AT&T, one of the leading telecom companies in the United States, has recently entered into a significant agreement with Ericsson, a Swedish supplier of network equipment. The deal entails AT&T purchasing up to $14 billion worth of equipment from Ericsson over a span of five years.
This development is a part of AT&T’s ambitious plan to establish a commercial-scale open radio access (RAN) network. By leveraging open RAN technology, telecom companies like AT&T can construct their networks using equipment sourced from multiple suppliers. This approach not only fosters innovation but also encourages healthy competition in the industry.
Chris Sambar, the Executive Vice President of AT&T Network, expressed his excitement about the collaboration, stating, “With this collaboration, we will open up radio access networks, drive innovation, spur competition, and connect more Americans with 5G and fiber.”
The news had a contrasting effect on the stock market. While AT&T’s shares experienced a slight decline of 0.3% during premarket trading, Ericsson’s American depositary receipts witnessed an impressive increase of 2.1%.
Brandon Nispel, an analyst at KeyBanc, shared his insights on the matter in a research note, mentioning that this could potentially be the largest deployment of open RAN technology. He also pointed out that this move aims to reduce costs for telecom equipment while simultaneously maintaining speedy deployment and increasing flexibility.
Although the news primarily revolves around AT&T and Ericsson, it is worth noting that other major players in the telecommunications sector, such as Verizon Communications and T-Mobile US, are also actively pursuing their respective Open RAN plans for network expansion.
In conclusion, AT&T’s game-changing deal with Ericsson signifies a significant step towards revolutionizing the telecom industry. Through embracing open RAN technology and collaborating with leading suppliers like Ericsson, AT&T aims to provide better connectivity, foster innovation, and create a more competitive landscape for the benefit of American consumers.
Nokia Faces Consequences as Ericsson Wins AT&T Deal
Finnish equipment supplier Nokia is set to face a significant blow as its existing equipment will be replaced by Ericsson’s. This news has caused Nokia American Depository Receipts (ADRs) to drop by 7% in premarket trading.
The impact of this change for Nokia is substantial. The loss of business means that its push to achieve double-digit operating margins in its Mobile Networks business will be delayed by two years. AT&T, which accounted for 5%-8% of Nokia’s Mobile Networks net sales this year, has played a significant role in this setback.
Nokia has expressed that it will gradually move away from supporting AT&T in one area of their relationship over a period of 2-3 years. As a result, the expected revenue from these specific activities will gradually decrease over the same time frame.
Despite this setback, Nokia remains committed to Open RAN technology. Furthermore, AT&T has confirmed that its decision was due to company-specific circumstances, reinforcing Nokia’s dedication to this tech.
Both Ericsson and Nokia have previously cautioned about the uncertain picture for mobile network spending in 2022. In fact, in October, Nokia announced layoffs of 9,000 to 14,000 employees as a response to the challenging market conditions.