By Dominic Chopping
STOCKHOLM -- Shares in Ericsson AB and Nokia Corp. 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. in the market for 5G.
The suggestion from Mr. Barr, a former general counsel at cellphone carrier Verizon Communications Inc. -- 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 said it 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 share 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."
The suggestion from Mr. Barr represents one of the Trump administration's most aggressive proposals yet for pushing back against Shenzhen-based Huawei.
U.S. officials have pushed governments to ban Huawei's gear from their networks, saying the Chinese company could be legally obliged to allow Beijing to use its staff and equipment to spy on foreign networks. Huawei has denied that it would ever do this.
"We have to make a decision on the 'horse' we are going to ride in this race," Mr. Barr said during a speech at the Center for Strategic and International Studies in Washington, where law-enforcement officials described the challenges of combating China's threats to U.S. economic and national security.
Mr. Barr warned that allowing China to dominate 5G networks poses a "monumental danger" not just for security but for the future of the U.S. economy.
The technology promises to supercharge cellphones and ultimately enable driverless cars and internet-controlled factories.
"Some propose that these concerns could be met by the United States aligning itself with Nokia and/or Ericsson through American ownership of a controlling stake, either directly or through a consortium of private American and allied companies," Mr. Barr said. "Putting our large market and financial muscle behind one or both of these firms would make it a more formidable competitor and eliminate concerns over its staying power."
Analysts suggested the U.S. government was more likely to encourage American companies to buy a stake in the Nordic companies than invest itself. They also suggested that the U.S. government could support Ericsson and Nokia in other ways -- such as tax breaks or research-and-development support -- to better compete with Huawei.
--Adrià Calatayud contributed to this article.
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