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ECONOMY

After 3G hype, 4G frequencies to go on auction in Germany

A decade ago, telecoms paid big to snap up 3G mobile licenses and later regretted it. Now in Germany, the next generation 4G frequencies are about to go up for auction.

After 3G hype, 4G frequencies to go on auction in Germany
Photo: DPA

In 2000, at the height of the tech bubble, telecom operators fell over themselves to snap up 3G or third generation mobile licenses in an auction in Germany.

In the hangover that followed, successful bidders were left drowning in a sea of debt, and 3G, once it eventually got off the ground, proved something of a disappointment.

Ten years on, it is the turn of 4G frequencies to go under the hammer in the western city of Mainz on Monday. But the German government expects to reap only a fraction of the €50 billion ($67 billion) it received last time.

But with the new technology promising nothing less than a revolution, interest among firms like Britain’s Vodafone and T-Mobile is strong, with analysts predicting a windfall of €5 to €10 billion for Berlin.

This time around, operators are confident too that the technology will not disappoint and that it will be in the hands of consumers a lot sooner.

“Demand is well ahead of supply,” said Matthias Kurth, head of the German telecoms regulator running the auction, with “severe competition” among operators like Vodafone and T-Mobile to grab a piece of the 4G pie.

In Europe’s first 4G auction, a large part of what is up for grabs is the so-called “digital dividend,” a chunk of frequencies left unwanted by television companies following their switch from analogue to digital broadcasting.

The 4G technology, known as Long Term Evolution (LTE), will mean that using your mobile handset just to phone people will become old hat since it will allow data to be transferred at breakneck speeds.

The resulting downloading capacities will make the mobile phone a powerful tool for surfing the Internet. Phone calls, too, will occur by Internet telephony, as happens on PCs now with programs like Skype.

Another advantage for both firms and users of the new technology will be that remote areas currently with little or no high-speed Internet will soon be covered.

And with experts predicting a price war among operators, consumers may start to wonder whether they still need a mobile phone operator as well as a fixed net provider, since home computers could use the networks too.

“With LTE, mobile phone networks will become a real alternative to cable or DSL (broadband telephone connections),” said Herbert Merz, head of the German hightech association Bitkom.

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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