UPDATE AT&T (NYSE: T) is attempting to downplay its decision to throw a $14 billion, five-year Open RAN contract to Ericsson (NASDAQ: ERIC). At the UBS Global TMT Conference this week, John Stankey, AT&T CEO, President and Director, attempted to assuage any hurt feelings at Nokia, caused by the carrier’s decision.
Stankey noted that $14 billion over five years, which equals $2.8 billion annually, is much less than the $24 billion that it invests in its network annually. He also took pains to explain that the decision to go with Ericsson did not connote dissatisfaction with Nokia’s equipment.
“We had two very good suppliers. They both did good work for us. They both had really good equipment,” Stankey said. “We stepped back and said, how can we get to the most modernized network that gets the most amount of traffic across open — potentially open interfaces.”
Nokia, in its reaction to the Ericsson deal, defended itself saying it has invested heavily in a “highly competitive product portfolio,” which is a “recognized leader in Open RAN.”
Conciliatory remarks aside, AT&T’s decision to go with Ericsson will leave a mark at Nokia. Over the next two to three years, Nokia expects a decrease in revenue from AT&T, which accounted for five to eight percent of Mobile Networks net sales year-to-date in 2023. As a result, the vendor will be forced to cut costs. Nokia expects Mobile Networks to remain profitable, but the loss of AT&T would delay the timeline of achieving double digit operating margin by up to two years.
Stankey said the carrier made the decision to award Ericsson the contract to push vendors to be more aggressive in opening up their technology, noting that progress on Open RAN so far has been slow. Beginning in 2025, the company will scale this Open RAN environment throughout its wireless network in coordination with multiple suppliers such as Corning Incorporated, Dell Technologies, Ericsson, Fujitsu and Intel. Beyond that, AT&T’s goal is to open up 70 percent of its network to multiple suppliers by 2026, he said, and the carrier is open to having Nokia on board.
“We’d obviously like to see multiple players there,” Stankey said. “We think that’s how we manage, one, cost in the network, but also a degree of innovation on the packaging and that’s going to become more important as networks become more distributed and you start dealing with smaller packages.”
The truth is, Nokia is already on board with AT&T’s network. The years it has spent supplying products and services across wireless, wireline and other network technologies leaves a healthy embedded base at the carrier.
By J. Sharpe Smith, Inside Towers Technology Editor