The deal to combine the third and fourth largest wireless companies in the U.S. appears to be close to approval by the federal government. But, the ranks of states attorneys general against the deal has grown. T-Mobile (NASDAQ: TMUS) has been working on the Sprint (NYSE: S) deal for over a year. T-Mobile management will take the helm if the merger is completed.
The attorneys general from New York, California, Colorado, Connecticut, Maryland, Michigan, Mississippi, Virginia, Wisconsin and Washington, D.C., brought an initial action in the federal Southern District of New York to block the deal. They have been joined by Hawaii, Massachusetts, Minnesota, and Nevada. Legal experts have been quick to point out that federal approval would allow the merger to go through. That leaves the question of what would happen if the courts sides with the states.
The key to the merger has been that T-Mobile and Sprint have agreed to give up some assets to make the combination less of a threat to consumer pricing. A possible rise in the prices the new company may charge is the most critical barrier to a deal. If there are only three carriers, which would include the merged company with AT&T (NYSE: T) and Verizon (NYSE: VZ), consumers will have fewer choices, and thus the carriers have a better chance of charging higher subscription prices. Arguments on both sides are based on the “truth” of the accusation. It may be years to know whether either is accurate.
The Sprint deal with T-Mobile is not done. And, if it is, perhaps it can be undone by the states and federal courts.