Why a Federal Judge Just Ruled for T-Mobile’s $26.5 Billion Bid

Shares of Sprint (S) are up more than 73% this morning after a U.S. District judge ruled in favor of its $26 billion deal to merge with T-Mobile (TMUS) – up 11% on the news.

Should the California Public Utilities Commission approve the deal, we may see closure.

Initially, attorneys from New York, California, Connecticut, Hawaii, Illinois, Maryland, Michigan, Minnesota, Oregon, Wisconsin, Massachusetts, Pennsylvania, Virginia and D.C. argued the merger would limit competition and result in higher prices for consumers. However, Sprint and T-Mobile argued that such a deal would only help them compete against AT&T and Verizon.

Judge Victor Marrero sided with Spring and T-Mobile, noting, “The resulting stalemate leaves the Court lacking sufficiently impartial and objective ground on which to rely in basing a sound forecast of the likely competitive effects of a merger,” as quoted by CNBC.

The Judge’s Top 3 Points for the Merger

One, in his decision, the judge said the counter parties failed to convince the court that the merger party “would pursue anticompetitive behavior that, soon after the merger, directly or indirectly, will yield higher prices or lower quality for wireless telecommunications services.”

Two, the court rejected the idea that Sprint would continue operating “effectively as a wireless services competitor without the merger,” as highlighted by CNBC. “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 said.

Three, the court rejected the argument that Dish Network “would not enter the wireless services market as a viable competitor nor live up to its commitments to build a national wireless network.” The deal called for Dish to step in as a new wireless player based on agreements with the DOJ and FCC.”

State attorneys are not pleased with the decision.

New York Attorney General Letitia James, for example, notes that she does, “disagree with this decision wholeheartedly, and will continue to fight the kind of consumer-harming megamergers our antitrust laws were designed to prevent.” She called the ruling and called it a “loss” for Americans who rely on wireless networks and said the states will review their options, including a potential appeal, as also highlighted by CNBC.

“From the start, this merger has been about massive corporate profits over all else, and despite the companies’ false claims, this deal will endanger wireless subscribers where it hurts most: their wallets,” James said.