NEW YORK – