AT&T (NYSE:T) is teaming up with Ericsson to implement an open radio access network (Open RAN) for 70% of its U.S. wireless traffic by late 2026. The deal led to speculation that AT&T may shift all new equipment purchases to Ericsson, replacing Nokia’s existing gear. As a result, Nokia’s (NYSE:NOK) stock by declined around 7% in pre-market trading.
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Now, let’s understand what Open RAN is. This architecture enables service providers to use non-proprietary components sourced from diverse vendors. Thus, by embracing Open RAN, telecom operators will not have to rely on proprietary equipment from a restricted set of companies lacking interoperability.
The agreement is expected to reduce network costs, enhance operational efficiency, and support AT&T’s investments in the expanding broadband network.
More about the Deal
As part of the agreement with Ericsson, AT&T plans to spend around $14 billion over the next five years. In the meantime, Ericsson will use its USA 5G Smart Factory in Texas to make 5G equipment for this agreement. Notably, the company expects to achieve fully integrated Open RAN sites in collaboration with Ericsson and Fujitsu by 2024.
This shift will make it easier for the company to manage and expand its network with different suppliers’ hardware. Further, starting in 2025, AT&T will extend this approach to the rest of its wireless network, working with other companies like Dell Technologies (NYSE:DELL), Intel (NASDAQ:INTC), Corning Incorporated, Ericsson, and Fujitsu.
Is AT&T Stock Expected to Go Up?
AT&T’s focus on enhancing its wireless network in North America and expanding the 5G network augurs well for growth. Moreover, the shift towards Open RAN leads to more flexibility in choosing equipment, resulting in lower network costs, driving operational efficiencies, and cushioning its earnings.
AT&T stock has received eight Buy and seven Hold recommendations for a Moderate Buy consensus rating. Further, analysts’ average AT&T price target of $19.82 implies 18.97% upside potential from current levels.
