Billion dollar deal over five years
AT&T replaces Nokia with Ericsson
December 5, 2023, 8:59 a.m
The Swedish network supplier Ericsson will supply the US company AT6T. That’s why this Nokia is throwing out the door. One reason for the award is the Swedes’ promise to produce the parts in the USA. The competitor from Finland has to adjust his goals after the defeat.
Mobile operator AT&T has largely turned away from Nokia to supply telecommunications equipment. The US group has concluded a deal with Ericsson for hardware and services worth up to $14 billion over a period of five years. Nokia warned that its margin targets in the affected segment could only be achieved later. After trading, the Finnish shares collapsed, while the Swedish shares went up.
AT&T plans to make the change starting next year. By the end of 2026, 70 percent of mobile traffic should flow via open platforms. The US group wants to accelerate the renewal of its network and use more hardware and software from niche providers such as Corning, Dell, Fujitsu and Intel in the coming years. Ericsson had previously agreed to open its software to rival systems.
The move replaces Nokia as a supplier that built about a third of AT&T’s wireless network, AT&T network chief Chris Sambar said. Ericsson won the contract because the Swedes followed “Buy America” guidelines and produced the equipment in their new factory in Texas, says a dealer.
Nokia said AT&T contributed 5 to 8 percent of revenue in the Mobile Networks segment this year. The already announced cost reductions are expected to partially offset the effects of the US group’s decision. Nokia expects Mobile Networks to remain profitable in the coming years. However, the schedule for achieving a double-digit operating margin will be delayed by up to two years.