Sprint Stock Soars 70% on T-Mobile Merger Approval – Will Consumers Hold the Bag?

A Federal court has ruled in favor of the merger between Sprint and T-Mobile. Will American consumers be left holding the bag?
Sprint, T-Mobile merger
The mega merger between Sprint and T-Mobile has been approved. It's a big win for shareholders, but will Americans be left holding the bag? | Image: JUSTIN SULLIVAN and SAUL LOEB / various sources / AFP
  • Sprint and T-Mobile have won a major lawsuit in their quest to merge.
  • The deal is great for Sprint’s investors, but it will dramatically reduce competition in the industry.
  • This merger is a major setback for anti-trust concerns in the United States, and it may harm consumers.

Sprint’s (NYSE:S) stock soared over 70% on Tuesday after winning an important milestone in its quest to merge with T-Mobile (NASDAQ:TMUS). If combined, the two wireless carriers would become the third-largest in the United States, after AT&T and Verizon.

The progress towards the $26 billion merger has sent Sprint’s market cap to $34.55 billion while T-Mobile’s value went up to $80.76 billion as of Wednesday.

Chart
Sprint stock soared after winning an important legal battle in its quest to merge with T-Mobile.| Chart: Ycharts

With big investors winning from the recent ruling, will regular consumers be left holding the bag? According to many lawmakers, the answer is yes.

Does this Merger Hurt Consumers?

Many critics feel that a merger between Sprint and T-Mobile will hurt consumers by reducing competition in the industry and allowing the carriers to raise prices. T-Mobile disagrees, promising that it will spin-off $5 billion worth of assets to Dish Networks, who will create a fourth wireless provider as competition.

George Slover, a policy at Consumer Reports, doesn’t buy the offer. He states the following:

Going from four established nationwide wireless networks to only three – with the possibility that we might someday, eventually, get some version of a fourth network added back into the mix – will be extremely damaging to competition

He elaborates:

It will degrade the choices available to consumers, the options for network access, and the incentives to create better and more innovative service.

Worries about adverse consumer impact have plagued Sprint’s merger ambitions since inception, with 14 state attorney generals backing a lawsuit to block the union. Here is what Amy Klobuchar, a senator from Minnesota who is also running for president, had to say in July.

Amy Klobuchar, a Democratic presidential candidate, believes the merger will reduce competition in the industry. | Source: Twitter 

A Loss for Consumers, but a Win for Sprint Shareholders

The Federal District Court in New York disagrees with the consumer protection advocates trying to block the merger between Sprint and T-Mobile. Judge Victor Marrero ruled in favor of T-Mobile, seeming to gush over the corporation in his remarks.

The court stated the following:

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 proposed merger would allow the merged company to continue T-Mobile’s undeniably successful business strategy for the foreseeable future.

With this important legal victory, the Sprint and T-Mobile merger looks to be a done deal. Investors will love it, but consumers may find themselves holding the bag.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.

Sam Bourgi edited this article for CCN.com. If you see a breach of our Code of Ethics or find a factual, spelling, or grammar error, please contact us.

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William Ebbs

William Ebbs

As a writer with over five years of financial experience, William Ebbs has earned millions of page views with his hard-hitting, opinionated work. When Will isn't writing, he enjoys strategy gaming, world travel, and researching for his next article. William Ebbs is based in the United States of America. Muck Rack | Email me | Follow Me on Twitter |Link up with me on LinkedIn

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