The economic environment

This section provides important additional information and explains recent changes in the economic environment compared to those described in the 2023 combined management report (2023 Annual Report), focusing on macroeconomic developments, the overall economic outlook including the currently prevailing economic risks, and the regulatory environment in the first nine months of 2024.

Macroeconomic development

The U.S. economy performed robustly in the third quarter of 2024, mostly buoyed by consumer and public spending and federally subsidized business investments. In Europe, the economy trended weaker in nations with a large industrial sector, and stronger in economies with a high service share. In the second quarter of 2024, Germany, Hungary, and Austria faced a decline in economic output compared with the prior quarter. Contrary to expectations, the German economy grew by 0.2 % in the third quarter of 2024; however, sentiment and leading indicators suggest no sustained economic recovery is in sight.

The turnaround in interest rates likewise continues, with the U.S. Federal Reserve (Fed) cutting its benchmark interest rates by a larger-than-expected 0.5 percentage points in September 2024, and, in November 2024, by a further 0.25 percentage points. The Fed thus followed the cuts made by the European Central Bank (ECB) in June, September, and October 2024 of 0.75 percentage points in total. The inflation rate rose in October 2024 to 2.0 % in Germany and the eurozone. In the United States, inflation was at 2.4 % in September.

According to the Bitkom-ifo-Digitalindex, the business climate in Germany’s digital economy deteriorated in the third quarter of 2024, returning to negative territory for the first time since May 2020. The digital economy, however, remains more optimistic than the economy as a whole.

Overall economic outlook

There are signs of a slowdown in economic growth in the United States, with the first cracks beginning to appear in the labor market and the outlooks for consumer spending losing momentum. In Germany, structural change is adding further pressure to the already downturned economy.

In its October 2024 forecast, the International Monetary Fund (IMF) expects global economic output to grow by 3.2 % in the current year compared to growth of 3.3 % in the prior year. Whereas economic output is set to rise in the United States by 2.8 % and in the eurozone by 0.8 %, in Germany it is expected to stagnate. The economic outlook remains vulnerable to significant downside risks, with geopolitical tensions and potential trade disputes in particular posing high risks to economic growth and inflation.

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 had 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. A hearing was held before the Federal Court of Justice on October 1, 2024, in which a ruling for January 14, 2025 was announced.

European Commission publishes white paper. On February 21, 2024, the European Commission published a white paper entitled “How to master Europeʼs digital infrastructure needs?” This white paper compiles proposals for measures by the European Union in preparation for a planned Digital Networks Act. Deutsche Telekom submitted its view on the proposals on June 28, 2024 during the open consultation process. Legislative initiatives based on the white paper and the responses to the public consultation are expected from 2025.

The white paper identifies future action areas as the build-out of digital networks of the future, managing the transition to new technologies and business models, covering the future need for connectivity, and the safeguarding of economic competitiveness and of secure, resilient infrastructure in the EU. As a result, a far-reaching revision of the current regulatory framework is expected.

Bundesnetzagentur’s regulatory procedures based on the decision on access regulation including FTTB/H network access. On July 17, 2024, the Bundesnetzagentur published the approval on the regulated charges for access to civil engineering infrastructure. The charges apply until December 31, 2025. The parallel Bundesnetzagentur regulatory procedure concerning the related reference offer has not yet been decided.

Awarding of spectrum

In the first nine months of 2024, spectrum in the 26 GHz band and residual spectrum in the 3.4 to 3.8 GHz band was auctioned off in Austria. In the 26 GHz band, T‑Mobile Austria secured 400 MHz of nationwide spectrum for itself, and in the 3.4 to 3.8 GHz band, 40 MHz in Vienna and 60 MHz in Carinthia, for EUR 10.5 million in total. In the United States, the spectrum in the 2.5 GHz band acquired in Auction 108 in September 2022 for around USD 0.3 billion (EUR 0.3 billion) was allocated. The majority of this spectrum was connected immediately. In the Czech Republic, the 900/1,800 MHz GSM license expiring in 2024 was extended at a cost of around EUR 28 million for T‑Mobile Czech Republic.

