The economic environment

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

Macroeconomic development

The global economic outlook dampened in the second 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. The upturn in consumer prices in the United States and the eurozone has slowed, although the core inflation rate remains at a relatively high level.

In its July 2023 forecast, the International Monetary Fund (IMF) expects global economic output to grow by 3.0 % in the current year compared to growth of 3.5 % in the prior year.

For the German economy, the IMF expects economic output to decline by 0.3 %. According to the Bitkom-ifo-Digitalindex, the business climate in the digital sector deteriorated in the second quarter of 2023, but remains positive in contrast to the business climate in the economy as a whole.

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 1.8 % in the United States and by 0.9 % in the eurozone.

Overall economic outlook

Cooling inflation and falling prices on the global energy markets could lead to moderate economic recovery in the course of the year. However, 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. 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 launched the award procedure for the 3,400 to 3,800 MHz band with an auction announcement on June 22, 2023. Mobile network operators had until August 8, 2023 to register their interest in participating. The bidding phase is scheduled for September/October 2023. Awards for the 700/800 MHz and 26 GHz 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 Slovak 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 GHz band is also expected to be awarded in 2023. To free up this band, Hungary has already begun awarding substitute frequencies in the 32 GHz 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.

Agreements on spectrum licenses

In the United States, on August 8, 2022, T-Mobile US entered into agreements with Channel 51 License and LB License for 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 by the end of 2023, while the second tranche is expected to be concluded in 2024.

On July 1, 2020, T-Mobile US and DISH Network Corporation (DISH) entered into an agreement on the sale of spectrum licenses, under which DISH receives an option to purchase certain 800 MHz spectrum licenses from T-Mobile US for USD 3.6 billion (EUR 3.5 billion). The transaction is subject to approval by the Federal Communications Commission (FCC). Pursuant to the agreement, the application for approval would have had to be filed with the FCC at the latest by June 1, 2023. As of July 27, 2023, DISH has not fulfilled this obligation. At the request of the U.S. Department of Justice, T-Mobile US agreed not to take action to terminate the agreement until August 11, 2023. If the application is filed with the FCC before this date, and the FCC subsequently approves the transaction, the contractual parties are obligated to close the transaction within five days of the FCC’s approval. If DISH were to be in breach of contract, it would have to pay a contractual penalty of USD 72 million to T-Mobile US. However, should the transaction not be closed by April 1, 2024, without breach of contract, both parties are entitled to terminate the agreement. In this case, DISH would not be required to pay a contractual penalty. If DISH does not exercise its option to purchase the 800 MHz spectrum licenses, T-Mobile US is obligated to put the licenses up for sale at auction. 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.