The economic environment

This section provides additional information on, and explains recent changes to, the economic situation as described in the 2022 combined management report (2022 Annual Report), focusing on macroeconomic developments, the overall economic outlook, the currently prevailing economic risks, and the regulatory environment in the first three months of 2023.

Macroeconomic development

The development of the global economy was rather weak in spring 2023. While its gradual recovery from both the coronavirus pandemic and the consequences of the war in Ukraine is stimulating economic activity, persistent inflation and the tight monetary policy of central banks around the globe will continue to have a negative impact. The interest rate hikes worldwide since spring 2022 contributed to turbulences in the finance sector in the first quarter of 2023. The inflation-induced loss of purchasing power is stifling macroeconomic demand, while higher interest rates are negatively affecting financing terms for households and businesses.

In light of current developments, in its April 2023 forecast, the International Monetary Fund (IMF) expects global economic output to grow by 2.8 % in the current year compared to growth of 3.4 % in the prior year.

The IMF expects German economic output to decline by 0.1 % and consumer prices to increase by 6.2 % in the current year. According to the Bitkom-ifo-Digitalindex, the business climate in the digital sector remains significantly brighter than in the economy as a whole. In March 2023, the business expectations of IT and telecommunications companies for the coming months reached their highest level since the war broke out in Ukraine in February 2022.

The national economies in our core markets in North America and Europe are set to grow this year. According to the IMF forecast, economic output is expected to grow this year by 1.6 % in the United States and by 0.8 % in the eurozone.

Overall economic outlook

In particular China’s U-turn on its strict zero-Covid policy is likely to stimulate steady global economic growth and revive global trade in goods. This should also help further alleviate supply shortages. With energy prices falling in Europe, the growth outlooks are brightening. However, an easing of consumer price inflation in the U.S. economic area and the eurozone is likely to be slow. High inflation is expected to continue to curb consumer spending in the coming quarters.

Significant downside risks continue to weigh on the economic outlook. If inflation falls at a slower rate than expected, it could result in the need for a more aggressive tightening of monetary policy. This would further dampen consumer demand. At the same time, the recent rise in financial market risks has hindered the central banks’ efforts to combat inflation. Europe avoided a gas shortage in winter 2022/23, but the supply situation for winter 2023/24 is still uncertain and energy prices could rise if demand for natural gas increases in Asia. A possible escalation of the war in Ukraine could also lead to a renewed rise in energy prices. Geopolitical tensions between the United States and China present a further risk, and could put significant pressure on global trade in goods and international supply chains.

Regulation

Awarding of spectrum

At the multi-band auction in Croatia, which began with a bidding phase on January 17, 2023, Hrvatski Telekom secured an above-average package of spectrum, comprising the largest share of spectrum (2x 105 MHz), for around EUR 135 million.

The Polish regulatory authority UKE concluded an initial consultation on a draft award procedure for the 3,400 to 3,800 MHz band, and announced a further consultation which began on April 6, 2023. The procedure is now expected to conclude by the end of 2023. Awards for the 700/800 MHz and 26,000 MHz bands could follow in the course of 2023. In the Czech Republic, the procedure to extend the 900/1,800 MHz GSM license, which expires in 2024, is expected to begin in the course of 2023. Meanwhile, the Slovakian regulator announced a procedure (auction) to re-award spectrum in the 900 MHz and 2,100 MHz bands at the end of 2023. In Austria and Hungary, the millimeter wave spectrum in the 26,000 MHz band is also expected to come up for award in 2023. In order to free up this band, Hungary has already begun awarding substitute frequencies in the 32,000 MHz band.

In the United States, on August 8, 2022, T‑Mobile US reached agreements with Channel 51 License and LB License on the acquisition of licenses in the 600 MHz spectrum for an aggregate purchase price of USD 3.5 billion (EUR 3.4 billion). On March 30, 2023, the contractual parties further agreed that the transaction be divided into two separate tranches. The transfer of the licenses in accordance with the agreements is subject to regulatory approvals and certain other customary closing conditions. The first tranche is expected to be concluded between the middle and end of 2023, while the second tranche is expected to be concluded in 2024.

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