- Nokia fell to its lowest level in three years after losing out to rival Ericsson in a major contract with telecom giant AT&T due to the launch of an open radio access network (Open RAN) in the United States.
- Shares of Ericsson, a Swedish company listed in Stockholm, rose sharply on Tuesday morning after the deal was concluded.
- The companies said AT&T’s spending could approach $14 billion during its five-year contract with Ericsson.
Ericsson recently announced that it plans to cut 8,500 jobs as part of cost-cutting measures.
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Shares in Finland’s Nokia fell to their lowest level in three years, as the telecommunications company lost a major deal to launch a new telecommunications network in the United States with industry giant AT&T.
Nokia’s Helsinki-listed shares fell 7% at 9:40 a.m. London time on news that AT&T will partner with Swedish rival Ericsson, which will manufacture 5G equipment for the project at its factory in Lewisville, Texas. Ericsson shares, listed in Stockholm, rose 7.4%.
AT&T’s spending will approach $14 billion during its five-year contract with Ericsson, the two companies said late Monday. The partnership covers 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 late 2026.
This decision deals a major blow to Nokia by losing market share as a supplier to AT&T, which will see Nokia’s existing equipment replaced in several places.
Nokia CEO Pekka Lundmark called the news “disappointing” but said the company remains “fully committed” to Open RAN and has a strategy to diversify its business and improve profitability.
The company is already facing a turbulent financial picture, after its profits fell in the third quarter as customers cut costs.
It said Monday it expects AT&T’s revenue in its mobile networks division, which represents 5-8% of net sales year to date, to decline over the next two to three years. It expects the division to remain profitable but noted a delay in its timeline to achieve a double-digit operating margin of up to two years.
A previously announced cost-cutting plan announced in October that will cut up to 14,000 jobs will partially mitigate the impact of AT&T’s decision, it said. Nokia will continue to supply AT&T with products and services in various other areas.
The American giant also cooperates with companies including Japan’s Fujitsu, Intel, and Dell.
Open RAN, or ORAN, represents a cost and power shift for telecommunications companies to use cloud software and equipment from many suppliers, rather than proprietary equipment provided by a smaller number of larger companies that do not work together. The move has faced some resistance from sellers due to concerns about losing trading opportunities.
“Through this collaboration, we will open up radio access networks, drive innovation, stimulate competition and connect more Americans to 5G and fiber,” said Chris Sambar, executive vice president of AT&T Network. He said in a statement on Monday.
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