State attorneys general in 10 states filed a lawsuit on Tuesday to block a proposed $26 billion merger of Sprint and T-Mobile, a deal that would combine two of the four largest wireless carriers in the U.S.
“This is exactly the sort of consumer-harming, job-killing mega-merger our antitrust laws were designed to prevent,” New York AG Letitia James, who along with California’s Xavier Becerra is spearheading the legal challenge, said in a statement. The attorneys general of Colorado, District of Columbia, Maryland, Michigan, Mississippi, Nevada, Virginia and Wisconsin also joined the complaint.
The two telecommunications companies announced their proposed union, after a merger attempt during the Obama administration fell through. The deal would reduce the number of major wireless carriers in the U.S. to three—Verizon, AT&T and the new company, which would take the T-Mobile name. Critics say that level of consolidation would hurt consumers by driving up prices—especially since T-Mobile and Sprint now have the largest number of low-income customers among the four major wireless carriers.
The suit is a major blow for the merger, according to Blair Levin, an analyst with New Street Research. “[A]t this moment, no one should have a high level of confidence in the deal moving forward,” he said in a research note. The states “have a relatively straightforward case with significant antitrust precedent on their side.”
Shares of both companies fell on the news, with Sprint losing 7% and T-Mobile dropping nearly 2%.
Federal Communications Commission Chairman Ajit Pai has said he supports the deal. However, staff in the Department of Justice’s antitrust division have recommended that the agency block it.