AT&T’s CEO John Stankey spoke at a UBS investor conference early this morning, and of course, the first thing he was asked about was AT&T’s news yesterday that it would use Ericsson for open RAN.
“We’ve been working hard on O RAN for a number of years,” said Stankey. “There’s been progress, but it’s been slow progress. With the slowdown in the vendor markets, we were able to step back and say ‘What can we do to get an opportunistic agreement where we can drive vendors into a position to move forward aggressively on O RAN?’”
He added, “We can take advantage of a little bit of a lull right now in the supply base. We stepped back, looked at it, and said this was an opportunity for us to do that.”
Stankey was referring to the fact that it’s been a rough year for both the major telecom vendors Nokia and Ericsson. Their earnings reports have been painful for the companies. During its Q3 2023 earnings, Nokia announced it would be cutting up to 14,000 jobs.
And during its Q3, Ericsson reported a net loss of $2.8 billion and said that net sales decreased by 5% to $5.91 billion, down from $6.23 billion in the same quarter last year.
Telecom companies in the U.S. are precluded from using equipment from Huawei, the third major telecom vendor.
In terms of AT&T’s selection of Ericsson as its open RAN vendor, Stankey said today, “It’s material for up to a $14 billion agreement over five years. We’ll invest $24 billion in our network this year. This is a component of our investment. It’s not all our investment. It’s not all of our RAN investment either. We need to kind of keep it in context.”
He said the work AT&T will do with Ericsson on open RAN represents a “long-term” position until the next big investment cycle comes, whether that’s 6G or perhaps something that could stem from the government making more spectrum available.
As far as the work AT&T will do with Ericsson, Stankey said, “By 2026 we’ll have about 70% of our traffic across infrastructure that effectively will have interfaces that can be opened up for other supply, and that allows us then to think long-term. It’s entirely possible Nokia could be one of those suppliers of that more diverse vendor base that we ultimately start working toward. We’d obviously like to see multiple players there.”
He said open RAN will make the network more simple to operate because it will be one network infrastructure with a set of systems on top of it. He said open RAN also makes sense as networks become more distributed with smaller “packages” because “the macro game has largely been played out at this point.”
Capital investment
AT&T is spending about $24 billion on capex this year but will scale that back to between $21 billion and $22 billion next year. Stankey doesn’t think open RAN will require the company to boost capital investment levels, but he also doesn’t think that savings from open RAN “is the secret sauce” that takes capital intensity down dramatically. “It will be a tool we’ll use to continue to manage this and keep ourselves in that mid-teens level of capital intensity,” he said.
Holiday promotions
Asked about AT&T’s promotional strategy as the year-end holidays approach, Stankey said, “We’re coming off of two record years in the industry of investment. Those that made the investments are stepping back and saying ‘How do I earn a return on that investment?’ I see carriers and service providers being very diligent around trying to walk customers up to higher returns with better ARPU and trying to keep them longer as customers. We’ve been effective at doing that with our customer base. I would expect you’re going to see sequential growth in our net adds from third quarter.”
Fixed wireless
Finally, he also said AT&T was fine tuning its fixed wireless strategy. “We’re starting to see that play into the overall equation.” He said if AT&T knows it’s going to be building an area with fiber over the course of the next 24 months, and it already has existing copper broadband subscribers in that area, it may offer fixed wireless to those subs to “hold” them until the fiber is deployed. “I think it’s appropriate for us to use that technology to hold that customer. And if that slows down some of the deterioration of that base while we’re getting the new infrastructure in place to catch that customer, that’s a good thing.”