AT&T hires Ericsson for $14 billion network overhaul, edging out Nokia

(Bloomberg) — AT&T Inc. will hire Ericsson AB to modernize its U.S. wireless network, a project that could cost nearly $14 billion over five years.

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For Ericsson, which already accounts for about two-thirds of AT&T’s U.S. network, the deal represents a significant win over rival Nokia Oyj, which accounted for the other third of AT&T’s business. It’s another blow for Espoo, Finland-based Nokia, which announced job cuts in October alongside major difficulties in its 5G infrastructure business.

Nokia fell 9.3% in U.S. postmarket trading, extending an earlier selloff on speculation that the company could be removed from AT&T’s list of 5G equipment suppliers. Shares of Stockholm-based Ericsson rose 4.6% late Monday in New York.

The deal will see Ericsson build AT&T’s network with an open architecture that allows providers to compete to supply components, a company statement said Monday. Today, most networks are tied to a relationship with a single manufacturer.

The open architecture allows for more flexibility in the network, said Chris Sambar, executive vice president of AT&T Network, in an interview. “You get more creativity.”

What Bloomberg Intelligence says:

Ericsson’s late but bold move to adopt Open Radio Access Network (RAN) technology appears to be coming soon thanks to a new deal with AT&T that could be worth nearly $14 billion over five years to pay out. The win, which ousts Nokia, could help ease investor concerns about a sluggish sales trend. Still, the multi-vendor nature of the deal could 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 will create “new opportunities for operators to monetize the network.”

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Nokia said in a separate statement that the decision would delay its timeline for achieving double-digit operating margins by up to two years. AT&T has accounted for 5% to 8% of the company’s net wireless revenue so far this year. “The news from AT&T is disappointing,” said Nokia CEO Pekka Lundmark.

AT&T officials expect companies to compete to provide equipment for the network, such as base stations at the base of cell towers, antennas at the top and connections in between.

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.

U.S. officials say having a range of suppliers can increase flexibility, reduce costs and avoid dependence on non-U.S. vendors such as Huawei Technologies Co. that are considered security risks.

AT&T, America’s third-largest wireless carrier, said the new network will allow it to “quickly capitalize on the next generation of wireless technology.” Benefits include more sustainable networks with lower power consumption and higher performance, the company said in its statement.

(Adds comment from Nokia and reaction from BI in 7th paragraph. An earlier version of this article corrected the spelling of Ericsson’s CEO.)

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