AT&T Snubbed Nokia. Why the Stock Is Rising.

Nokia
cut its long-term operating margin guidance Tuesday as the fallout of
AT&T’s
contract snub continued to hit the telecom equipment maker.

Finnish company
Nokia
said it was “prudent” to lower its 2026 operating margin guidance to 13% from 14%, citing the market conditions facing its mobile networks business. The unit will face challenges in 2024 and 2025 before returning to grow faster in 2026, the comany added.

One such challenge stems from
AT&T’s
decision to award a $14 billion contract to
Nokia’s
Swedish rival
Ericsson
to build out a new U.S. network. The agreement is part of an effort by
AT&T
to build a commercial-scale open radio access network beginning next year.

Despite the guidance cut, Nokia’s American depositary receipts rose 2.4% in early trading. After a 14% drop in the two days following the announcement of AT&T’s
Ericsson
deal, there’s probably also some relief among investors that Nokia’s long-term guidance wasn’t any worse.

Nokia last week said it would delay the timeline for reaching double-digit operating margin in its mobile networks by two years.

Nokia said Tuesday that it assumes mobile networks sales will fall in 2024, with AT&T’s snub a key reason. The challenging spending environment and a normalization in India after rapid 5G deployment were other factors, it said.

Significantly, Nokia sees further opportunities to increase margins beyond 2026 and still sees the 14% as achievable over the longer term.

“Nokia still sees a path to achieving the at least 14% comparable operating margin target but considering the current market conditions in Mobile Networks, this is deemed a prudent change,” the company said in a statement Tuesday.

There was some good news for Nokia—and its shares—as the company said it has begun rolling out its commercial open RAN network with Germany’s
Deutsche Telekom.

Nokia’s ADRs have fallen 33% in 2023, as of Monday’s close.

Write to Callum Keown at [email protected]

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