By Dominic Chopping

Nokia said Tuesday that its share of revenue from AT&T would fall over the next 2-3 years after the U.S. company announced plans to build out its telecom network using technology from other vendors.

AT&T said late Monday that it has struck a deal with Ericsson to buy up to $14 billion of so-called Open RAN technology from the Swedish equipment supplier. The five-year agreement moves virtually all of AT&T's new purchases of certain cell-tower equipment to Ericsson, replacing existing gear from Nokia in many markets.

Open RAN technology allows operators to build telecom networks using equipment from several different suppliers, rather than having to commit to using gear from one supplier.

AT&T said the shift will fast-track its network overhaul and allow it to deepen its use of hardware and software from niche suppliers like Corning, Dell Technologies, Fujitsu and Intel in future.

AT&T accounted for 5%-8% of Nokia's mobile networks net sales year-to-date in 2023 and the Finnish company said its previously announced cost reduction measures will partially mitigate the impact of AT&T's move.

"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," it said in a statement.

The Finnish telecommunications company recently said it plans to cut between 9,000 and 14,000 jobs from its total workforce of 86,000 as it seeks to save up to 1.2 billion euros ($1.3 billion) amid a sharp downturn in spending by telecom operators. The cuts come amid weakening demand in its network-infrastructure and mobile-networks businesses as customers face a tough macroeconomic environment beset by high inflation and rising interest rates.

Nokia said it remains fully committed to Open RAN with Japan's NTT DOCOMO recently selecting its O-RAN 5G network for their commercial deployment.

"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," said Nokia Chief Executive Pekka Lundmark. "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."

Nokia remains a key partner for AT&T within both its network infrastructure and cloud and network services businesses and the company said AT&T has confirmed that its Open RAN supplier decision was driven by reasons specific to AT&T.

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(END) Dow Jones Newswires

12-05-23 0310ET