Inside AT&T's Nokia rip-and-replace with Ericsson

Months after signing their landmark deal, AT&T and Ericsson have started the work of replacing Nokia's radios with those from Ericsson. Here is the inside story of that five-year, $14 billion project.

Mike Dano, Editorial Director, 5G & Mobile Strategies

June 13, 2024

18 Min Read
AT&T's Yigal Elbaz speaks at a recent industry event, with AT&T's Chris Sambar (right)
AT&T's Yigal Elbaz speaks at a recent industry event, with AT&T's Chris Sambar (right)(Source: Mike Dano / Light Reading)

It's official: AT&T has begun tearing Nokia's radios out of its network and replacing them with radios from Ericsson. 

"That process has started," Todd Zeiler, VP of wireless engineering at AT&T, told Light Reading recently. "We're into some of the early swap outs."

Zeiler and other AT&T officials declined to provide specifics about the effort. But a source familiar with the project said the work started in New York less than two months after Ericsson and AT&T signed their landmark five-year, $14 billion agreement in December. Work is now spreading across the US, and the project is scheduled to shift into high gear starting in July, the source said.

Already some network engineers are discussing the work – which begins with AT&T's permits for cell site changes – on social media sites.

Ultimately AT&T's rip-and-replace program calls for the removal of Nokia's equipment from almost a third of its overall nationwide wireless network. AT&T officials wouldn't provide specifics, but analyst Joe Madden with Mobile Experts estimated the job could cover hundreds of thousands of Nokia radios. AT&T's wireless network stretches across an estimated 73,000 US cell towers, and each of those towers could hold a half dozen radios, or more.

Zeiler said AT&T spent more than a year evaluating its deal with Ericsson before making it official. He said the operator is looking to shrink its cell site portfolio, which has been built over more than 30 years of iterations, into just four basic templates: big, macro cell sites; rooftop sites; small cells; and indoor access points.

By creating specific templates for each of those deployment scenarios, AT&T intends to streamline its overall approach to network rollouts and equipment upgrades, according to Zeiler.

"We're going to significantly simplify. If you take a picture of our network in 10 years, it's just [going to be] servers and access points," he said. "It's going to be a whole pivot in the way we think."

The build

"I think the word 'cell site' goes away," Zeiler said. "I think this pivots to a world of CU, DU, RU. Servers and access points."

Under AT&T's agreement with Ericsson, the operator is planning to shift to an open radio access network (RAN) design which breaks the RAN up into three main blocks:

  • First is the radio unit (RU) atop a cell tower, which receives and handles customers' radiofrequency signals.

  • Next comes the distributed unit (DU), a box often near the tower site (sometimes at the foot of it) that is mainly responsible for the "baseband" functions that process those signals.

  • Further away is the central unit (CU) that looks after the control plane – essentially the network's traffic cop.

Each of those elements could be updated under AT&T's contract with Ericsson. But the company is starting with its RUs.

Zeiler explained that AT&T is using 3D imagery, including digital twins, to catalog its current cell tower sites and plan its network upgrade efforts. "That's speed to market. Speed to market is money," he said of AT&T's planning process.

But AT&T will also rely heavily on third-party construction companies (called "turf vendors") to conduct the physical work of removing Nokia's radios from its cell sites and replacing them with radios from Ericsson, or other radio vendors.

According to a report from Inside Towers, roughly 18 unnamed engineering firms received requests from AT&T for the initial rip and replace work. And according to Wireless Estimator, AT&T is funneling much of its network management needs to MasTec Network Solutions and Pearce Services. MasTec will primarily oversee the East Coast, while Pearce will manage the West Coast.

Citing unnamed sources, Wireless Estimator reported that AT&T previously used around 29 smaller contractors around the country for its network management work. In December, the operator shifted that work to MasTec and Pearce in a move designed to cut operating costs.

However, AT&T confirmed to Light Reading that Pearce is not involved in its network upgrade project.

MasTec CEO Jose Mas cheered his company's new deal with AT&T.

"We significantly expanded our relationship with our biggest customer AT&T. AT&T expanded both our scope and geographic territory on our core wireless work," Mas said in May, according to Seeking Alpha. "This expansion coupled with their announcement of a complete swap out of Nokia equipment to Ericsson equipment over a five-year period is expected to significantly increase our wireless business over the next few years."

Officials from Ericsson confirmed that the company will not be hiring large numbers of new employees to handle its work with AT&T.

