billion forints (€1.23 billion) in government contracts. In the last few months, however, orders were hard to come by, with 4iG instead receiving a record number of orders. Perhaps the Hungarian government made Deutsche Telekom’s decision easier by giving preferential treatment to 4iG, thereby demonstrating that holding on to T-Systems might not be profitable in the future.

Gellért Jászai’s company is very small, especially in comparison to T-Systems. The question is where 4iG will get the necessary 125-150 million euros to purchase the affiliate of Magyar Telekom. The company spokesman was vague. He told journalists that, “in addition to our own resources, we have been working on several financial scenarios that include loans, bond issuance, and the inclusion of institutional investors.” That kind of vagueness is suspicious, first because this purchase is substantial by Hungarian standards and second, according to the announcement, the plan is to finish the whole transaction by the end of the year. It is also difficult to figure out how the company could, in a short time, generate enough revenue to pursue further acquisitions at home and in the region, as they are contemplating. I have my suspicions about the source of much of the funding. Moreover, rumor has it that Gellért Jászai’s minority ownership of 4iG is temporary. The majority stake in the company will be back in Lőrinc Mészáros’s hands in no time.

There is one fallout of the purchase of T-Systems by the Jászai-Mészáros concern that is especially worrisome. T-Systems was in charge of several important government projects. For example, it was heavily involved in running the 2018 national election. The firm will be responsible for running the 2019 municipal elections as well. Given the lack of trust in the Orbán government’s handling of personal data and the suspicion that surrounds the breakdown of the Election Office’s website in the middle of tallying the votes in the last  national election, it is not surprising that there are some who are convinced that the Orbán government “is preparing the ground for electoral fraud.”

I too am convinced that this government would be quite ready to make some “adjustments” in the figures if, for example, the precious two-thirds majority were at stake. Keep in mind that in the last two national elections the two-thirds majority hinged on a single parliamentary seat, which looked too pat to me. The villages are all sewn up; Fidesz doesn’t need to cheat there. But if it looked as if the party were to lose Budapest and some of the larger cities, someone might be inclined to tinker with the software. In any case, it would be better if the electoral system software were not about to fall into the hands of Lőrinc Mészáros, Viktor Orbán’s front man.

July 13, 2019

Is Deutsche Telekom lending a helping hand to the Orbán government to suppress media freedom?

Scandals in Hungary often fizzle out, as one of our readers correctly stated, but abroad scandals don’t die so fast. They spread via the international media. This is what happened with the case of Origo, an internet news organ, whose latest editor-in-chief, Gergő Sáling, was forced to resign, most likely for political reasons. Soon enough the deputy editor-in-chief followed suit, and by now practically the whole news team is gone. A fairly large demonstration was organized immediately after the sacking of the editor-in-chief, and more demonstrations are planned for next week.

Yesterday 444.hu, a relatively new internet newspaper, came out with additional information on the case which, if true, isn’t pretty. Origo Zrt. is a subsidiary of Magyar Telekom, which is in turn a subsidiary of Deutsche Telekom, which is partly owned by the German government. 444.hu learned from a high-ranking member of the government that the firing of Gergő Sáling was the result of a deal between Magyar Telekom and the Orbán government.

Kerstin Günther / Source: Portfolio

Kerstin Günther / Source: Portfolio

One of the problems with the Hungarian economy is the preponderance of the state in all facets of economic life, which means that good relations with the government are very important for any company. In 2010 and 2011 relations between Magyar Telekom and the government were strained, mainly because of the extra taxes levied on communications companies. Apparently Hungarian politicians didn’t particularly like the CEO of Magyar Telekom, the American Christopher Mattheisen. Then in April 2013 the post of CEO was split in two, carving out a separate post of chairperson of the board. This new job was created for Kerstin Günther, who was very knowledgeable about Hungary because she began her Telekom career in Budapest in the 1990s. According to 444.hu‘s informer, she was sent to Hungary for the purpose of improving relations between the company and the Orbán government.

The company needed the goodwill of the Hungarian government because it is the government that decides the fates of frequencies that T-Mobil, a large part of Magyar Telekom’s business, uses. In 2013 it was time to renew these frequencies. Their renewal was vital for the company. At the end of the year, the government decided to renew the frequencies of all three cell phone companies operating in Hungary until 2022. For these frequencies the government asked a total of 100 billion forints. Magyar Telekom’s share was approximately 35 billion forints. It is 444.hu‘s claim, based on information received from its source, that Origo’s fate was sealed by the end of 2013. The deal was that Magyar Telekom would get an extension of its frequencies and that in return the management would make sure that Origo plays ball. Apparently, János Lázár “was often unhappy” about some of the articles that appeared on the site about various Fidesz and government wrongdoings, including his own.

According to the informer, Günther and Lázár met even before Günther arrived in Hungary. Lázár apparently showed her a 150-page analysis of the news items that had appeared in Origo and Híradó, the government mouthpiece that provides news to all state radio and television stations. Given Híradó‘s pro-government stance, it’s no wonder that Origo looked “dramatically oppositional.” It seems, however, that Magyar Telekom found the “study” well founded and often referred to it in arguments with Origo.

In the last two years pressure mounted on the internet site, hence the frequent personnel changes at the head of the editorial board. In three years there have been four different editors-in-chief. In government circles it was common knowledge that Lázár believed that “one must do something about RTL Klub and Origo.”

The relationship between Magyar Telekom and the Orbán government is excellent at the moment. In fact, it looks as if Deutsche Telekom will be entrusted with “the government’s comprehensive development of rural broadband access” that will cover the whole country. Or at least this is what János Lázár said in his parliamentary hearing that approved his suitability for the post of minister at the head of the prime minister’s office.

444.hu immediately translated the article into English, and naturally the story was picked up by several important German papers, especially since DPA (Deutsche Presse-Agentur) reported on it. A long and detailed article, not based on the DPA summary, entitled “Under Pressure” appeared in Süddeutsche Zeitung by Cathrin Kahlweit. She operates out of Vienna but knows the Hungarian scene quite well. In the article she reminds her readers that four years ago the controversial media law “drew international protests,”  and says that it seems that the Orbán government is again using “money and new legal provisions to impede critical reporting.” According to her, Deutsche Telekom received a one-billion euro contract from the Hungarian government for the “expansion of the broadband network,” the price of which was the taming of Origo. Deutsche Welle also reported on the attempted censorship by the Orbán government. And naturally, Reporters Without Borders protested as well.

Up to now two opposition politicians, Gergely Karácsony (E14-PM) and András Schiffer (LMP), have written letters to Timotheus Höttges, CEO of Deutsche Telekom, in which both strongly disapproved of the alleged “deal” between Deutsche Telekom and the Hungarian government. Karácsony called the deal unethical and expressed his hope that Deutsche Telekom would not be a partner to such a dirty affair. Surely, he said, Höttges considers freedom of the press a basic right. Schiffer’s letter was equally hard hitting and expressed amazement that a respectable firm operating in a democratic country would lend its name to such shady business.

Deutsche Telekom is washing its hands of the affair. The spokesman for the firm emphasized that they are all for freedom of the press but reiterated that they have nothing to do with personnel changes within Origo, which are the “result of internal restructuring.” I fear that will not be enough.