The economic environment

This section provides important additional information and explains recent changes in the economic environment compared to those described in the 2023 combined management report (2023 Annual Report), focusing on macroeconomic developments, the overall economic outlook including the currently prevailing economic risks, and the regulatory environment in the first quarter of 2024.

Macroeconomic development

The global economic outlook brightened somewhat in the first quarter of 2024. Global growth was surprisingly robust over the last year. Lower energy prices and declining pressure on supply chains contributed to inflation falling faster than expected. However, a strong global upswing is still not in sight.

In its April 2024 forecast, the International Monetary Fund (IMF) expects global economic output to grow by 3.2 % in the current year, after also growing by 3.2 % in the prior year. The IMF also forecasts growth this year in the economic output of the national economies in our core markets in North America and Europe: of 2.7 % in the United States, 0.8 % in the eurozone, and 0.2 % in Germany.

According to the Bitkom-ifo-Digitalindex, the digital sector was looking more optimistic at the end of the first quarter of 2024: both the assessment of the current business situation and the business expectations in March were up against the level in the prior month – this marked the first month-on-month rise since July 2023. The digital sector was much more optimistic than the economy as a whole.

Overall economic outlook

The declining rate of inflation and anticipated benchmark interest rate reductions should lead to a moderate economic recovery in the current year. Nevertheless, significant downside risks continue to weigh on the economic outlook – in particular, the current geopolitical crises carry with them high risks for economic growth and inflation.

Regulation

European Commission published white paper. On February 21, 2024, the European Commission published a white paper entitled “How to master Europeʼs digital infrastructure needs?” This white paper compiles proposals for measures by the European Union in preparation for a planned Digital Networks Act. To this end, the general public is invited to express views in an open consultation process that will run until June 30, 2024. Legislative initiatives based on the white paper and the responses to the public consultation are expected from 2025.

The white paper identifies future action areas as the build-out of digital networks of the future, managing the transition to new technologies and business models, covering the future need for connectivity, and the safeguarding of economic competitiveness and of secure, resilient infrastructure in the EU. As a result, a far-reaching revision of the current regulatory framework is expected.

Bundesnetzagentur’s regulatory procedures based on the decision on access regulation including FTTB/H network access. On April 10, 2024, the Bundesnetzagentur published a draft consultation for the charges for access to civil engineering infrastructure regulated under the access regulation. The Bundesnetzagentur is expected to make a final decision on charges in summer 2024. The parallel Bundesnetzagentur regulatory procedure concerning the related reference offer has not yet been decided.

Awarding of spectrum

In the first quarter of 2024, spectrum in the 26 GHz band and residual spectrum in the 3.4 to 3.8 GHz band were auctioned off in Austria. In the 26 GHz band, T‑Mobile Austria secured 400 MHz of nationwide spectrum for itself, and in the 3.4 to 3.8 GHz band, 40 MHz in Vienna and 60 MHz in Carinthia, for EUR 10.5 million in total. In the United States, the spectrum in the 2.5 GHz band acquired in Auction 108 in September 2022 for around USD 0.3 billion (EUR 0.3 billion) was allocated in the first quarter of 2024. The majority of this spectrum was connected immediately.

In Poland, the award procedure for the 700 MHz band and, if applicable, for spectrum in the 26 GHz band could also potentially begin in 2024. In Slovakia meanwhile, the procedure (auction) to re-award spectrum in the 900 MHz and 2,100 MHz bands originally announced for the end of 2023 is at stake following calls by several parties to re-examine the auction conditions. In the Czech Republic, the procedure to extend the 900/1,800 MHz GSM license, which expires in 2024, got underway. In Germany, the regulatory authority Bundesnetzagentur is consulting on a draft decision concerning the extension of usage rights for the 800 MHz, 1,800 MHz, and 2,600 MHz mobile frequencies, which expire at the end of 2025, by five years. The extension is to replace the originally planned auction to award these frequencies. In return, the draft stipulates further coverage obligations for the existing frequency owners as well as the obligation to allow network provider 1&1 to co-use frequencies below the 1 GHz band. The consultation on the draft will continue until July 8, 2024; the regulatory authority’s final decision is expected in the second half of 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.

Agreements on spectrum licenses

On August 8, 2022, T‑Mobile US entered into agreements with Channel 51 License and LB License for the acquisition of spectrum licenses in the 600 MHz band in exchange for a total cash consideration of USD 3.5 billion (EUR 3.2 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 Federal Communications Commission (FCC) approved the first tranche of the license transfer on December 29, 2023. T‑Mobile US expects the first tranche to be concluded in the second quarter of 2024 with payment of the corresponding purchase price in the third quarter of 2024, and the second tranche to be concluded in late 2024/early 2025.

On July 1, 2020, T‑Mobile US and DISH Network Corporation (DISH) reached an agreement on the sale of spectrum licenses, under which DISH agreed to purchase certain 800 MHz spectrum licenses from T‑Mobile US for USD 3.6 billion (EUR 3.3 billion). On October 15, 2023, T‑Mobile US and DISH modified the agreement to include, among other changes, a non-refundable extension fee of USD 0.1 billion (EUR 0.1 billion) which DISH will pay to T‑Mobile US, as well as the requirement that the purchase of the spectrum licenses must be finalized by April 1, 2024. DISH did not exercise its purchase option by April 1, 2024. The extension fee already paid on October 25, 2023 will be retained in accordance with the agreement. T‑Mobile US is now obligated to put the licenses up for sale at auction and has initiated the corresponding auction process. Should bidding not reach the defined minimum purchase price of USD 3.6 billion, T‑Mobile US would be released from its obligation to sell the licenses.