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.
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
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.
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.