AT&T’s Quarterly Spending Rises on Open RAN Transition

U.S.-based wireless carrier AT&T, Inc., reported that costs increased by about a half billion dollars in the second quarter of this year due in large part to higher expenses from the company’s switch to open radio access network (Open RAN) network infrastructure.

The company is undertaking that switch under terms of an arrangement announced late last year under which it will spend up to $14 billion over five years with equipment maker Ericsson on a commercial scale Open RAN deployment.

AT&T’s said last December that it expects to have “fully integrated open RAN sites operating in coordination with Ericsson and Fujitsu, starting in 2024,” and to have 70 percent of its wireless network traffic to flow across “open-capable platforms” by 2026.

“This move away from closed proprietary interfaces will enable rapid scaling and management of mixed supplier hardware at each cell site,” AT&T said when it announced the plan. “Beginning in 2025, the company will scale this Open RAN environment throughout its wireless network in coordination with multiple suppliers such as Corning Incorporated, Dell Technologies, Ericsson, Fujitsu, and Intel.”

AT&T’s second quarter earnings report issued in late July showed some of those Open RAN transition costs beginning to kick in.

At the top line, AT&T reported a 0.4% year-over-year revenue decrease for the quarter, and a decline in operating income to $5.8 billion, from $6.4 billion in the year-ago period.

Operating expenses climbed by about $500 million, to $24.0 billion “primarily due to our Open RAN network modernization efforts, including restructuring costs and accelerated depreciation on wireless network equipment, and higher depreciation related to our continued fiber and 5G investment,” the company said.

In its longer-form financial report covering the second quarter and filed with the Securities and Exchange Commission, AT&T explained that “depreciation expense increased in the second quarter and for the first six months of 2024, primarily due to shortening of estimated economic lives of wireless equipment that will be replaced earlier than originally anticipated with our Open RAN deployment and network transformation, and ongoing capital spending for network upgrades and expansion, which we expect to continue through the remainder of 2024.”

Restructuring charges incurred in the second quarter included $480 million “primarily related to termination fees of a RAN vendor whose equipment is being phased out of our network as part of our network modernization program,” AT&T said in the SEC filing.

The company also reiterated financial guidance for the second half of 2024, including capital spending in the range of $21 to $22 billion, which at least one analyst noted would mark AT&T’s largest second half spending over the past several years.