Nokia OyJ (NOK) - Get Free Report shares edged lower Thursday after lawmakers in France rejected moves by the government to tighten rules on telecoms companies providing next generation equipment that could raise concerns over national security.
The proposed rules, which come amid increasing concerns over the role that China's Huawei Technologies has played in the roll-out of next generation broadband networks around the world, would have forced network gear providers such as Nokia and Ericsson (ERIC) - Get Free Report , as well as Huawei, to seek formal government approval before installing certain types of equipment. Lawmakers, however, said they needed more time to study the 11th hour proposals, which followed a warning from the U.S. government over security risks linked to Huawei and its domestic rival, ZTE Corporation (ZTCOY) and may revisit a renewed draft of the bill later this year.
"The move from 4G to 5G changes many things at a technical level," Finance Minister Bruno Le Maire told France 2 television. "It means that the most sensitive information are not only in the core networks but also in the antennas. We must protect this sensitive information."
Nokia's U.S.-listed shares were marked 1.16% lower at the start of trading Thursday to change hands at $5.98 each, a move that would erase nearly all of the stock's three-month gain. Ericsson shares, meanwhile, were little-changed in Stockholm to trade at SEK81.36 each.
TheStreet's founder, Jim Cramer, noted that he hasn't been able to recommend Nokia shares since 1997, but now that the stock has an attractive valuation, and a stronger end-to-end portfolio of solutions, he thinks there's upside potential if Europe follows the U.S. lead on shutting the door to Huawei and ZTE in 5G markets.
"For years Nokia and Ericsson have been steamrolled by Huawei and ZTE," Cramer told his Mad Money audience on CNBC last night. "That's over. The U.S. government is doing everything it can to keep these companies out of 5G networks, not just here, but worldwide and that is a huge opportunity for Nokia and Ericsson.
"I bet both stocks will get more attractive as our government keeps ratcheting up the pressure on allies to not use anything from these Chinese companies," Cramer said.
Earlier this month, Reuters reported that U.S. State Department officials pressed European leaders to exclude Huawei equipment from its 5G rollout plans, arguing that security risks linked to the China-backed company have made their products unsafe and potentially open to hacking and espionage.
The agency also said the EU could amend a 2016 cybersecurity law that would effectively ban Huawei from one of its biggest markets, a move that could open the door for next generation equipment makers such as Nokia and Ericcson as well as Germany's Deutsche Telekom.
Germany has also made moves to assess security risks posed by Huawei, with Chancellor Angela Merkel telling an audience during her recent visit to Japan's Keio Univeristy that she wants assurances that "the company doesn't just simply hand the data to the (Chinese) state" if its awarded 5G contracts in Europe's biggest economy.