However, Ericsson will be using its newly expanded manufacturing facility, in Texas, to build most of the radios supplied to AT&T and its other North American customers. That facility will allow AT&T to boast of radios "made in America", a potentially important element in the company's sales to government customers.

The financials

In January, shortly after AT&T first announced its deal with Ericsson, AT&T said its "accelerated depreciation" of Nokia's equipment would reduce its annual earnings per share (EPS) by 17 cents. That equates to a cost of around $1.2 billion. AT&T confirmed that $850 million of that is directly related to the removal of Nokia's equipment.

Still, according to AT&T CEO John Stankey, the move will pay off in the long run. Without naming Ericsson specifically, Stankey said in January that AT&T enjoyed a "vendor circumstance like we've seen in wireless where somebody comes in and changes pricing and we get more efficiencies out of something."

Overall, AT&T will spend between $21 billion and $22 billion on its networking capital expenses (capex) during 2024, down from $24 billion in 2023.

However, the operator is also reducing its use of vendor financing in 2024 by more than $3 billion. Vendor financing involves an equipment supplier lending money to a buyer to purchase the vendor's gear. It's essentially a form of credit that allows a network operator to spread out its equipment payments over time, rather than paying the full amount upfront.

"Consequently, vendor financing payments in 2024 will be significantly lower, while actual capex spending is expected to increase vs 2023," wrote the financial analysts at Raymond James in a note to investors in January, following the release of AT&T's 2024 capex expectations. "The reduced reliance on vendor financing is an encouraging development since a lower mix of vendor financing payments means reported capital investments will more closely start to reflect actual capex for the period."

Others have come to similar conclusions. "AT&T stated that they will be reducing their exposure to vendor financing," wrote Madden, the Mobile Experts analyst, in a recent article for Fierce Network. "Our conclusion is that AT&T is taking this step [with Ericsson] for operational reasons, not financial reasons."

Zeiler also said that open RAN will help AT&T's financial footing. "We had to pivot to a cost structure that was more simple," he explained.

But Stankey, AT&T's CEO, said in December that AT&T's embrace of open RAN technology isn't going to dramatically affect its overall network spending. "I don't think I'm going to walk out and tell you that O-RAN is the secret sauce to take this down to a single-digit-teens as a percent of revenue capital intensity business," he said. "I don't believe that will be the case. It'll be a tool that we will use to continue to manage this and keep ourselves in this mid-teens level of capital intensity."

"I wouldn't blow this out of context," Stankey added at the time. "This is a component of our [network] investment, it's not all of our investment. It's not all of our RAN investment either, it's a portion of it."

The vendors

AT&T has described its move to open RAN technology as a way to expand the number of vendors it uses. But initially, the company has only named a few big companies as suppliers.

One is Japan's Rakuten Symphony. According to The Mobile Network, AT&T counts roughly 7,000 users of Rakuten Symphony's Site Manager software within its own and its contractor construction teams. The software automates parts of AT&T's site deployment processes.

Another Japanese vendor: Fujitsu. The company will supply an unspecified number of radios to AT&T and will sit next to Ericsson as AT&T's second open RAN radio vendor. AT&T has already begun deploying Ericsson's radios into its network under the companies' new agreement, and AT&T officials have said they expect to onboard a second, unnamed radio vendor later this year. That second vendor may be Fujitsu.

Two big American vendors that will be supporting AT&T are Dell and Intel. AT&T has said it will put Dell's servers, initially running Intel's Sapphire Rapids EE chips, into an unspecified number of its DUs and CUs.

As part of that, AT&T will likely use the "lookaside" approach to open RAN hardware acceleration that is supported by Intel and Ericsson. Hardware acceleration is considered necessary for the high-performance computing tasks inside wireless networks that general-purpose processors can't handle. Verizon has also indicated its preference for "lookaside" hardware acceleration.

Nokia, for its part, supports an alternative acceleration technique called "inline." The company – once burned by its reliance on Intel – argues that inline technology paves the way to products from multiple chip vendors like Nvidia, Qualcomm and Marvell.

Another American vendor in AT&T's network will be Microsoft. AT&T's standalone (SA) and non-standalone (NSA) 5G operations run partly through Microsoft equipment. Now, AT&T is shifting that traffic into Microsoft's new Azure Operator Nexus platform. AT&T has said its efforts won't be affected by Microsoft's layoffs in its Azure for Operators business.

Further, AT&T has said that Ericsson's RAN software will not rest exclusively on Microsoft's Azure Operator Nexus platform. Instead, some functions will continue to reside on Ericsson's cloud-native infrastructure solution (CNIS).

