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Federal Judge Clears Way For Kansas City’s Sprint to Merge With T-Mobile

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Peggy Lowe
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KCUR 89.3
A Sprint store on 4365 NE Chouteau Trafficway in Kansas City sits near an empty Payless Shoe Store.

Clearing one of the last hurdles in a nearly two-year merger marathon, a federal judge on Tuesday ruled that Overland Park-based Sprint may complete its $26 billion deal with rival T-Mobile.

The decision will merge the No. 3 and 4 wireless carriers and save the long-suffering Sprint from going bankrupt or being sold off in pieces. It also created a spike in Sprint stock, which had long languished as the company struggled for years to gain a foothold in a competitive landscape.

Sprint Executive Chairman Marcelo Claure, in a statement, hailed the decision as in the best interests of the U.S. economy and wireless consumers.

“With the support of federal regulators and now this court, we will focus on quickly completing the few remaining necessary steps to close this transaction,” Claure said. “I am proud of my Sprint team’s dedication, passion and resilience throughout the merger review process, and we are ready to make the vision of a New T-Mobile a reality.”

Ruling against the state attorneys general who filed the lawsuit, U.S. District Court Judge Victor Marrero in New York said that the merger was unlikely to “substantially lessen competition” in the telecom industry. Critics of the deal have long said it would violate federal anti-trust laws, decrease competition and raise prices for consumers.

The deal now has one more hurdle: California regulators must sign off on the merger.

New York Attorney General Letitia James, who led the other states' attorneys general in the lawsuit, blasted the decision as bad for consumers, workers and innovation.

“From the start, this merger has been about massive corporate profits over all else, and despite the companies’ false claims, this deal will endanger wireless subscribers where it hurts most: their wallets," she said.

For the 6,000 Sprint employees on the downsized campus in Overland Park, the decision is anti-climactic, as workers have watched the company steadily shrink over the last two decades. The court’s ruling also signals the end of a long journey for Sprint, a company Kansas City leaders had hoped would lead the region into a high-tech future but which, instead, has struggled to stay afloat in the competitive landscape.

Hopes were high in the beginning, especially with 23,000 people at work in 2000. But Sprint lost 1,000 jobs, on average, every year for nearly the past two decades, said Frank Lenk, director of research services at the Mid-America Regional Council in Kansas City. That decline hurt the regional economy, Lenk said.

"The employees that are highly productive, not only are they paid well, but the value of what they produce is exceptionally high. (Sprint) exports to the rest of the world and it brings dollars in," he said. "When those dollars stop coming in, they can't circulate through the economy. And so really we really take a big hit."

Analysts watching the drawn out merger process over the past few months said it was unusual, noting that at every step they saw things that had never happened before.

Blair Levin of the Brookings Institution told KCUR in November that the FCC Chairman Ajit Pai said he would approve the plan even before the deal was scrutinized. The U.S. Department of Justice, meanwhile, gave the companies a chance to rework the deal, and the coalition of state attorneys general filed the lawsuit to block the merger.

“In fact, usually the FCC, the DOJ, and the states are all on the same side,” said Levin, a former chief of staff to the Federal Communications Commission chair. “In this case you actually have three different groups and really three different opinions. So it’s pretty weird.”

Peggy Lowe is an investigative reporter for KCUR. You can follow her on Twitter