The FCC also granted Deutsche Telekom, which is partially owned by the German government, permission to buy PowerTel, a company that provides wireless access to about 1 million people in the southeastern United States.
The FCC let the merger proceed by a unanimous 4-0 vote despite strong opposition from legislators who objected to a foreign government-owned company competing in a market that officials have striven to deregulate for decades.
"U.S. consumers will benefit from the effects of the proposed merger, which will include the build-out and extension of VoiceStream's network," the FCC said in a statement. "U.S. consumers also will benefit from the resulting increase in competition in mobile services."
But lawmakers see things differently. "If we permit foreign state-owned companies into the U.S. market, we will be facilitating the entry of new players who don't participate on a level playing field," Senator Ernest Hollings, D-S.C., said in a statement.
Hollings plans to reintroduce legislation that would force foreign governments to sell by the end of this year any stake in U.S. phone carriers that constitute more than 25 percent. Upon completion of the merger, VoiceStream and PowerTel would become wholly owned subsidiaries of DT, with the German government owning 45 percent of the company, according to the FCC.
The FCC focused on competitive issues, specifically predatory pricing, in its deliberation and concluded that the newly formed company could not compete unfairly in the U.S. market.
"This item went under substantial evaluation to make sure we were serving the interests of U.S. consumers," an FCC official said during a conference call.
The merger, which is valued at more than $33 billion, has to pass a government committee that evaluates foreign owned mergers to gain final approval.