CommScope's role in AT&T's deployment is unclear. Some analysts believe CommScope, another American company, is being pushed out of AT&T's business by Ericsson. But others think CommScope will actually enjoy new opportunities due to AT&T's Ericsson deal. AT&T officials haven't commented one way or the other.

Finally, AT&T's most important vendor so far is Ericsson, which will be providing radios, baseband equipment and an important layer of network-management software AT&T officials are calling the SMO (service management and orchestration).

The players

There are a handful of executives that have been intimately involved in AT&T's shift to open RAN and Ericsson.

One, Niklas Heuveldop, has moved on. Just weeks after Heuveldop helped land Ericsson's deal with AT&T – the vendor's largest-ever contract – he was promoted to the CEO position of Ericsson's Vonage business. Yossi Cohen – previously head of Ericsson's strategy, technology, marketing and business development in the US – replaced Heuveldop as Ericsson's chief executive in North America.

Under Cohen is Paul Challoner, who for years has been Ericsson's US representative for open RAN. Now, he's spearheading the company's AT&T deal as "CTO, Global Customer Unit AT&T" for Ericsson.

On AT&T's end, there are now plenty of executives involved in the operation, including Zeiler, AT&T's VP of wireless engineering. 

Another key AT&T executive is Rob Soni, who is responsible for all aspects of AT&T's RAN architecture and infrastructure technical road maps for hardware and software, including baseband units, radios, antennas and all ancillary components. Soni helped represent AT&T at the recent MWC Barcelona trade show.

Development of AT&T's open RAN strategy was handled inside the company's Labs division, which is now headed by Yigal Elbaz, AT&T's network CTO. Elbaz essentially replaces Andre Fuetsch, who left the company in 2022. Elbaz reports to AT&T CTO Jeremy Legg, who reports to Stankey.

But now that AT&T is actually deploying open RAN technology, the bulk of that work is shifting from AT&T Labs and into AT&T's commercial network operation. Thus, responsibility for deploying open RAN now falls onto Chris Sambar, who leads AT&T's Network organization and is responsible for designing, engineering, building and operating the operator's wireless and wireline networks. Sambar reports to AT&T's chief operating officer, Jeff McElfresh.

The open RAN angle

AT&T has said that its deal with Ericsson will allow the company to eventually embrace open RAN technology. Specifically, AT&T has said its goal is to shift up to 70% of its wireless traffic onto "open-capable platforms" by late 2026.

But how AT&T intends to reach that goal is unclear given the ambiguity of the company's statements on the topic. For example, will that traffic flow over thousands of open RAN radios or one of just a handful of open RAN-capable core network deployments? Or will it simply involve AT&T's traffic touching software that uses open RAN specifications from the O-RAN Alliance?

Regardless, AT&T's interest in open RAN is no secret. The company has been officially involved with the technology since it helped found the xRAN Forum in 2016.

The xRAN Forum merged with the C-RAN Alliance to form the O-RAN Alliance in 2018. Since then, the O-RAN Alliance has been developing open RAN specifications designed to create open interfaces between various wireless networking components. Doing so, according to proponents, could allow operators to mix and match components from a variety of vendors in a way that's impossible under the tightly integrated products from traditional RAN suppliers.

"We, as the customer, have the flexibility to choose something else down the road," explained AT&T's Elbaz in comments to Light Reading. He said AT&T's move to open RAN technology helps the operator lower its risk of getting locked into products from just one supplier.

"A lot of this starts with Ericsson at the beginning," Elbaz added. But he said that in the future AT&T likely will be able to obtain equipment from a variety of open RAN suppliers. For example, the company is already evaluating rApps from a number of software providers, according to Elbaz. Those apps will sit atop Ericsson's SMO and will provide AT&T with new network management applications from third-party vendors.

Ericsson, for its part, is relatively new to the open RAN ecosystem. After Ericsson managed to get the O-RAN Alliance to standardize its Class A approach to massive MIMO antenna technology a year ago, the company then pledged to support O-RAN Alliance specifications in its products. Ericsson's Class A technique pushes some uplink features from the DU and into the RU. Class B, meantime, keeps most uplink features in the DU.

Thus, AT&T is poised to support the Class A implementation of massive MIMO, as favored by Ericsson.

"I think it's a new view of what open RAN means," explained Madden, the analyst with Mobile Experts. He said AT&T's version of open RAN involves Ericsson building a foundation that other companies can plug into using open RAN interfaces.

"The operators want simplicity," Madden explained.

