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 six 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 high degree of uncertainty.

Macroeconomic development

The global economy has been dominated by the coronavirus pandemic since spring 2020. In the June 2020 update to its spring outlook, the International Monetary Fund (IMF) announced it expected to see the global economy contract by 4.9 percent in 2020 followed by growth of 5.4 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 7.8 percent in the current year. The coronavirus crisis is affecting individual industry sectors to varying extents. The business climate in the digital sector has brightened again: The Bitkom-ifo-Digitalindex, calculated on the basis of the business situation and expectations, returned to a positive level in June 2020 for the first time since February. IT and telecommunications companies are now reporting a significant improvement in their situation compared with April and May of this year.

The economies of our core markets in North America and Europe, too, will shrink this year, with the IMF predicting a contraction in the U.S. economy of 8.0 percent and in the eurozone of 10.2 percent. In the United States, the situation on the labor market made a marked improvement in June 2020, although private consumption is likely to be slowed by a renewed spike in infection rates which have led to some regions taking back the previous easing of measures to contain the spread of coronavirus.

Outlook

While the measures introduced to contain the coronavirus pandemic have catapulted the global economy into the worst recession since the end of the Second World War, there are increasing signs that the worst is behind us. Indications suggest that the severe economic downturn seen in the first half of 2020 will be followed by gradual recovery in the second half of the year. However, if measures such as smart distancing do not succeed in keeping the rate of new infections to a minimum and restrictions cannot be eased further to restore a sense of safety to businesses and households, then a sustained period of weakness is to be expected.

Overall economic risks

Overall economic risks arise primarily in connection with the possibility of further spikes in coronavirus infections. A renewed decline in economic activity is likely if pandemic restrictions are stepped up once again. If the number of customers defaulting on payments increases – for example, as a result of bankruptcy – this could place the banks under pressure and put financial stability at risk. In parallel, the longer the coronavirus pandemic persists, the more difficulties governments may have riding out the crisis with borrowing and fiscal interventions. 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. This was confirmed in further BEREC reports published in June 2020 on the stability of Europe’s telecommunications networks. 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. Other national regulatory authorities imposed additional regulations, such as in Austria where mobile providers are required to send out text messages on behalf of the authorities. The timeline for spectrum award procedures in the near future has also been adjusted. For further details, please refer to the table below.

Roaming regulation. The European Commission began a consultation on the future regulation of international roaming. The current regulation applies price caps through 2022 on the roaming charges that European mobile network operators can bill peer operators for the use of roaming services. In addition to the future regulation of these charges, the Commission is also consulting on whether and which rules will apply in the future to roaming for the Internet of Things (IoT) and to roaming access to value-added services and emergency call numbers.

Awarding of spectrum

Spectrum was awarded in the second quarter of 2020 as follows: In Hungary, a total of 160 MHz purchased by Magyar Telekom at auction in March 2020 for around EUR 263 million (translated into euros) was assigned to the subsidiary in April 2020. T‑Mobile US successfully bid on total spectrum of 691 MHz at the U.S. auction in March 2020 and received the 5G licenses it bought for USD 873 million in April 2020. In the Netherlands, an auction started on June 29, 2020 for spectrum in the 700 MHz, 1,500 MHz, and 2,100 MHz bands. The auction ended with the completion of the allotment phase on July 21, 2020. T‑Mobile Netherlands successfully bid on spectrum in all three bands for an aggregate amount of EUR 400 million. In the meantime, the start dates for spectrum award proceedings in Greece, Austria, and Poland were postponed to or around the third or fourth quarters of 2020. Hungary also announced plans for a further auction. Croatia now intends to hold its spectrum auction in the first half of 2021 and is considering the inclusion of additional spectrum bands, while Slovakia and the Czech Republic have called a halt to their award planning with no new date set at present.

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.