US should take stake in Nokia, Ericsson to counter Huawei in 5G: Barr

US should take stake in Nokia, Ericsson to counter Huawei in 5G: Barr

Britain’s Prime Minister Boris Johnson (R) welcomes US President Donald Trump (L) to the NATO summit at the Grove hotel in Watford, northeast of London on December 4, 2019.

Peter Nicholls | AFP | Getty Images

The U.S. Attorney General said America should consider taking a controlling stake in European telecoms equipment makers Nokia and Ericsson to “blunt” Chinese firm Huawei’s “drive to domination.”

William Barr’s comments come after President Donald Trump expressed “apoplectic” fury towards U.K. Prime Minister Boris Johnson over Britain’s decision to allow Huawei limited participation in its 5G networks, according to a report from the Financial Times.

5G refers to next-generation mobile networks that promise super fast data speeds and will become critical to future infrastructure. Washington has maintained that Huawei’s equipment could be used for espionage on Americans by Beijing. The U.S. also argues that if Huawei owns 5G infrastructure, by default, it’s in the hands of China and they could shut down networks at any time. Huawei has denied all of the allegations.

The U.S. has been pressuring allies, including the U.K., to completely block Huawei from its 5G networks. But last month, Britain decided to allow Huawei to participate in a limited part of the 5G rollout and limit the Chinese company’s market share, in a move that was seen as a test for the relationship between the U.K. and U.S.

The FT reported, citing officials, that after this decision, Trump and Johnson had a phone call in which the U.S. president expressed anger at the British Prime Minister.

The White House and Downing Street were not immediately available for comment when contacted by CNBC.

Huawei competitor

Huawei’s biggest rivals are Finnish firm Nokia and Swedish company Ericsson. The U.S. does not have a rival to the Chinese firm.

But there have been rising calls to create an American competitor, a tough task given the long lead time and high cost it would take to develop the technology and the fact that 5G has already begun rolling out globally.

Instead, Barr offered a different option, suggesting the U.S. find a way to take a controlling stake in Nokia and Ericsson.

“We have to make a decision on the horse we’re going to ride in this race,” Barr said during a speech at a conference run by the Center for Strategic and International Studies. “Who is the 5G equipment supplier or suppliers that we will rely on to compete against Huawei around the globe to win contracts from operators and blunt Huawei’s drive to domination?”

He said the Nokia and Ericsson don’t have “Huawei’s scale nor the backing of a powerful country with a large embedded market like China” and suggested the U.S. “actively” consider buying a stake.

“There have been some proposals 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,” Barr said.

“Putting our large market and financial muscle behind one or both of these firms, would make it a far more formidable competitor and eliminate concerns over … their staying power.”

Ericsson declined to comment when contacted by CNBC.

“We always welcome investor interest in Nokia. Beyond that we cannot comment on Mr Barr’s statement,” a Nokia spokesperson told CNBC.

Ericsson shares were up near 3.7% around 10:0 a.m. London time while Nokia was just shy of 4% higher.

Potential Ericsson deal ‘positive’

Ericsson’s biggest shareholder Cevian Capital said U.S. interest in technology firm, is “clearly positive” for the company, Sweden and shareholders.

“An acquisition is really the only alternative if the U.S. wants to be leading in this area (5G). Such an acquisition would in turn mean significant resources to invest on innovation and market leadership,” Christer Gardell, managing partner at Cevian Capital, told CNBC by email.

He said that any deal would be based on a “completely different valuation level than today for Ericsson,” claiming the current share price “greatly undervalues the company’s long-term fundamentals.”

But ultimately, Gardell appeared to back an American deal.

“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. The board and management need to drive and handle this question with the highest priority,” he said.

Just how the U.S. could take a stake in Ericsson and Nokia remains to be seen. There are also questions over whether such a move may raise concerns with the European Union.

“Both Ericsson and Nokia are publicly listed, meaning that the US could build a stake that way, but how they would do it remains to be seen, as this is not something they usually do with US companies, let alone foreign ones,” Dexter Thillien, senior analyst at Fitch Solutions, told CNBC by email.

“I don’t think Ericsson and Nokia would be particularly happy about it either, because it reinforces the perception that they’re so far behind Huawei they need US state help, and might give China the excuse to ban the from the country (it’s a small part of their respective overall revenues).”

Source link

قالب وردپرس

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top