By Dominic Chopping
STOCKHOLM--Shares in Telefon AB L.M. Ericsson (ERIC-A.SK) and Nokia Corp. (NOKIA.HE) rose Friday after the Trump administration floated the idea that the U.S. could buy a stake in either of the telecom-equipment manufacturers--a sign that investors at least are taking the gambit seriously.
U.S. Attorney General William Barr told an audience in Washington on Thursday the U.S. and its allies should consider taking a controlling financial interest in the two Nordic companies, as a way of countering the dominance of China's Huawei Technologies Co.
The suggestion from Mr. Barr, a former general counsel at cellphone carrier Verizon Communications--a big customer of Ericsson and Nokia--left many industry watchers wondering how serious the administration was about the idea.
Representatives for Ericsson and Nokia didn't comment, and neither did spokespeople for the governments of Sweden and Finland, where the two companies are based and are national champions. Some investors, though, appeared to embrace the idea, with shares in both companies rising more than 4%.
Cevian Capital, one of Ericsson's largest shareholders, said a deal would make perfect sense for the U.S. if it wanted to be a leader in 5G technology. Cevian has an 8.4% stake in Ericsson.
However, any deal would have to involve a hefty premium to Ericsson's share price, said Christer Gardell, Cevian's managing partner.
"The current share price greatly undervalues the company's long-term fundamentals," he said.
The shares prices of both Ericsson and Nokia have fallen over the past year as the companies battle for control of the burgeoning market for 5G equipment with Huawei.
Mr. Gardell suggested a U.S. investment in Ericsson could pose fewer hurdles than a deal with Nokia because the Swedish company doesn't have state ownership. Finland holds a 3.8% stake in Nokia through its Solidium holding company, which holds stakes in nationally important listed companies. Solidium declined to comment.
"It is clearly better for Sweden, the company, the employees and the shareholders that an American deal is done with Ericsson and not with Nokia," Mr. Gardell said. "The board and management need to drive and handle this question with the highest priority."
Write to Dominic Chopping at firstname.lastname@example.org