In a monumental deal that will send billions of dollars into the pockets of two telecom equipment makers, AT&T has chosen Ericsson to build a telecom network using a new cost-cutting technology, ORAN, that will cover 70% of its wireless traffic in the United States by late 2026. That’s a massive win for Ericsson and will help it boost its share in one of the most prominent telecom players in the world. It also erodes the presence of rival Nokia in the North American market. And that’s a big deal because as the 5G rollout gets into full swing, Ericsson and Nokia are poised to sell tens of billions of dollars worth of network infrastructure.
Ericsson shares rose 8% in early trading on Tuesday after the announcement, while Nokia fell 9%. The companies benefit from a tidal wave of cash pouring into telecommunication networks as they prepare to switch to 5G. The networks are expected to become much faster and more reliable as they support higher-speed applications like virtual reality, self-driving cars, and high-definition video streaming.
The $14 billion, five-year deal will boost Ericsson’s share in AT&T, the second-largest US telecom company with 190 million customers. The agreement with Ericsson will also allow the Swedish company to leverage its expertise in open RAN technology, which allows operators to choose vendors that supply individual components rather than lock them into one supplier. The move is a strategic shift away from Nokia, the leading player in the O-RAN Alliance founded last year by operators including AT&T.
AT&T cited its efforts to drive down the costs of building its network as a critical reason for choosing Ericsson over Nokia. That includes working with suppliers that use standardized interfaces instead of proprietary ones, making upgrading to the next generation of networking hardware and software easier. AT&T also cited its ability to support multiple radio platforms, including the Massive MIMO radios critical to the 5G rollout.
The contract also comes amid a slowdown in network operator spending. A recent report by analysts at KeyBanc Capital Markets suggested that the slump in spending could be worse than many expected, with US carriers putting off upgrades to their networks until demand recovers. That could mean that Nokia is on the verge of missing out on a significant revenue boost it desperately needs.
