Following the news that AT&T awarded a $14 billion contract to Ericsson, Nokia issued a statement expressing its disappointment and assesing its next steps.
Specifically, Nokia now expects revenue from AT&T in Mobile Networks will decrease over the next 2-3 years. AT&T accounted for 5-8% of Mobile Networks net sales year-to-date in 2023.
Nokia has previously announce plans to reduce its cost base, and these actions are expected to partially mitigate the impact of AT&T’s decision. Nokia expects Mobile Networks to remain profitable over the coming years but this decision would delay the timeline of achieving double digit operating margin by up to 2 years.
Nokia has invested heavily in the last few years to deliver market leading radio technology and a highly competitive product portfolio. This has helped it gain the most 5G market share since Q1 2022 among the top RAN suppliers, reaching 29% in Q3, excluding China (source: Dell’Oro). Nokia remains one of the few global vendors of mobile network equipment with significant scale and R&D investment capability to deliver market leading products to customers and while the company is taking action to lower its cost-base, it will protect its R&D output. The company notes that NTT DOCOMO recently selected Nokia’s O-RAN 5G network for their commercial deployment.
Nokia remains a key partner for AT&T within both its Network Infrastructure and Cloud and Network Services businesses. AT&T will also continue to buy products such as microwave radio links and femto solutions from Mobile Networks. AT&T confirmed to Nokia that while its decision was driven by reasons specific to AT&T, it believes Nokia has highly competitive products and services in Radio Access Networks (RAN) and an accomplished R&D capability.
Pekka Lundmark, President and CEO of Nokia, said, “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. I firmly believe we have the right strategy to create value for our shareholders into the future with opportunities to gain share, diversify our business and improve our profitability. Mobile Networks are critical to our global connected future and as I have said before the cloud computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities. Our customers can rest assured that we continue to invest in R&D and develop market-leading products for them.”
