U.S. COMPANY LOSES OUT IN TAINTED RADIO TENDER

C O N F I D E N T I A L BUDAPEST 000787 SIPDIS DEPARTMENT FOR S, EUR FO, EUR/CE JAMIE MOORE. COMMERCE FOR MAC SYLVIA SAVITCH, AND ADVOCACY CENTER CHRIS JAMES. PLEASE PASS TO NSC JEFF HOVENIER E.O. 12958: DECL: 10/28/2014 TAGS: PGOV ECPS KCOR HU SUBJECT: U.S. COMPANY LOSES OUT IN TAINTED RADIO TENDER DECISION REF: BUDAPEST 737 Classified By: Political Officer Jon Martinson, reasons 1.4 (b,d) ¶1. (SBU) Summary. The Hungarian Radio and Television Board (ORTT) voted October 28 to award the two national radio frequencies to bidders backed by the two largest Hungarian political parties. The decision leaves the current license holders, U.S.-based Emmis Communications' "Slager Radio," and "Danubius Radio" owned by a UK based investment fund, with EBRD participation, on the outside after more than a decade of significant investment. Emmis Corporation is reviewing legal options to appeal the decision. Post will continue its advocacy, publicly and privately, in the coming days to underscore significant disappointment with an obvious politically tainted decision. USEU assistance is also requested to engage EU Competition Commissioner. End summary. ¶2. (U) Following press and media reports of political party collusion in the radio license tender process (reftel),the ORTT unanimously decided October 28 to grant the two national radio frequencies to bidders backed by the Socialist and opposition Fidesz parties. The ORTT consists of two Socialist, three Fidesz, and one Free Democrat (SzDSz) party members, but the SzDSz Board member did not vote. ¶3. (U) The Board's decision follows an intensive effort by the Charge, Commercial Officers, the Emmis Communications' President and other concerned entities to ensure an open, transparent, and fair selection process. The Embassy also coordinated with the Swiss Ambassador and EBRD who also advocated for clients with interests at stake. ORTT President Laszlo Majtenyi, who was procedurally restricted from voting, denounced the decision, stating that "the case is not closed; it is but the beginning of a scandal." ¶4. (C) Prior to the public announcement, the Prime Minister's Foreign Policy and National Security Advisor, David Koranyi, emailed the Charge to advise him of the decision, highlighting the PM's own unsuccessful efforts to ensure a fair tender. (Comment. While the Prime Minister has no legal means to intervene, his inability to prevent this outcome is disappointing. His official statement that he is "concerned" about the situation surrounding the tender is also milder than expected. End comment.) ¶5. (C) Emmis Communications' representative in Budapest, Barbara Brill, met with Charge on October 29 to discuss ORTT's decision. Noting Emmis' 12 year, USD 120 million investment in Slager Radio, Brill said that Emmis is working with a team of lawyers to plan their strategy, to include possible cooperation with the owners of Danubius Radio to share legal expenses. She commented that the company plans to file a lawsuit against ORTT and the two contracts in the next few days. They anticipate that any legal proceedings, which according to their lawyers have an 85 percent chance of success, will last three to six months. Brill commented that while the company is not afraid to go public with names of politicians who offered "deals" to ensure a license re-issuance, parliamentary immunity diminishes the efficacy of such a move at the current time. She also noted that there is a possibility that the National Communications Authority (NHH) can delay granting the license to the two winning companies. While the company is looking at short-term options to continue broadcasting, at least in Budapest, Brill commented that whether there is a NHH delay or a court filing, Slager Radio will be off the air as of November 20. ¶6. (C) Focusing on a multi-faceted approach, Brill requested Post's help in reaching out to USEU to engage the EU's Competition Commissioner to determine if there is any EU mechanism available to address ORTT's decision. Additionally, she requested continued Embassy engagement with both government and party leaders to ensure the issue remains high profile. Brill commented that many of Slager Radio's listeners have called in to express frustration with the tender outcome. However, there is a public perception that little can be done, as the two largest parties on opposite sides of the political spectrum have colluded for blatant party interests. LEVINE