AT&T Picks Ericsson to Help Build ORAN; CEO Doesn't See Major Cost Reductions

AT&T is accelerating its move to an open radio access network, agreeing to spend up to $14 billion on a five-year contract with Ericsson. The carrier expects limited cost savings as it adopts ORAN, AT&T CEO John Stankey said during a UBS conference Tuesday. In addition, AT&T announced it will work with other vendors, though the move was widely seen as a loss for Ericsson rival Nokia.

“We've been working hard on ORAN for a number of years -- there's been progress, but it's been slow progress,” Stankey told analysts.

AT&T projected 70% of its wireless network traffic will flow across open platforms by late 2026. “This move to an open, agile, programmable wireless network positions AT&T to quickly capitalize on the next generation of wireless technology and spectrum when it becomes available,” said a news release: “AT&T expects to have fully integrated open RAN sites in operation, in coordination with Ericsson and Fujitsu, starting in 2024.” The company said it plans to lead the U.S. on ORAN deployment.

A move away from “closed proprietary interfaces will enable rapid scaling and management of mixed supplier hardware at each cell site,” AT&T and Ericsson said. Beginning in 2025, AT&T said it plans to increase its use of ORAN “in coordination with multiple suppliers,” including Corning, Dell Technologies, Ericsson, Fujitsu and Intel. Ericsson will use its 5G smart factory in Lewisville, Texas, to provide some equipment for the contract, the companies said. Stankey said Nokia may also provide gear.

Analysts should keep the investment in perspective, Stankey said at the conference. “We'll invest $24 billion in our network this year,” he said: “This is a component of our investment. It's not all of our investment. It's not all of our RAN investment.” This is “the right time for us to think about doing this,” he said.

ORAN isn’t “the secret sauce” behind slashing investments in networks, Stankey said. “We're going to probably see a little bit more efficiency on a unit level,” but the units don’t offer “quite as much yield and coverage and so you tend to have to do more,” he explained. AT&T is “fighting this never-ending battle of getting more efficient to kind of keep up with traffic,” he said: “I think that battle will continue.”

“Whilst the news from AT&T is disappointing, our Mobile Networks business has made significant progress in recent years, increasing our RAN market share and technology leadership,” Nokia CEO Pekka Lundmark said in a statement. Nokia expects revenue from AT&T will decrease over the next two to three years, the company said, noting the carrier has accounted for up to 8% of its mobile networks net sales this year. “Already announced” actions “Nokia is taking to reduce its cost base is expected to partially mitigate the impact of AT&T’s decision,” Nokia said.

Nokia stock fell 5.06% Tuesday, to close at $3. Ericsson was up 4% to close at $5.46.