When the attorneys general of nine states and the District of Columbia earlier this week filed a lawsuit to block the proposed merger of T-Mobile US and Sprint, it threw a wrench in high-level negotiations between the operators and the federal government, said Roger Entner, founder and lead analyst at Recon Analytics.

“The state thing came out of nowhere,” he said. "This is a very unusual merger because typically the [Department of Justice] goes first and then the states usually pile on and then the FCC makes a decision, which usually follows the one with the DOJ. Now it’s the other way around."

The lawsuit, which was led by California and New York and joined by Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia, and Wisconsin, contends that the merger will decrease competition and lead to an increase in prices.

Federal Communications Commission (FCC) Chairman Ajit Pai and two fellow Republicans at the FCC have given their blessing to the merger, but a formal vote still needs to be held. The deal cannot move forward without DOJ approval, and agency staffers are still reviewing the merger amid negotiations with T-Mobile US and Sprint for further concessions, according to media reports.

“The whole order is upside down in this merger,” Entner said. “If the DOJ approves it then we’re in completely new legal territory because that has never happened before.”

Anshel Sag, analyst at Moor Insights and Strategy, said the lawsuit could significantly jeopardize the merger. “If this lawsuit is allowed to stand in court and they have to actually deal with it, it will further delay the merger’s completion which could ultimately kill the deal.”

Obtaining further concessions from T-Mobile US and Sprint is important to the DOJ, and it has its own goals to pursue that don’t necessarily overlap with the concerns raised in the lawsuit, Sag explained. “Many people are questioning whether or not this new company can be held to account on the things it has agreed to do in order to make this merger happen.”

T-Mobile US has agreed to what it calls “verifiable, enforceable, and specific commitments” related to pricing, population coverage, and the sale of Boost Mobile, but most observers expect more concessions will be made. “The problem for state attorneys general is that in all mergers in the past, prices always went down,” Entner said.

When the merger was first announced in April 2018, Entner gave it a 90% chance of approval. Now his odds of approval are as low as 30%.

Sag has reached a similar conclusion following the latest legal challenge, putting chances for approval at 40%. “Every day I see the likelihood of this merger failing, which is a shame because I believe that the two companies together would be a more competitive carrier to Verizon and AT&T,” he wrote in response to questions.

“Ideologically it is a bad merger for consumers, but practically speaking the market has already been allowed to consolidate to a point where T-Mobile and Sprint are both at a disadvantage against AT&T and Verizon in their current form,” he explained.

“There is a lot of mind share and money going against this deal,” Sag concluded.