WASHINGTON (Reuters) – At least 10 state attorneys general plan to file a lawsuit as soon as Tuesday to stop the $26 billion merger of Sprint Corp and T-Mobile US Inc, according to three sources familiar with the matter, a deal that would reduce the number of nationwide wireless carriers to three from four.

A smartphones with Sprint logo are seen in front of a screen projection of T-mobile logo, in this picture illustration taken April 30, 2018. REUTERS/Dado Ruvic/Illustration

The states, which are expected to file the challenge in New York, have been investigating whether the deal would boost consumer prices by reducing competition. The companies have pledged not to boost rates for three years.

New York state’s attorney general is leading the lawsuit, one source said. The office has announced a news conference for this afternoon.

T-Mobile, whose parent company is Deutsche Telekom AG, and Sprint, controlled by Japan’s SoftBank Group Ltd, did not comment. A spokeswoman for the New York attorney general declined to comment.

Shares of Sprint were down 6.9% and T-Mobile slid 2.2%.

While AT&T and Verizon dominate the overall U.S. wireless market, T-Mobile is the most popular among customers who make less than $75,000 per year, and Sprint’s Boost Mobile prepaid brand counts 83 percent of its users in that income range, according to Kagan, S&P Global Market Intelligence data.

Critics of the deal fear it will likely lead to higher prices for the poorest Americans, many of whom use prepaid wireless plans.

The companies have offered to sell Boost to reduce the combined company’s market share in the prepaid business. They have also indicated they were considering divesting wireless spectrum.

The two companies have been in regular contact with regulators as they lobby for approval. Sprint Chief Executive Officer Marcelo Claure and John Legere, his counterpart at T-Mobile, met with Justice Department officials on Monday, according to a source familiar with the matter.

If the states’ lawsuit goes forward, the courts would have the last say, not the Justice Department, said Blair Levin, an analyst with New Street Research, in a note on Tuesday following the development, which Reuters first reported.

The next two big steps will be determining the position of Makan Delrahim, head of the antitrust division, and the identity of the judge assigned to the states’ lawsuit, Levin wrote.

State attorneys general often participate in lawsuits aimed at stopping mergers but rarely go it alone.

The deal has won the backing of a majority of the Federal Communications Commission. The U.S. Justice Department’s antitrust division staff has recommended the agency block the deal, but no final decision has been made.

Reporting by Diane Bartz, David Shepardson, Karen Freifeld; Editing by Chris Sanders, Steve Orlofsky and Jeffrey Benkoe



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