By Drew FitzGerald, Sarah Krouse and Brent Kendall
A judge's approval of T-Mobile US Inc.'s takeover of Sprint Corp. will usher in a new balance of power in the U.S. wireless market and test whether three giants will compete as aggressively for cellphone users as four unequal players once did.
U.S. District Judge Victor Marrero concluded the deal, worth $26 billion when it was struck two years ago, wasn't likely to substantially lessen competition, and rejected the main arguments by a group of states seeking to block the deal as anticompetitive.
"T-Mobile has redefined itself over the past decade as a maverick that has spurred the two largest players in its industry to make numerous pro-consumer changes," the judge wrote, adding that a closed deal would allow it to continue "T-Mobile's undeniably successful business strategy for the foreseeable future."
Judge Marrero rejected the states' argument that Sprint, without the deal, could continue competing. He also said a deal brokered by federal regulators to set up Dish Network Corp. as a new cellular phone service provider would benefit consumers.
The opinion will leave most of the country's wireless customers with three major network operators: Verizon Communications Inc., AT&T Inc. and the new T-Mobile. New entrant Dish plans to use the deal as a springboard for its mobile ambitions, while U.S. cable companies are stuck with existing providers' networks for their fledgling cellular services.
Shares of all the companies advanced in premarket trading Tuesday after The Wall Street Journal first reported Monday on the expected verdict, a sign that investors expect the consolidation will boost industry profits.
The verdict is a defeat for the group of 13 states and the District of Columbia that challenged the deal, an unusual state lawsuit against a combination blessed by federal regulators. The U.S. Justice Department and Federal Communications Commission approved the combination last year after they secured concessions from T-Mobile and Sprint, but a coalition of Democratic-led states remained unconvinced. The case went to trial in December.
Judge Marrero said the states brought a case that appeared strong and might have been enough to warrant a merger injunction in other industries. But he said the fast-changing wireless sector was different.
The judge was convinced both by testimony from Sprint executives that the struggling carrier was falling behind, despite what he described as "valiant attempts" to remain competitive, and from Dish that it would be able to operate a viable new carrier.
He also acknowledged the effort the FCC and Justice Department put into crafting a fourth nationwide carrier run by Dish. The agreement requires Sprint to sell airwaves and about nine million customer accounts to Dish.
T-Mobile and Sprint have spent more than seven years pursuing a combination in some form. They abandoned previous attempts in 2013 and 2017 before their boards struck an agreement in early 2018 that would allow T-Mobile to take over its smaller rival, creating a company closer in size to Verizon and AT&T.
Absorbing Sprint crowns a dramatic come-from-behind win for T-Mobile, which struggled to consistently gain market share a decade ago. Under Chief Executive John Legere, the Bellevue, Wash., company bounced back from a failed union with AT&T in 2011 and eventually surpassed Sprint in the race for the most subscribers. Its purchase of most Sprint customer accounts will put the company in second behind Verizon.
T-Mobile's hand will be strengthened by a massive stockpile of wireless radio licenses held by Sprint. Those spectrum holdings allow the new company to serve more customers with high-speed internet service on the go, putting pressure on AT&T and Verizon to match them as carriers upgrade to faster fifth-generation, or 5G, standards.
The states might decide to appeal the ruling and another U.S. district judge in Washington must approve the existing Justice Department arrangement. The cellphone companies also need clearance from California's Public Utilities Commission. But the merger partners' position is strengthened by their federal court victory.
--Cara Lombardo contributed to this article.
Write to Drew FitzGerald at firstname.lastname@example.org, Sarah Krouse at email@example.com and Brent Kendall at firstname.lastname@example.org
(END) Dow Jones Newswires
February 11, 2020 09:13 ET (14:13 GMT)Copyright (c) 2020 Dow Jones & Company, Inc.