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 three quarters of 2023.

Macroeconomic development

The global economic outlook dampened in the third 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 October 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 0.5 %. According to the Bitkom-ifo-Digitalindex, the business climate in the digital sector deteriorated in the third 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 2.1 % in the United States and by 0.7 % in the eurozone.

Overall economic outlook

Cooling inflation and falling prices on the global energy markets could lead to moderate economic recovery in the coming 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, in particular 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

Ongoing court case on the approval under merger control law for the joint venture Glasfaser NordWest. On September 12, 2023, the Federal Court of Justice admitted the appeal filed by the Bundeskartellamt and Telekom Deutschland against the Düsseldorf Higher Regional Court’s decision dated September 22, 2021. The Düsseldorf Higher Regional Court had decided to reverse the Bundeskartellamt’s approval under merger control law of the joint venture Glasfaser Nordwest. Telekom Deutschland and EWE had established the joint venture Glasfaser NordWest in 2020 to bring fast internet to up to 1.5 million households and business locations. The September 12, 2023 decision now paves the way for the Federal Court of Justice to open a legal review into the reversal of the approval. The joint venture can continue building out FTTH until the proceedings are concluded.

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. In Poland, the bidding phase for the 3,400 to 3,800 MHz band award ended on October 18, 2023. T‑Mobile Polska purchased 100 MHz of this spectrum for around EUR 111 million, securing one of the two spectrum blocks with the fewest technical constraints.

Award procedures for the 700/800 MHz and 26 GHz bands could also follow in Poland in 2023/2024. The Austrian regulatory authority RTR has begun the procedure to award 26 GHz millimeter wave spectrum. It also plans to award residual frequencies in the 3,400 to 3,800 MHz band from the 2019 auction in the same procedure. A public consultation on the tender conditions is under way. RTR expects the bidding process to start in the fourth quarter of 2023.

In the Czech Republic, the procedure to extend the 900/1,800 MHz GSM license, which expires in 2024, is still expected to begin before the end of 2023. In Slovakia meanwhile, the procedure (auction) to re-award spectrum in the 900 MHz and 2,100 MHz bands announced for the end of 2023 is at stake following calls by several parties to re-examine the auction conditions. Moreover, the minister responsible is currently being replaced.

In Germany, the regulatory authority Bundesnetzagentur launched a public consultation on September 13, 2023, following which it intends to extend the usage rights – which expire at the end of 2025 – for the 800 MHz, 1,800 MHz (partial), and 2,600 MHz mobile frequencies by five years and therefore not award them by way of an auction for the time being.

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 in the 600 MHz band in exchange for total cash consideration 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 not expected to be closed before the first half of 2024, while the second tranche is expected to be closed in late 2024 or early 2025.

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 3.4 billion). The transaction is subject to approval by the Federal Communications Commission (FCC). On October 15, 2023, T‑Mobile US and DISH modified the agreement to include, among other changes, a non-refundable extension fee of USD 100 million 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. The extension fee is fully creditable against the purchase price provided DISH exercises its option to purchase the spectrum by this date. If DISH does not purchase the 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.

On September 12, 2023, T‑Mobile US agreed with U.S. cable network operator Comcast to acquire spectrum in the 600 MHz band in exchange for total cash consideration of between USD 1.2 billion and USD 3.3 billion (EUR 1.1 billion and EUR 3.1 billion). The final purchase price will be determined at the time the parties make required transfer filings with the FCC once it is decided which spectrum Comcast intends to sell. The transaction is expected to close in the first half of 2028, pending approval from the FCC. At the same time, T‑Mobile US and Comcast have agreed exclusive leasing arrangements. The leasing rights for T‑Mobile US will apply for at least two years, even if Comcast elects to remove some of its licenses from the purchase agreement.