UPDATE 1-Tellabs says hasn't lost AT&T business

* Tellabs says has not lost AT&T business

* Shares up 2.87 percent

NEW YORK, June 10 (Reuters) - Communications equipment maker Tellabs Inc TLAB.O on Thursday denied speculation that it was losing business from top U.S. phone company AT&T T.N to a rival, and said orders were strong.

Competition had increased, but there were “no degradations” in the relationship with AT&T, Tellabs Chief Financial Officer Tim Wiggins said, adding that he was seeing stronger orders than expected.

Shares in Tellabs had been hit by volatility in recent sessions on fears that AT&T, which accounts for more than 20 percent of the company’s revenue, may stop buying some of its products for its wireless backhaul system.

Morgan Stanley downgraded the shares to “equal weight” from “overweight” earlier this week on such concerns.

Tellabs' rivals include Cisco Systems Inc CSCO.O and Alcatel-Lucent ALUA.PA.

Shares in Tellabs closed up 19 cents, or 2.87 percent, at $6.82. (Reporting by Ritsuko Ando. Editing by Robert MacMillan.)