The economic environment

This section provides additional information on, and explains recent changes to, the economic situation as described in the combined management report for the 2017 financial year, focusing on macroeconomic developments in the first nine months of 2018, the outlook, the currently prevailing economic risks, and the regulatory environment. The overall economic outlook presupposes there are no major unexpected occurrences in the forecast period.

Macroeconomic development

The global economy continued on its growth course in the first nine months of 2018. In its updated September 2018 forecast, the OECD expects global gross domestic product (GDP) to grow by 3.7 percent in 2018, compared with 3.6 percent in 2017. The national economies in our core markets continue to expand. While the upswing in Europe is weakening, GDP in the United States is stronger than in the prior year.

Outlook

Under the current conditions, we expect to see continued positive economic trends in the economies of our core markets. However, uncertainties over the future of global trade are negatively affecting current forecasts, which now show that economic growth may be slower overall than previously expected for 2018 and 2019.

Overall economic risks

At present, global economic growth continues to withstand the negative effects of economic policy in recent months. The economic risks have increased. Trade conflicts and political tensions in Europe could jeopardize sustained expansion. Furthermore, geopolitical crises could also have a negative impact on the economies of the countries in which we operate.

Regulation

Federal Network Agency decision on StreamOn. On December 15, 2017, the Federal Network Agency prohibited elements of the MagentaMobil StreamOn add-on option. According to the Federal Network Agency, two aspects of this option breached the EU Regulation on net neutrality and roaming. The ruling stipulates that we must transmit all StreamOn data traffic at the maximum available bandwidth and that this also cannot be deducted from the included data volume contingent when roaming within the EU. However, we believe that our service complies with EU law. We sought a preliminary injunction with the Cologne Administrative Court against the Federal Network Agency’s ruling. We will continue to offer StreamOn in unchanged form during the summary proceedings.

Federal Network Agency decisions on bitstream charges. On March 8, 2018, we received the Federal Network Agency’s final decision on our rate application dated September 21, 2017. The application relates to the rates we can charge to wholesale customers for access to our broadband lines for “layer 2 bitstream access.” In its final decision, the Federal Network Agency confirmed its preliminary decision from December of last year and approved the majority of rates at the current levels. We had requested an increase in the monthly rate as part of contingent models. As per the preliminary decision, this application was not approved in the final decision. On September 18, 2018, the Agency published a draft consultation on bitstream charges for supervectoring, which is used to make bandwidths of up to 250 Mbit/s available. According to the draft, the approved rates are higher than those for lower speeds. The Agency thus consistently acknowledges investments in higher bandwidths. The Agency will set the final rates once the consultation process is concluded.

Awarding of spectrum

The table below provides an overview of the main spectrum awards such as auctions as well as license extensions in Germany and at our international subsidiaries. It also indicates spectrum to be awarded in the near future in various countries.