Sprint Corp. and T-Mobile USA Inc. today cleared a major hurdle to their planned $26.5 billion merger after a federal judge dismissed a multistate lawsuit challenging the transaction. 

Sprint’s shares shot up more than 73% on the news. T-Mobile has gained more than 11% in trading.

The two carriers originally announced plans to become a single company back in 2018, promising that the expected $6 billion worth of cost synergies from the deal will help advance the rollout of 5G technology across the U.S. Justice Department officials approved the deal last July and the Federal Communications Communications followed suit a few months later.

But the merger was greeted with decidedly less enthusiasm at the state level: A group of attorneys general representing more than a dozen states filed suit last year to block the merger. Southern District of New York judge Victor Marrero sided with the carriers in a ruling today.

The states argued that a merger between Sprint and T-Mobile, the nation’s fourth- and third-largest wireless network operators, respectively, would hurt consumers by reducing the number of competitors in the market. But the judge wrote in his decision that he was “not persuaded” the combined company would take any steps that would raise prices for users or lower service quality.

The carriers also successfully argued that Sprint, which has been steadily losing market share in recent years, would struggle to stay competitive as an independent provider.

“The Court is thus substantially persuaded that Sprint does not have a sustainable long-term competitive strategy and will in fact cease to be a truly national [mobile network operator],” the ruling stated.

A third factor, or more precisely third company, that played a central role during the deliberations was Dish Networks Corp. The Justice Department last year approved the T-Mobile-Sprint merger on the condition that Sprint sell off certain assets to Dish so that firm may take its place as the nation’s fourth major wireless carrier. The attorneys general opposing the deal contended in their suit that the move would fail to create a viable competitor to the three major players, but the argument was not accepted by the court.

New York Attorney General Letitia James, who led the coalition of attorney general in the lawsuit, issued a statement saying that “we disagree with this decision wholeheartedly, and will continue to fight the kind of consumer-harming megamergers our antitrust laws were designed to prevent. As we review our options, including a possible appeal, Americans should continue to hold the companies to account for their promises.”

Sprint Executive Chairman Marcelo Claure, meanwhile, praised the ruling, saying that “Judge Marrero’s decision validates our view that this merger is in the best interests of the US economy and American consumers.”

The transaction still needs to be approved by the California Public Utilities Commission before becoming official. T-Mobile and Sprint said they expect the deal to close by April 1. 

Photo: T-Mobile