For Emerging Countries, Cellular Is No LuxuryJonathan B. Levine
Two years ago, the Hungarian village of Uri, 25 miles south of Budapest, was in trouble. Most of its 2,700 residents were thrown out of work when the truck-parts factory went bankrupt. Their best hope: Jozsef Nagy's electrical-fixture factory. But the town had only one phone--a hand-cranked model--so Nagy had to spend seven days a week driving around taking orders. After paying $2,300 for a cellular phone, however, orders started coming to him. Today, he runs a 400-employee, $2.5 million business, mostly from his red Honda Accord. Back in the office, he has four more mobile phones. "Without the phones," Nagy says, "we'd all be dead ducks."
Mobile phones have become a basic survival tool for emerging nations. From Indonesia to Pakistan to the former Soviet bloc, cellular is quickly creating modern phone links. Upgrading old wired systems could take decades.
This summer, after four years and a modest $85 million investment, Hungary's Westel Radiotelefon will finish its nationwide network. The joint venture of state-owned Hungarian Telecommunications Co. (HTC) and U.S. West Inc. has signed up more than 24,000 subscribers. For one-third of them, the mobile phone is their only one.
Nobody expected Westel to take off so quickly. "This was unknown territory," says General Manager Andras Sugar. But it is rapidly becoming part of the fabric of daily life. Near Miskolc, in northeastern Hungary, dairymen use Westel phones to drum up business for once-dying farms. In the rural district of Kunadacs, Dr. Kalman Farkas dispatches ambulances from his car phone: His region of 140 square miles has only 30 wired phones. "We're saving lives," he says.
GO-GO ECONOMY. Westel has been an unexpected boon for U.S. West, which owns 49% of the venture. At 1,000 a month, customers are signing up twice as fast as expected and are talking more than 6 hours a month, or three times the Western average for cellular callers. In 1992, Westel more than doubled its revenue, to $60 million, and broke even in 1991--two years ahead of schedule. Steven E. Andrews, head of U.S. West's non-U.S. wireless operations, figures his $10 million investment could return 20% to 30% pretax over 10 years, up to twice what it earns at home.
Encouraged by results in Hungary, Andrews has aggressively pursued other franchises. U.S. West now has deals in the Czech and Slovak republics and in Moscow, St. Petersburg, and 11 other Russian cities, making it the biggest cellular player in Eastern Europe. New opportunities include a chance to run one of two new digital cellular nets in Hungary. U.S. West is also likely to be a bidder when the government sells off about 30% of HTC next year.
For ordinary Hungarians, who earn $250 a month, $2,000 for a handset and $1,000 in hookup fees put cellular phones out of reach. But for entrepreneurs in Hungary's go-go economy, no price is too high. Like Nagy, three-quarters of subscribers use the phones to run businesses, and 14% say they would go bankrupt without them. "We were hungry," he says, "for something we never knew we were missing."