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Ericsson and Nokia are expecting a sunnier second half of 2024 - but why?
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For Ericsson, it's all about its AT&T contract
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Meanwhile, Nokia has new ventures such as its Dell private networking deal, as well as RAN stalwarts like T-Mobile
Neither Ericsson nor Nokia had a spectacular start to the year, with revenue down for both in Q1. Both, however, predict a sunnier second half of 2024.
Ericsson generated $5.13 billion in revenue in the first quarter, down 15% year over year due to continued weakness in its networks business. Nokia reported $5.07 billion in revenue, with this down 20% year-on-year.
Yet both of the radio access network (RAN) vendors said that in the second half of the year sales would improve. But why? We took the question to a trio of analysts from AvidThink and Dell'Oro Group.
Most noted that Ericsson’s AT&T contract will really kick in later this year, as the company has said itself.
Ericsson replaced Nokia as AT&T’s RAN provider in early December 2023 with a $14 billion multi-year contract. It will start to bestow fully integrated open RAN sites on AT&T in 2024 in conjunction with Fujitsu in 2024. AT&T’s open RAN plan is for 70% of its wireless network traffic to move across open-capable platforms by late 2026.
Ericsson is currently the sole RAN provider for AT&T. The vendor started its open RAN gambit slightly before the contract was announced.
But where does that leave Nokia? Well, as Dell’Oro Group VP and RAN specialist Stefan Pongratz pointed out, Nokia “has other accounts in the US beyond AT&T.” Indeed, the vendor’s major remaining RAN contract with a top 3 operator in the U.S. is with T-Mobile, which is still improving its 5G network.
The analyst said that RAN activity in both the U.S. and India somewhat helps to explain the vendor’s optimism for the second half of 2024.
“It is a confluence of factors - inventory normalization combined with easier comps in both India and U.S. is partially helping to explain the more favorable second half RAN guidance,” Pongratz noted.
AvidThink principal Roy Chua also noted the vendors “have order intake visibility, so clearly there's new incoming orders that turn into H2 revenue opportunities." He added that perhaps Nokia's private 5G deal inked with Dell is helping to drive revenue. It seems Nokia certainly thinks so!
Sales to non-carriers - like other technology companies and data center operators, or government segments - could bring additional opportunities. “Some of that was reflected in their January announcements, though now they are saying that optical sales recovery will be slower than I think was reflected back then,” Chua noted.
“It sounds like Nokia is seeing the bottoming of the inventory digestion period,” concluded Jimmy Yu, who covers optical and routing for Dell’Oro Group. “That plus improving order flow is giving them confidence that second half will be better.”