Sprint stock plunged more than 7% on Tuesday after a group of states Attorneys General filed a federal suit to block the wireless company’s pending merger with T-Mobile US, arguing that the $26 billion deal would drive up cellular service prices.
Sprint stock fell as much as 7.3% on Tuesday to $6.48 per share as news of the suit, filed in U.S. District Court for the Southern District of New York, came out. The suit was led by New York Attorney General Letitia James and California Attorney General Xavier Becerra, who were joined by AGs from Colorado, the District of Columbia, Maryland, Michigan, Mississippi, Connecticut, Virginia and Wisconsin.
Sprint stock closed at $6.58 each on June 11, down 5.9%, or 41 cents per share. T-Mobile shares closed at $75.46, down 1.6%, or $1.21 each.
“When it comes to corporate power, bigger isn’t always better,” said New York AG James said in a press release. “The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country. That’s why we are going to court to stop this merger and protect our consumers, because this is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”
The merger would join the third and fourth largest wireless companies in the country, eliminating at least one major competitor, which in the past has been a hard regulatory hurdle to clear. But the companies were encouraged after Federal Communications Commission chairman Ajit Pai announced his support of the deal after the two parties proposed divesting its Boost Mobile pre-paid wireless subsidiary and pledging to build out 5G service to most of the country.
“Although T-Mobile and Sprint may be promising faster, better, and cheaper service with this merger, the evidence weighs against it,” California AG Becerra said in the press release. “This merger would hurt the most vulnerable Californians and result in a compressed market with fewer choices and higher prices. Today, along with New York and eight other partner states, we’ve filed a lawsuit to block this merger and protect the residents of our state.”
Sprint and T-Mobile have been down this road before. The two scrapped plans for a merger in 2014 after it became clear that it would not receive approval from Obama administration officials. The two tried it again in November 2017, but balked after they couldn’t agree on control issues. But by May of 2018, both were back at the negotiating table.
Opposition to the deal seems to be split across party lines. The Attorneys General that are part of the most recent suit are all Democrats. Earlier Tuesday, Fox Business Network correspondent Charlie Gasparino reported that T-Mobile CEO John Legere met Monday with federal officials and that “it looks like this thing is moving forward in terms of potentially approving.”
According to a report in the Wall Street Journal, Sprint and T-Mobile can still go through with the merger despite the states’ objections as long as they win federal approval, but there would be a cloud of legal uncertainty over the deal’s future.