Fate of T-Mobile-Sprint deal is in judge’s hands as trial wraps up

T-Mobile US Inc.’s bid to buy wireless rival Sprint Corp. is in a judge’s hands after the companies made their final plea for him to reject a state lawsuit seeking to block the deal.

U.S. District Judge Victor Marrero in New York heard closing arguments Wednesday in the states’ antitrust lawsuit over the $26.5 billion deal, which would unite the third- and fourth-largest U.S. wireless carriers and create a rival to market leaders AT&T Corp. and Verizon Communications Inc.

Marrero, who asked no questions of the parties, said he will rule as “promptly as possible.” It’s been almost two years since the companies announced their planned merger in April 2018. T-Mobile and Sprint had discussed a merger previously, but their proposals were rejected by Obama-era federal regulators.

The companies had better luck with the Justice Department and Federal Communications Commission under President Trump, but then state attorneys general led by New York’s and California’s filed a lawsuit arguing that the deal would eliminate competition between T-Mobile and Sprint and lead to billions of dollars in higher costs for subscribers.

Marrero may take a couple of months to decide. The decision allowing AT&T Inc. to buy Time Warner took about a month and a half, and the ruling blocking the tie-up of health insurers Anthem Inc. and Cigna Corp. was issued about two months after the arguments in the case.

If the judge blocks the deal, it would leave Sprint a hobbled fourth competitor, weighed down by debt and facing a costly rollout of the next-generation wireless technology known as 5G. T-Mobile Chief Executive John Legere testified at the trial that Sprint would be “sold for parts” if the merger doesn’t go through. Legere and Sprint Chairman Marcelo Claure both attended the closing arguments.

A loss for the companies would be a momentous victory for the states in policing mergers. Thirteen states and the District of Columbia took the rare step of suing to block the deal even though the Justice Department’s antitrust division approved the tie-up.

New York Atty. Gen. Letitia James, who attended the states’ closing argument, said before the hearing that the states are operating under their own authority to investigate and challenge mergers.

“We will continue to look at mergers all across this nation in a wide range of industries that are anticompetitive,” she said.

Investors are increasingly skeptical of the deal’s chances of closing. The spread between T-Mobile’s offer price for Sprint and Sprint’s trading price, an indication of the merger’s prospects, hit its widest mark Tuesday in intraday trading. Sprint’s stock price slipped 0.6% on Wednesday, while T-Mobile shares rose 0.6%.

Blair Levin, an analyst at New Street Research who has been following the trial and was in court Wednesday, said the states have the edge in the fight.

“Their argument is fundamentally sound,” Levin said after the states presented their argument. “This could go either way, but I think the states have the advantage.”

After the judge concluded the hearing, Walter Piecyk, an analyst with LightShed Partners, said he thought that the states’ lead lawyer, Glenn Pomerantz gave a “very good closing argument” but that “it would be remarkable” if the states won.

The carriers argue that by combining the two companies, the new T-Mobile will have much more capacity in its network and will want to fill it by lowering prices and winning market share.

“They’re going to win customers from AT&T and Verizon,” T-Mobile lawyer David Gelfand told Marrero. “When a merger brings together two companies — that creates lower costs, better product — that actually makes the transaction procompetitve.”

They also say that a plan to sell assets to Dish Network Corp. so Dish can set up a new wireless carrier and put its massive stock of airwaves to use will bring new competition to the market. Dish Chairman Charlie Ergen testified at the trial that he is ready to compete in the market right away.

The states’ Pomerantz said in his closing argument that a combination of T-Mobile and Sprint would violate antitrust law because it would significantly consolidate the U.S. wireless market and give the combined company a market share of nearly 40% of wireless subscribers.

According to Pomerantz, the deal would eliminate Sprint as a low-cost competitor, giving T-Mobile the power to raise prices by $4.6 billion. He also said an independent Sprint would still be an effective competitor in the market, whereas Dish wouldn’t be.

“There’s absolutely no reason to take that risk,” Pomerantz said. “We have only four national competitors, and we need all of them.”