Nokia lowers guidance after AT&T picks Ericsson for Open RAN

Everything is on a larger scale in the US, and AT&T's Open RAN rollout is no exception. It is aiming for 70% of its wireless network traffic to be carried by what it calls 'open-capable' platforms as soon as late 2026.

It expects to have fully integrated Open RAN sites operating in coordination with Ericsson and Japanese vendor Fujitsu starting from next year. Switching away from proprietary interfaces will enable rapid scaling and management of multi-vendor hardware at each site, AT&T said.

AT&T plans for the wide-scale deployment to begin in earnest from 2025, and in addition to Ericsson and Fujitsu, it has lined up Corning, Dell and Intel as suppliers.

While there are still questions over whether Open RAN can match the performance of legacy RAN in high footfall locations, AT&T believes it can deliver lower-power, sustainable networks with higher performance.

"High-performance and differentiated networks will be the foundation for the next step in digitalisation," said Ericsson CEO Börje Ekholm. "I am excited about this future and happy to see our long-term partner, AT&T, choosing Ericsson for this strategic industry shift – moving to open, cloud-based and programmable networks."

Open RAN by its very nature means that telcos can use compatible equipment from any vendor they want, and theoretically that includes Nokia.

However, there is no getting away from the fact that when it comes to AT&T, Ericsson's Finnish rival is now playing second fiddle to the big Swede. That was reflected in the stock market – Ericsson's shares were up 5.1% at time of writing, while Nokia's were down 7.9%.

In a statement, Nokia said AT&T accounted for 5-8% of year-to-date sales at its Mobile Networks division. Following the Open RAN announcement, Nokia said it now expects revenue from AT&T to decline over the next 2-3 years, which will delay its plan to achieve double-digit operating margin by up to 2 years.

Feeling understandably defensive, Nokia insisted it is still regarded by AT&T as a capable and competitive RAN vendor. It also pointed out that according to research firm Dell'Oro it took the lion's share of the 5G market (29%) in Q3.

It also talked up its role in Open RAN, and drew attention to the recent deal it won from Japan's NTT DoCoMo.

"Whilst the news from AT&T is disappointing, our Mobile Networks business has made significant progress in recent years, increasing our RAN market share and technology leadership. I firmly believe we have the right strategy to create value for our shareholders into the future with opportunities to gain share, diversify our business and improve our profitability," said Nokia CEO Pekka Lundmark.

Like all Open RAN backers, AT&T expects the technology to stimulate competition and innovation in the RAN market, leading to greater efficiencies. The flexibility that comes with choosing equipment from a broader range of suppliers should also lead to lower network costs and improved operational efficiencies, it added.

Indeed, even though it plans to spend an eye-watering $14 billion under the Ericsson deal, AT&T said this is still less than what it expects to spend on wireless capital expenditure over the next five years.

Speaking of which, five years is a long time in telecoms, and for Nokia it will feel even longer. Ericsson will no doubt enjoy the spoils for the duration, and will work hard to maintain its position as AT&T's lead supplier thereafter.

Part of that effort involves manufacturing the hardware for AT&T's new network in the US itself. Production will take place at Ericsson's 5G Smart Factory in Lewisville, Texas, which recently completed an expansion project and now covers more than 107,000 square feet.

A company the size of AT&T going with Open RAN represents a boost for the technology in general, and could stimulate greater investment, and encourage more new entrants to take the plunge.

"With this collaboration, we will open up radio access networks, drive innovation, spur competition and connect more Americans with 5G and fibre," said Chris Sambar, EVP, AT&T Network. "We are pleased that Ericsson shares our support for Open RAN and the possibilities this creates for American digital infrastructure."