In Germany, the regulatory authority Bundesnetzagentur consulted on a draft decision concerning the extension of usage rights for the 800 MHz, 1,800 MHz, and 2,600 MHz mobile frequencies, which expire at the end of 2025, by five years. The extension is to replace the originally planned auction to award these frequencies. In return, the draft stipulates requirements such as further coverage obligations for the existing frequency owners as well as the obligation to allow network provider 1&1 to co-use frequencies below the 1 GHz band. The consultation on the draft continued until July 8, 2024; the regulatory authority’s final decision is expected in either the fourth quarter of 2024 or the first quarter of 2025.

The award rules of the 2019 auction were declared unlawful by the Cologne Administrative Court on August 26, 2024. However, this ruling initially has no direct impact on our spectrum usage rights in the 2.1 and 3.6 GHz bands awarded in those proceedings, and the spectrum allocations will remain in effect until further notice. We cannot make a final analysis of the decision’s impact until we have received the court’s written judgment.

Proceedings to re-award spectrum in the 2,600 MHz band expiring at the end of 2026 and possibly spectrum in the 2,300 MHz band are starting in Austria. In Poland, the public consultation was opened on October 4, 2024 on the award of 2x30 MHz in the 700 MHz band and 2x5 MHz in the 800 MHz band. According to the consultation documents, the award procedure is expected to begin at the end of 2024 and the auction is expected to begin in the first quarter of 2025. If necessary, the procedure to award the 26 GHz band could also begin. In Slovakia, the procedure (auction) to re-award 900 MHz and 2,100 MHz spectrum originally planned for late 2023 was called into question. Instead, a comprehensive multi-band auction for the 800, 900, 1,500, 2,100, and 2,600 MHz bands expiring in 2025, 2026, and 2028 is under discussion, hence the regulator is initially considering extending the 900 MHz band and, if necessary, the 2,100 MHz band on a short-term basis.

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 September 10, 2024, T‑Mobile US and N77 License (N77) entered into an agreement on the sale of spectrum licenses, pursuant to which N77 has the option to purchase all or a portion of T‑Mobile US’ remaining 3.45 GHz licenses for a range of cash consideration. The number of licenses sold will be determined based upon the amount of committed financing raised by N77. At the reporting date, the licenses concerned had a carrying amount of USD 2.7 billion (EUR 2.4 billion). T‑Mobile US maintains the right to terminate the agreement no later than February 7, 2025, if the committed financing is less than a certain target level of cash consideration. The transaction is subject to approval by the Federal Communications Commission (FCC).

On August 8, 2022, T‑Mobile US entered into agreements with Channel 51 License and LB License (Channel 51) for the acquisition of spectrum licenses in the 600 MHz band in exchange for total cash consideration of USD 3.5 billion (EUR 3.1 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. On December 29, 2023, the FCC approved the transfer of the first tranche of licenses. The first tranche was concluded on June 24, 2024. The corresponding purchase price payment of USD 2.4 billion (EUR 2.1 billion) was made on August 5, 2024. On October 22, 2024, the FCC approved the transfer of certain licenses from the second tranche. The transfer of these licenses and payment of the associated purchase price of USD 0.5 billion (EUR 0.5 billion) are expected to be closed in December 2024. The transfer transaction for the remaining licenses from the second tranche is expected to be closed in 2025.

On July 1, 2020, T‑Mobile US and DISH Network Corporation (DISH) reached an agreement on the sale of spectrum licenses, under which DISH agreed to purchase certain 800 MHz spectrum licenses from T‑Mobile US for USD 3.6 billion (EUR 3.2 billion). On October 15, 2023, T‑Mobile US and DISH modified the agreement to include, among other changes, a non-refundable extension fee of USD 0.1 billion (EUR 0.1 billion) 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. DISH did not exercise its purchase option by April 1, 2024. The extension fee already paid on October 25, 2023 was retained in accordance with the agreement. T‑Mobile US was contractually obligated to offer the licenses for sale at auction. The associated auction process ended on October 1, 2024. Since bidding did not reach the defined minimum purchase price of USD 3.6 billion by the end of the auction, T‑Mobile US was relieved of its obligation to sell the licenses. T‑Mobile US is currently exploring alternatives to sell or utilize the licenses.