HUNGARY - Tuning in to corruption: PE sues in Hungary

Kim
11 November 2009

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Once deemed CEE's frontrunner in terms of economic advancement and attracting foreign investment, Hungary seems to have taken a step backward, with the government becoming embroiled in a legal dispute with Vienna-based private equity investor Accession Mezzanine Capital amid accusations of protectionism.

AMC has taken legal action after its portfolio company, Danubius, lost out in its bid to renew its broadcasting licence for one of the countries two national FM frequencies, in favour of a local party. ORTT, the country's airwaves administrator, has similarly redeployed the licence to the second frequency to a local bidder, having turned down a renewal attempt from US company Emmis Communications.

The decisions have prompted cries of protectionism. The moves were justified by the fact that the local groups - a consortium named FM1 and Advenio Zrt respectively - were supposedly willing to pay a far greater sum. Both AMC and Emmis applied to renew their licenses earlier this autumn, with promises of 11-15% of net review as fees. The local bidders apparently put forward figures of 50-55%, though this is deemed to steep to be serious.

AMC initially backed the business in June 2003 when it teamed up with Advent International to purchase the business from former parent GWR Group. In January 2008 AMC took over sole ownership of Danubius. The station has been going since 1986.

According to website BrandTrend, "total radio advertising revenue was Hft 12bn in 2008, Hft 2.5bn of which was from local radio channels. The majority of the approximately Hft 700m local radio advertising income was generated by local entrepreneurs and the rest by advertising agencies. Due to the recent changes at the two major commercial channels radio professionals expect this number to grow by 25-30%."