Estranged from media mogul friend, Hungary PM seeks new allies

* Group says it works on market basis, no Orban mouthpiece

By Marton Dunai

BUDAPEST, May 12 (Reuters) - Hungarian Prime Minister Viktor Orban for years enjoyed sympathetic coverage from media outlets owned by a friendly oligarch, so when the two fell out just as Orban's popularity slumped, he was left with a problem.

Now he may find help from a new media group co-owned by one of his closest associates, a man regarded by diplomats as an unofficial spin doctor for Orban and his Fidesz party.

Modern Media Group (MMG) has denied it will be a mouthpiece for Orban, but its April launch came shortly before the prime minister publicly appealed to his supporters to create new outlets through which the government can get its message across.

"We have lost our media, the right-wing media that helped the supporters of Fidesz," Orban told Echo TV in an interview. "There is a conflict between the government and the owners of the dominant right-wing media. That is the truth."

The change in Hungary's media landscape is part of the fallout from a dispute between Orban and Lajos Simicska, former high school classmates whose partnership was central to Orban's political rise.

Orban stayed popular with voters through five years in power during which his idiosyncratic policies caused furious rows with Brussels, Washington and foreign financiers. But the unravelling of his relationship with Simicska could spell the end of his charmed political life.

Their estrangement left few government-friendly mass media outlets just as opinion polls showed support for Fidesz falling on unpopular policies, the government's friendliness with Moscow and a perception of corruption among senior politicians.

Newcomer MMG is co-owned by Tibor Gyori and Arpad Habony, who both have ties to Fidesz.

Gyori was a member of Orban's cabinet until last year and has held various management positions in the Simicska media empire. Habony, who is 47, has not held any official government or party post, but is frequently seen hovering near the prime minister on election nights and at Fidesz events.

MASTERMIND

Fidesz insiders credit Habony with masterminding several of the party's election victories and he is co-founder of the Fidesz-friendly Nezopont Institute, a think tank.

Gabor Polyak, a media analyst at the Mertek think tank, whose main supporter is George Soros' Open Society Foundations, said the owners of MMG clearly wanted to fill Simicska's shoes and help strengthen Fidesz.

But he said: "Theirs is a risky venture ... They are trying to build an audience for a Fidesz mouthpiece at a time when fewer people care for what Fidesz has to say."

Repeated attempts to reach co-owners Habony and Gyori for comment were not successful.

The chief executive of MMG, Peter Keresztesi, told Reuters in an email the owners had seen a gap in the media market. He did not discuss plans, except to say they would start by launching a free magazine, and declined to say where the venture was getting its funding.

Asked whether the group would support the government, Keresztesi -- who is also communications chief at government-affiliated think-tank Szazadveg -- replied: "The company is organised on a market basis. Any subject that goes down well with media consumers could be interesting."

Hungary's publicly owned media largely toes the government line, but it is not widely watched, leaving Orban needing help from private networks to spread his message.

MMG could also benefit from a centralisation of state advertising into the new National Communications Office (NKH), which will have the final say over a planned annual spend of 25 billion forints ($92.43 million). The government has been criticised for buying advertising mainly in pro-Fidesz media.

Asked if the government would work with the new media group to get out its political message, Orban's chief of staff Janos Lazar told Reuters it did not matter who was behind the venture.

"Everything depends on how many people watch a programme, read an article or listen to a broadcast," he said.

($1 = 270.4800 forints) (Editing by Catherine Evans)