Nokia (Buy, TP: EUR4.00) - Our take on media speculation that AT&T may remove Nokia as RAN vendor
This weekend, we note telecom industry media stories that the largest US wireless customer AT&T may dump Nokia from its Radio Access Network (RAN) vendor list, according to industry analyst EJL Wireless Research and cited by LightReading. Apparently, Nokia’s use of fan-assisted cooling in some of its massive MIMO (multiple-input multiple-output) radios makes its gear heavier, affecting tower lease spending. Should this come to pass, it would be a blow to Nokia’s competitiveness in the lucrative US RAN market, with the highest gross margins in the industry, having already been replaced by Samsung at Verizon in Q3 2020. Nokia’s stock dropped 8%+ when speculation of the Verizon contract loss began in July 2020, and another 5% on the day when the news was confirmed by Samsung in September 2020. Ericsson & Nokia are AT&T’s RAN vendors, which would imply either that Ericsson wins the entire network (clearly positive for the name, strengthening our view of its ‘second to none’ RAN portfolio), or that another vendor (Samsung most likely) would replace Nokia’s part. A swap would take time and this remains early speculations, but as our first take, we believe AT&T RAN spending could represent ~5–10% of Nokia’s 2024e EBIT.Nokia is an Internet and communications technology company based in Finland. Co.'s operations are focused on three businesses: network infrastructure software, hardware and services, which Co. offers through Networks; location intelligence, which Co. provides through HERE; and advanced technology development and licensing, which Co. pursues through Technologies. Co. maintains a global presence with operations and Researh & Development facilities located in Europe, North America and Asia, and sales in approximately 130 countries. Co. has an installed base of around 600 customers worldwide and these operators serve over 4 billion subscribers.
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