A final component of AT&T's push for open RAN involves the US government. Officials in both the Trump and Biden administrations have touted open RAN as a way to support domestic 5G suppliers and stem the rise of those from China.

US government officials have been pursuing a range of strategies to promote open RAN in the US and elsewhere. Those efforts include requiring open RAN in some federal facilities and allocating $1.5 billion in technology grants.

By embracing open RAN standards, AT&T can now participate in all of those federal initiatives.

The Nokia angle

According to AT&T executives, there's nothing wrong with the $850 million worth of Nokia radios that AT&T is writing off this year.

"No issues whatsoever with Nokia radios, technology," said AT&T's Elbaz. "Great company, great products."

Elbaz explained that AT&T's deal with Ericsson was more of a business decision about where AT&T wants to take the architecture of its network.

Indeed, AT&T CEO Stankey said in December that the operator might resume buying equipment from Nokia at some point in the future.

Nokia executives have made the same argument. For example, Nokia's mobile networks president, Tommi Uitto, recently pointed out that Nokia's market share has been growing in recent years. "This tells you something about [the] competitiveness of our products and services," he wrote on social media.

Moreover, Nokia supports both the Class A and Class B flavors of open RAN.

But the question remains: Why is AT&T so focused on removing Nokia's equipment from its network? Nokia and AT&T inked a five-year contract for radios at the beginning of 2021, and the companies are still negotiating on how to handle that contract in light of AT&T's pivot to Ericsson.

According to one source familiar with the deals, a big part of AT&T's calculus was energy savings. Ericsson's equipment, the source said, uses 30% less energy than similar equipment from Nokia – an important factor amid rising energy demands

Nokia disputed that assessment.

Analyst Earl Lum, of EJL Wireless Research, said cooling fans in Nokia radios were a big reason for AT&T's decision. Poor performance of those fans, plus other quality issues, pushed AT&T to go with Ericsson rather than waiting for Nokia to improve its products, he said.

Lum, it should be noted, first reported on AT&T's decision to dump Nokia in favor of Ericsson.

Nokia disputed Lum's assessment.

But for Madden, the Mobile Experts analyst, one of the biggest issues was the cost savings AT&T can obtain by consolidating its network through Ericsson's radios. For example, he said two Ericsson radios can often perform the same job as six separate radios on AT&T's existing cell tower deployments. 

"Smaller boxes cost less," Madden said, explaining that network operators like AT&T often pay by the square foot to rent space on other companies' cell towers. As a result, AT&T may be able to lower its tower rental fees with Ericsson's smaller radio configurations.

Madden also said that Ericsson's role as AT&T's prime network equipment supplier will help the operator ultimately cut down on the expenses it incurs while working with multiple vendors.

"That's the ROI," he said, pointing specifically to Ericsson's SMO management software. It will be up to Ericsson to make sure that all of the various elements in AT&T's network are working smoothly, mostly by ensuring they adhere to O-RAN Alliance standards.

"They're spending more money in the near term, but saving more money in the long term," Madden said.

The Ericsson angle

Thanks to Ericsson's new deal with AT&T, the vendor is now poised to power the mobile networks of all three of the big wireless operators in the US: AT&T, T-Mobile and Verizon. Ericsson is the only vendor supplying equipment to all three. Indeed, according to Mobile Experts, Ericsson's radios will be the only equipment in commercial use in roughly 40% of the country.

That situation has sparked plenty of speculation about what might happen to the rest of the market's players. Is there any room now for an upstart equipment provider like Mavenir? Will Nokia be able to maintain the research and development work necessary to continue to compete with heavyweights like Ericsson and Huawei? And will T-Mobile eventually follow Verizon and AT&T by dropping Nokia as a supplier?

"I think Ericsson is in line to be the Windows of the telecom market," said Madden.

He explained that, when Microsoft's Windows obtained a dominant position in the market for PC computers, the computing industry was able to take a big step forward because software developers no longer had to prioritize one platform over another.

According to Madden, a dominant Ericsson could pave the way for additional innovation in the space because integration work would only need to address one platform.

Others disagree with that take, arguing that dominant players often use their position to stifle innovation.

Either way, AT&T officials appear confident in the company's decision, and are moving forward with their project.

About the Author(s)

Mike Dano

Editorial Director, 5G & Mobile Strategies, Light Reading

Mike Dano is Light Reading's Editorial Director, 5G & Mobile Strategies. Mike can be reached at [email protected], @mikeddano or on LinkedIn.

Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.

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