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 2020 Annual Report, focusing on macroeconomic developments in the first six months of 2021, the outlook, the currently prevailing economic risks, and the regulatory environment. The macroeconomic outlook is provided contingent on the understanding that the further course of the pandemic will have a major effect on quantifying the impact of the coronavirus pandemic.

Macroeconomic development

The global economy saw a marked recovery as coronavirus restrictions have been eased. In the April 2021 update to its outlook, the International Monetary Fund (IMF) announced it expected the global economy to expand by 6.0 % in 2021, followed by growth of 4.4 % in 2022.

For the German economy, the IMF expects GDP to grow by 3.6 % in the current year. But the rapid recovery is taking its toll, with soaring prices for raw materials and companies increasingly facing a shortage of upstream products. The business climate in the information and communications technology sector has continued to brighten: The Bitkom-ifo-Digitalindex, calculated on the basis of the business situation and expectations, grew again in the second quarter of 2021 and reached an historical high in June.

The economies of our core markets in North America and Europe, too, will expand this year, with the IMF predicting growth of 6.4 % in the U.S. economy and of 4.4 % in the eurozone.

Outlook

The U.S. economy is also poised to return to its pre-pandemic level in the second quarter of 2021. With a rush of pent-up consumer spending expected in the second half of the year, growth is set to ramp up significantly. In contrast to the United States, the eurozone economy is much more sluggish. Nonetheless, economic activity rose significantly here too in spring 2021. Economic output in the eurozone is also on track to be back at its pre-pandemic level by the year-end.

Overall economic risks

Apart from the prevailing uncertainty relating to the further course of the coronavirus pandemic, there is a concomitant risk of companies encountering liquidity problems despite the relief measures implemented in many countries. Moreover, risks regarding the stability of global finance markets can arise from an expansionary monetary and fiscal policy. Further risks to economic development arise from the smoldering trade conflicts between the United States and China, as well as from other geopolitical risks.

Regulation

Commitment agreements entered into force. The agreements with Telefónica and Vodafone concerning their long-standing cooperation in the fixed network were extended in the fourth quarter of 2020 in the form of new commitment agreements to replace the former quota-based agreements under what has become known as the “contingent model.” Long-term agreements had also been signed with 1&1 and NetCologne in the first quarter of 2021. These cover the existing broadband networks as well as the FTTH fiber-optic networks to be continuously built out by Deutsche Telekom in the years to come. Since there were no regulatory objections to the agreements on the part of the Bundesnetzagentur, they entered into force effective April 1, 2021. This has established a solid foundation on which to take forward cooperation in the fixed network over the next 10 years.

European Commission sets termination rates from July 1, 2021. On April 22, 2021, the European Commission published a Delegated Act setting single maximum Union-wide mobile (MTR) and fixed-network (FTR) termination rates. The Act will reduce MTRs to a uniform level of 0.2 eurocents/min. by 2024 using a phased approach. A uniform level of 0.07 eurocents/min. will apply to FTRs from January 1, 2022; new price caps which vary by member state, however, will apply as early as from July 1, 2021.

European Electronic Communications Code (EECC) transposed into national law. The Telecommunications Modernization Act (Telekommunikationsmodernisierungsgesetz – TKMoG) will enter into force in Germany on December 1, 2021. The reform of the German Telecommunications Act (Telekommunikationsgesetz – TKG) became necessary to transpose the provisions of the EECC into national law. The biggest changes affect the rules on consumer protection, the regulation of very high capacity networks (including FTTH), spectrum policy, and the rules on universal service. TKMoG will also remove the right of property owners to pass on cable TV service costs to tenants via the service charges included in rental agreements. The rules on contract terms and contract extensions were modified in favor of the consumer, with customers now being able to cancel contracts on a monthly basis after reaching the minimum contract term. Other changes affect the existing rights of retail customers to a price reduction in the event of defective performance – a modification that was now also incorporated into the TKG. The deadlines for fault clearance have been further tightened. In terms of wholesale regulation of companies with a dominant market position, the amended TKG will ease regulations regarding the build-out of FTTH networks. The previous universal service is being replaced by an entitlement to fast telecommunications services. The thresholds for this will have to be laid down in an ordinance that has the force of law. One important change is the abolishment, effective June 30, 2024, of the privilege for property owners to pass on cable TV and internet service fees as ancillary rental costs to tenants. The fiber-optic build-out will be financed using new instruments, such as the fiber-optic provisioning charge for tenants capped at EUR 60 per year for 5 or 9 years, a cost apportionment added to the basic rent excluding service charges, or the existing rules on network usage charges. This step will also reduce the costs for network operators of using in-house networks. Greece and Hungary have already transposed the EECC into national law, while the lawmaking process is still ongoing in the Netherlands and the Czech Republic.

Awarding of spectrum

The assignment phase of the C-band auction (3.7 to 4.2 GHz) in the United States ended on February 17, 2021. On February 24, 2021, the FCC announced the number of licenses obtained by participating companies. Verizon paid around USD 45 billion for 3,511 licenses, AT&T over USD 23 billion for 1,621 licenses, and T‑Mobile US USD 9.3 billion for 142 licenses. A total of 280 MHz was sold at the C-band auction. The new license holders must make relocation payments over the next three years to cover the transfer of licenses from the former holders. The payments T‑Mobile US will have to make are expected to amount to USD 1.2 billion. In Hungary, proceedings to re-award 900 and 1,800 MHz spectrum licenses that are due to expire in 2022 were held on January 28, 2021 and concluded the same day. Magyar Telekom acquired 2x 8 MHz and 2x 20 MHz in the respective bands for a total price of EUR 123 million (when translated into euros).

Hrvatski Telekom in Croatia successfully registered for the award of spectrum in the 700; 3,400 to 3,800; and 26,000 MHz bands. The auction began on July 12, 2021. The proceedings are expected to conclude in August 2021. As previously, Poland has made no further announcements regarding a new start date for the postponed auction for 3,400 to 3,800 MHz. The process is being held up by incomplete legislative procedures. Romania plans to hold a large spectrum auction for the 700; 800; 1,500; 2,600; and 3,400 to 3,800 MHz bands, which is expected to take place in winter 2021/spring 2022. The Slovakian regulatory authority is preparing to allocate the 3,400 to 3,800 MHz band, which will become available for mobile broadband usage in 2024. It has begun a corresponding public consultation. In the meantime, the previously unused 2,600 MHz TDD band (50 MHz) has been added to the spectrum award planning. An auction postponement until next year cannot be ruled out. The Federal Communications Commission in the United States announced a start date of October 5, 2021 for the 3.45 GHz auction to award a total of 100 MHz of spectrum in the 3,450 to 3,550 MHz band.

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.