Texas, Nevada drop out of state AG group suing to block Sprint, T-Mobile merger

© Reuters. FILE PHOTO: A smartphones with Sprint logo are seen in front of a screen projection of T-mobile logo, in this picture illustration

WASHINGTON (Reuters) - Texas' attorney general settled with T-Mobile Inc (O:TMUS) and Sprint Corp (N:S) and will drop his opposition to the $26.5 billion merger, leaving just Democratic attorneys general fighting the proposed combination.

Texas Attorney General Ken Paxton had been the only Republican among the state attorneys general who had argued that the deal to combine the No. 3 and No. 4 wireless carriers would lead to higher prices and filed a lawsuit to stop it.

Also on Monday, Nevada said it would withdraw from the lawsuit in exchange for early deployment of the next generation of wireless in the state, creation of 450 jobs for six years and a $30 million donation to be distributed by Nevada Attorney General Aaron Ford and aimed at helping women and minorities, Ford's office said.

Shares of Sprint rose 3.6 percent after the news. T-Mobile shares edged lower.

Without Texas and Nevada, 13 Democratic state attorneys general and the District of Columbia will take up the case. But Erik Gordon, who teaches at the University of Michigan Ross School of Business, said the remaining states were "formidable."

"If all that was left was Rhode Island and Wyoming, they'd be giggling at T-Mobile. Nobody underestimates New York and California," he said.

A trial is set to begin on Dec. 9 in Manhattan federal court.

In a statement issued on Monday, Paxton's office said the agreement precludes the companies from raising prices for Texans for five years and commits the merged company to 5G network throughout Texas, including rural areas, during the next six years.

New York Attorney General Letitia James, who co-leads the lawsuit with California, said the deals that Texas and Nevada struck do not resolve antitrust concern about the proposed deal.

"The mega merger of T-Mobile and Sprint will reduce competition in the mobile marketplace," she said in a statement. "There is no doubt that this merger remains bad for consumers, bad for workers, and bad for innovation, which is why we remain committed to litigating this matter."

An adviser to California Attorney General Xavier Becerra said that the "coalition of states remains strong."

The U.S. Justice Department and the Federal Communications Commission signed off on the merger after the companies agreed to divest Sprint's prepaid businesses, including Boost Mobile, to satellite television company Dish Network Corp (O:DISH), and provide it with access to 20,000 cell sites and hundreds of retail locations. That deal is worth about $5 billion.