T-Mobile versus Sprint: Which Stock Should Investors Buy?

Today, U.S. Federal Judge Victor Marrero handed T-Mobile (NYSE:TMUS) a victory. He approved the company’s $26.5 billion acquisition of Sprint (NYSE:S). The judge rejected the states’ bid to stop the T-Mobile and Sprint merger.

Marrero based his decision on three important points. First, the states didn’t convince him that the tie-up would lead to higher prices or lower quality services. Second, he disagreed that Sprint could survive on a standalone basis. Finally, the states didn’t convince him that Dish Network (NASDAQ:DISH) can’t build its own nationwide 5G network.

Last year, a group of state attorneys general sued to block the deal due to concerns that the tie-up of the third and fourth-largest wireless carriers in the US would harm consumers. According to the plaintiffs, led by California and New York, the merger deal would reduce competition, which would result in higher prices for wireless consumers. The companies argued that the new T-Mobile could compete effectively with AT&T (NYSE:T) and Verizon and rapidly build a nationwide wireless 5G network.

However, the merger deal still faces challenges. The two companies can’t close the merger until the California Public Utilities Commission supports the deal.

The states disagreed with the court ruling. According to a CNBC report, New York Attorney General Letitia James said that “the states disagree with this decision wholeheartedly, and will continue to fight the kind of consumer-harming megamergers our antitrust laws were designed to prevent.” James also highlighted that the states might consider appealing the ruling.

In a statement, California Attorney General Xavier Becerra said, “Our fight to oppose this merger sends a strong message: even in the face of powerful opposition, we won’t hesitate to stand up for consumers who deserve choice and fair prices,” as reported by CNBC. He also said, “We’ll stand on the side of competition over megamergers, every time. And our coalition is prepared to fight as long as necessary to protect innovation and competitive costs.”

T-Mobile and Sprint negotiated with the government on certain terms before the agencies cleared the transaction. The Department of Justice approved the deal after Sprint agreed to sell its prepaid business and certain wireless spectrum to Dish for $5 billion. The FCC approved the deal after the combined entity agreed to build a 5G network that would cover 97% of the US population within three years of merger deal closing.

Wall Street analysts have given T-Mobile stock a mean target price of $93.68. The target price suggests an estimated upside of 10.8% for the next 12 months based on Monday’s closing price. Sprint stock offers a potential upside of 24.8% based on its mean target price of $5.99.

On Tuesday as of 9:59 AM ET, T-Mobile stock rose 10.9% at $93.78. Sprint stock rose 73.3% at $8.32, while Dish stock rose 5.4% at $38.82.

Read Big Day for the T-Mobile and Sprint Merger Deal and Will Sprint Stock Jump Following Merger Approval? to learn more. You can also read Should Investors Buy or Sell T-Mobile Stock? to learn more about the companies.