US Attorney General: US should buy controlling stakes in Nokia & Ericsson

Reuters writes that at a conference last Thursday, US Attorney General William Barr declared that the threat posed by Chinese telecom company Huawei Technologies was so great that the USA should consider buying controlling stakes in Finland’s Nokia and Sweden’s Ericsson – as the two competite with their Chinese counterpart. The fear circles around development of 5G networks – Huawei has already managed to secure partnership agreements with several US allies – but the US has alleged that the Chinese government could use Huawei’s technology for espionage. The Financial Times writes that Barr’s statements show the lengths that the Trump administration could take to weaken Huawei’s bid to be the biggest telecom developer of 5G, and as there are no US based companies that produce the necessary equipment, Nokia and Ericsson may be their only option. Neither Ericsson nor Nokia chose to respond to Barr’s statements. 
 
On Friday, Ericsson’s largest shareholder by capital, Cevian Capital, enthusiastically urged the telecom’s board to seriously consider a US’ bid to purchase a controlling stake in the company and Finnish competitor Nokia. Christer Gardell, co-founder of Cevian Capital, however, stressed that the purchase must be based on a “completely different valuation level than today’s ridiculous stock price” in comments to Dagens Industri. He added that a potential acquisition would be the only way for the US to become leading in 5G and would in turn “lead to significant resources to invest in innovation and market leadership” to Ericsson’s advantage. But unnamed shareholders are not as convinced, questioning whether the Trump administration is serious about purchasing shares, as it has not requested formal talks with shareholders before or after the statements were made public on Thursday. They also point to the geopolitical implications an American controlling stake would bring, potentially limiting Ericsson’s strategic reach in the Chinese market. “I think it would be too politically sensitive for the US to buy Ericsson,” one of them said. In order to buy influence over Ericsson, an approximate 10% stake and a board position is required, but that would entail sealing a deal with Ericsson’s three largest shareholders; Cevian, Industrivärlden and Investor. Former PM and Foreign Minister, Carl Bildt (M), told the Financial Times that Brussels should do more to promote both Ericsson and Nokia as they are “the frontline on the geotechnical field” and demand a level playing field with Beijing. Ericsson’s CEO, Börje Ekholm, who has yet to comment on the US bid, will meet German Chancellor Angela Merkel on Monday.
 
Observers ask whether it is realistic to purchase Ericsson. It certainly is possible, argues Mikael Törnwall in SvD Näringsliv, as it is not an expensive affair, but do they want to? In that case they should have shown interest when the company was cheaper a few years ago, and even if they do, they might be hard placed to persuade Investor. Would an acquisition benefit Ericsson? Many Swedish companies have struggled under a multitude of US acquisitions, but Volvo is faring well with Chinese-owned Geely. We could turn to South Korea’s Samsung for a potential acquisition to become a sector giant, suggests Richard Bråse in Dagens Industri. However, Sveriges Radio’s tech expert Sven Carlsson is not as easily convinced by the sale.

Hellen is a senior writer at Mundus News and a member of the media monitoring team. She holds a BA in Arabic with International Relations from the University of Westminster and MA in Near and Middle Eastern Studies from the School of Oriental and African Studies (SOAS). Having embarked her career at the BBC Arabic News Service, Hellen went on to work for a range of news agencies, before turning to the financial PR sector, focussing on Middle Eastern markets. She also has experience of policy work concerning the Syrian crisis as well as Palestine and Israel at the European Commission. Hellen is fluent in Swedish, English, French and Arabic.