The economic environment

This section provides additional information on, and explains recent changes to, the economic situation as described in the combined management report of the 2019 Annual Report, focusing on macroeconomic developments in the first three months of 2020, the outlook, the currently prevailing economic risks, and the regulatory environment. Given the almost total lack of historical experiences from which to draw comparisons with the current situation, the macroeconomic outlook is provided contingent on the understanding that the effects of the coronavirus crisis can only be quantified with a degree of uncertainty.

Macroeconomic development

The global economy has been dominated by the coronavirus pandemic since spring 2020. All signs point towards a global recession in 2020 on a scale that is likely to exceed that of the downturn from the global financial crisis in 2009. In its spring outlook, the International Monetary Fund (IMF) announced it expected to see the global economy contract by 3.0 percent in 2020 followed by growth of 5.8 percent in 2021. The global economy was likely to partially recover in 2021 but remain significantly below the level that had been projected before the emergence of the coronavirus crisis.

For the German economy, the IMF expects GDP to decline by 7.0 percent in the current year. Disposable income in private households will decrease in 2020 for the first time since the 2009 recession. The coronavirus crisis is affecting individual industry sectors to varying extents. In the digital sector, the business climate has deteriorated significantly: The Bitkom-ifo-Digitalindex dropped in March and April 2020. The economies of our core markets in North America and Europe will shrink this year, with the IMF predicting a contraction in the U.S. economy of 5.9 percent and in the EU economy of 7.1 percent.

Outlook

The coronavirus pandemic and the government-imposed measures to counteract its spread will impact the economy both this year and next. How the economy develops beyond this is largely dependent on how long lockdown restrictions continue to be applied and to what extent the governments and central banks manage to mitigate the negative impact of the crisis on employment and private household income, and prevent a resulting downswing in demand and production. The IMF outlook assumes firstly that the pandemic will peak in the second quarter of this year and taper off in the second half of 2020, and secondly that economic stimulus packages will gain traction.

Overall economic risks

Overall economic risks arise from the possibility of further waves of the coronavirus pandemic, temporary disruptions to supply chains, and potential upheavals in the finance system resulting from growing numbers of business bankruptcies that cannot be rescued by government bailouts. The same goes for financing for countries with already high levels of national debt – the longer and more severe the economic downturn, the more the debt sustainability of some of these countries may be called into question. Further risks arise from ongoing unresolved trade conflicts and uncertainty regarding Brexit. It remains to be seen what shape economic relations between the United Kingdom and the European Union will take following the end of the transition period at the end of this year.

Regulation

Responses of the telecommunications regulatory authorities to the coronavirus pandemic. The European Commission and the Body of European Regulators for Electronic Communications (BEREC) released a joint statement at the end of March 2020 announcing that increased use of the internet had not generally resulted in any major network bottlenecks to date. The two parties confirmed that a range of measures within the scope of existing regulations were permissible to help cope with temporary network congestion, although strict restrictions applied and were being monitored by national regulatory authorities. The Federal Network Agency published its “Guidelines on traffic management measures” on March 25, 2020 in close consultation with the telecommunications industry and incorporating the measures to safeguard network stability proposed by Telekom Deutschland. Some national regulatory authorities have imposed further specific regulations: For example, Austria requires mobile providers to send out text messages on behalf of the authorities with information on critical developments, while Romania has instructed network operators not to disconnect lines for non-payment during this time of national emergency. The timeline for spectrum award procedures in the near future has also been adjusted. For details please refer to the following table.

Awarding of spectrum

The following spectrum was awarded in the first quarter of 2020: At the auction in Hungary on March 26, 2020, Magyar Telekom secured spectrum in the 700 MHz, 2,100 MHz, and 3,400 to 3,800 MHz bands for the total equivalent of around EUR 152 million. A spectrum auction in the United States for 37 GHz, 39 GHz, and 47 GHz frequencies ended in March 2020. T‑Mobile US purchased total spectrum of 691 MHz at this auction, for which it paid USD 873 million. This additional spectrum will be used to further improve the company’s 5G spectrum position.

The following table provides an overview of the main spectrum awards and auctions as well as license extensions. It also indicates spectrum to be awarded in the near future in various countries.