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Judge expected to rule against states in lawsuit over T-Mobile, Sprint merger

A lawsuit brought by 13 states and the District of Columbia against a proposed merger between T-Mobile and Sprint could be settled on Tuesday with a judge ruling in favor of the deal, according to numerous news reports.

The ruling would complement a similar blessing by federal regulators last year that granted conditional approval for the merger of the country’s third- and fourth-largest wireless phone companies.

In seeking to block the deal, states attorneys general argued the merger would lead to an increase in fees for customers while reducing the number of options for wireless phone service. The attorneys argued the merger would likely impact low-income residents the hardest because they’re more likely to rely on prepaid phone service; as a condition of the sale, Sprint would be forced to divest its prepaid phone service to another company, with possible suitors including Dish Network.

The deal could also burden legacy Sprint customers because of technological difference. Sprint relies on CDMA technology for wireless service similar to rival Verizon, while T-Mobile relies on the international GSM standard. New smartphones, including all recent iPhones, are compatible with both CDMA and GSM networks, but Sprint customers holding on to older phones may be required to buy new devices if they want to keep their service.

For its part, T-Mobile has promised to not increase rates for three years and introduce a new budget plan of $15 for 2 gigabytes of mobile phone service if its merger with Sprint is allowed to go through. It also said the merger would allow it to blanket homes across 97 percent of the country with faster wireless Internet coverage.

The Wall Street Journal first reported the news of the expected ruling in favor of the merger, followed by a matching report from the New York Times and other financial news outlets. Shares of T-Mobile increased as much as 10 percent in after-hours trading, with shares of Sprint skyrocketing more than 60 percent.

Supporters of the merger said the deal is most important to Sprint, warning that the company likely would not be able to survive on its own if the deal fell through.

Executives at T-Mobile have promoted the merger by saying it would increase the amount of available wireless spectrum needed to boost its next-generation tech offerings, including 5G service, especially in rural areas — though a T-Mobile tech executive later contradicted the company’s position in a blog post that said 5G service likely wouldn’t have much effect in rural areas because the type of radio wave used for the service can’t scale “beyond small pockets of 5G hotspots in dense urban environments.”

A judge’s ruling in favor of the merger wouldn’t necessarily signal a go-ahead for the companies to continue with plans to combine: The 13 states attorneys general could ask an appellate court to hear the matter, which would prolong the lawsuit and delay the closure of the deal.

Disclosure: The author of this story owns stock in Sprint Corporation.

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).