(Bloomberg) — AT&T Inc. will resort to… to Ericsson AB to modernize its wireless network in the United States, a project that could be worth nearly $14 billion over five years.
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For Ericsson, which is already responsible for about two-thirds of AT&T’s network in the United States, the deal represents a major win over rival Nokia Oyj, which accounts for the other third of AT&T’s business. It’s another blow to Espoo, Nokia’s Finland-based subsidiary, which in October announced job cuts alongside broader struggles in its 5G infrastructure business.
Nokia shares fell 9.3% in aftermarket trading in the United States, extending an earlier selloff due to speculation that it could be removed from the list of 5G equipment vendors for AT&T. Shares of Stockholm-based Ericsson rose 4.6% late Monday in New York.
Under the deal, Ericsson is building AT&T’s open-architecture network, which will allow vendors to compete for component supply, according to a company statement on Monday. Most networks today are restricted to a relationship with a single manufacturer.
The open architecture allows for more flexibility in the network, Chris Sambar, executive vice president of AT&T Network, said in an interview. “You get more creative.”
What Bloomberg Intelligence Agency says:
Ericsson’s late but bold move to embrace open Radio Access Network (RAN) technology appears to be paying early dividends thanks to a new contract with AT&T that could be worth about $14 billion over five years. The win, which beats Nokia, may help ease investors’ concerns about the sluggish sales trend. However, the multi-vendor nature of the deal may put pressure on margins
—BI Senior Industry Analyst Matthew Bloxham
In a statement, Ericsson CEO Borje Ekholm called the deal a “strategic shift in the industry,” adding that it would create “new ways for operators to monetize the network.”
Nokia said in a separate statement that the decision would delay the timeline for achieving double-digit operating margins by up to two years. AT&T has accounted for between 5% and 8% of the company’s net mobile network sales so far this year. “The news from AT&T is disappointing,” Nokia CEO Pekka Lundmark said.
AT&T officials expect companies to compete to supply equipment needed for the network, including base stations at the foot of cell towers, antennas on top, and communications between them, for example.
The effort will make Dallas-based AT&T a U.S. leader in the technology, known as commercial-scale open radio access network, or Open RAN, the company said.
Having a number of suppliers can enhance flexibility, lower costs and avoid reliance on non-U.S. vendors designated as security risks such as Huawei Technologies Co., according to U.S. officials.
AT&T, America’s third-largest mobile phone provider, said the new network will allow it to “rapidly take advantage of the next generation of wireless technology.” The benefits include sustainable networks with lower energy and higher performance, the company said in its statement.
(Adds comment from Nokia in seventh paragraph, as well as reaction from BI. An earlier version of this article was corrected to use Ericsson’s CEO spelling.)
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