Nokia plunges to three-year low after losing key AT&T contract to rival Ericsson

  • Nokia plunged to its lowest level in three years after it lost out to rival Ericsson in a major contract with telecommunications giant AT&T to roll out an open radio access network (Open RAN) in the US
  • Stockholm-listed shares of Swedish company Ericsson rose significantly on Tuesday morning after the deal was completed.
  • The companies said AT&T could spend nearly $14 billion under its five-year deal with Ericsson.

Ericsson recently announced that it plans to cut 8,500 jobs as part of its cost-cutting measures.

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Shares in Finland’s Nokia company fell to a three-year low as the telecommunications company missed out on a major contract to launch a new telecommunications network in the US with industry giant AT&T.

Helsinki-listed Nokia shares fell 7% at 9:40 a.m. London time after news that AT&T will partner with Swedish rival Ericsson, which will make 5G equipment for the project at its factory in Lewisville, Texas becomes. Ericsson’s Stockholm-listed shares rose 7.4%.

AT&T’s spending on the five-year deal with Ericsson is expected to be nearly $14 billion, the companies said late Monday. The partnership includes the deployment of an open radio access network (Open RAN) in the US, which AT&T expects to use for 70% of its wireless network traffic by the end of 2026.

The decision deals a significant setback to Nokia by losing market share as a supplier to AT&T, requiring existing Nokia devices to be replaced in several places.

Nokia CEO Pekka Lundmark called the news “disappointing” but said the company remains “fully committed” to Open RAN and is pursuing a strategy to diversify its business and improve profitability.

The company is already facing a difficult financial situation after its profits slumped in the third quarter due to customer cost cutting.

On Monday, the company said it expected AT&T’s wireless revenue, which accounted for 5% to 8% of net sales year to date, to decline over the next two to three years. The company expects the division to remain profitable, but points to a delay in the timeline for achieving double-digit operating margins of up to two years.

It said a cost-cutting plan announced in October that included cutting up to 14,000 jobs would partially mitigate the impact of the AT&T decision. Nokia will continue to supply AT&T with products and services in various other areas.

The US giant also works with companies such as Fujitsu, Intel and Dell from Japan.

Open RAN or ORAN networks represent a cost- and power-saving transition for telecommunications companies to use cloud-based software and devices from multiple vendors, rather than proprietary devices provided by a smaller number of large companies that do not work together. The move was met with some resistance from providers who feared business opportunities could be lost.

“With this collaboration, we will open wireless access networks, drive innovation, boost competition and connect more Americans to 5G and fiber,” said Chris Sambar, executive vice president of AT&T Network, in a statement Monday.