The fallout after last week...the sequel

<<<DISCLAIMER>>>

Again, I need to REALLY STRESS THE FACT that I do not own any securities for any of the companies mentioned in this article nor am I recommending the purchase/selling of any securities.

Regarding the tiny itty bitty article I posted on LinkedIn last week that was picked up by Mike Dano over at Light Reading, and subsequently by many other wireless telecom reporters and news outlets, followed by the detonation event that occurred this week on Monday (T+3 days) with the simultaneous press announcements by AT&T and Ericsson regarding their ~USD $14 billion supplier contract, EJL Wireless Research would like to sift through the details of what has been announced and conjectured by the various media outlets.

As a tiny reminder, the article is a mere fraction of the vast ocean of information that EJL Wireless Research has accumulated over the decades within the wireless telecom industry and its ability to gather intelligence in real time for our clients.

HI (Human Intelligence) 1; AI 0.

Please contact us if you wish to engage in a more meaningful conversation about how EJL Wireless Research can guide your company through the current telecom down cycle.

A sidebar rant and shout out regarding the value of market research...

As a friendly reminder to the wireless industry, all of the industry analyst competitors/colleagues of EJL Wireless Research each serve a specific purpose and value within the ecosystem. We respect their knowledge and value add and this is a shout out to ALL of them and the hard work they do each and every day. We (collectively as known industry analysts) will and can NOT be replaced by emerging so called "market research" companies that have ghost analysts along with their false claims, crazy forecasts, non subject matter expertise, and their "vortex of stupidity." Now, onto the sequel article...

The facts of the deal...

1] "All of the new equipment that we are going to be putting out will be Open RAN capable," Chris Sambar, President of AT&T Network

EJL Wireless Research's take on this is to FOCUS on the key word highlighted above. Capable doesn't mean open immediately which implies current purpose built very high performance baseband units (BBUs) will be deployed in the network along with existing macro and massive MIMO radios from Ericsson.

2] Fully integrated Open RAN sites operating in coordination with Ericsson and Fujitsu starting in 2024. Fujitsu will be the #2 radio vendor for AT&T.

EJL Wireless Research's take on this is that AT&T has decided to pick a member of Team Japan as the alternate macro radio vendor. While Fujitsu scored a huge Open RAN win with DISH Wireless for the first phase of DISH's greenfield 5G network in supplying dual band midband and triple band low band macro radios, it did not supply any massive MIMO radios. We note that as of the publication date of this article, Fujitsu currently does not have any compatible multi-band macro radios that fit the frequency bands for AT&T's network. It is unclear if the current technology roadmap within Fujitsu will be able to achieve a 600MHz OBW/IBW 320W 64T64R massive MIMO solution that will encompass both the DoD Band as well as the C Band that AT&T needs. Nokia at least had this in the works already. Therefore AT&T is betting huge that sometime before the end of 2024 that Fujitsu can deliver on its promises. In the meanwhile, it will be 100% Ericsson.

3] Other vendors include Corning, Dell, and Intel.

EJL Wireless Research's take on this is that the Corning portion may be DAS but could also be similar to the ~USD$1 billion fiber optic deal that Verizon Wireless struck with Corning back in 2018. If the Corning participation is for only DAS, then we need to ask ourselves what happened to CommScope??? If AT&T used the aggressive strategy of lower unit pricing in a vendor weak operator's buyer market, that perhaps Corning was willing to go low like Ericsson to take 100% of the indoor portion of AT&T's network. For the Dell and Intel partnership, this seems to be standard servers for Cloud RAN in the future so nothing exciting from our perspective.

The implied facts...

Nokia's portion of the AT&T macro network is ~35% at somewhere between 50-60k sites with Ericsson being the majority supplier with ~65% of the footprint.

EJL Wireless Research's take on this is that our initial estimate of a 50/50 split for the network may still be CORRECT from a geographic perspective as most of the northern half of the US is currently Nokia territory with the southern half being Ericsson. We actually have a map of this but for obvious reasons, we are not able to share it in this article. :)

EJL Wireless Research Conjecture as to the specifics answering the question Why Ericsson?

1] "Deploying interoperable products from an incumbent vendor like Ericsson helps us make big changes to existing wireless networks without impacting the experience of millions of customers," Chris Boyer, Vice President Global Security and Technology Policy, AT&T Wireless.

EJL Wireless Research's take on this is to REALLY FOCUS on the highlighted words above. Incumbent vendor should be the two most important words used in the Open RAN community. AT&T was NOT going to take the risk of blowing up its RAN by using a new unproven vendor. We believe this may have been AT&T's play all along for its interpretation of Open RAN. We cite and give a huge shoutout to Dr. Riad Hartani from Xona Partners as the first analyst to mention this as a possible strategy for mobile operators globally, to have interoperability amongst its INCUMBENT RAN VENDORS.

2] Ericsson will use its recently expanded 5G smart factory in Lewisville, TX to make the 5G radios that AT&T will deploy. This factory is the first, from a mobile infrastructure supplier, to achieve compliance with the infrastructure law's "Build America, Buy America" provisions.

EJL Wireless Research's take on this is that most of the media has not focused on this KEY and super important FACT! The "Made in America" label is critical for AT&T to have given it is the incumbent network provider for FirstNet. We are not aware of Nokia having any manufacturing capabilities in the US.

3] AT&T capitalized on vendor weakness to extract favorable financing terms and pricing for the new 5G equipment.

EJL Wireless Research's take on this is that AT&T is trying to conserve its cash and leveraged a deal with Ericsson that not only got it very favorable per unit pricing on the RAN equipment BUT we believe that AT&T was also able to leverage substantial VENDOR FINANCING from Ericsson for the next 5 years. It would see that Nokia was just not able to go a low as Ericsson on the unit pricing and was also unable to meet the vendor financing terms that AT&T was looking for.

And now, the one important thing overlooked by EVERYONE in the media...

The passive antenna portion of the RAN for AT&T Wireless. We estimate that CommScope Holding Company, Inc. had great than 50% market share of the passive antenna market within AT&T for the macro layer and was a dominant antenna supplier for the outdoor small cell layer. We cannot fathom an outcome where Ericsson did not bid for the passive antenna portion of the RAN market as it did for the active portion. With the acquisition of Kathrein's mobile infrastructure antenna group in 2019, it has been able to compete head to head against CommScope globally for passive antennas. IF Ericsson was as aggressive on the passive antenna side as it was on the active RAN equipment side, then we conclude that CommScope was just unable to bid as low as Ericsson, given CommScope's overall current financial situation. IF CommScope also ended up like Nokia and was shut out of the passive antenna opportunity with AT&T, this would be a SEVERE BLOW to the head for the company's OWN (outdoor wireless network's) business unit and overall financial outlook.

So...

While it has been fun to participate in this media game for the past week, EJL Wireless Research will return to our core roots of providing unique primary research and consulting services to our clients while adhering to our core philosophy of perspicacity. We normally do not offer "free advice" but in this case, it was necessary. We will likely return after the holidays with another industry prediction in early 2024 that we hope will blow everyone away in telecom!

Happy Holidays and New Year to all and we hope for peace across the world in 2024.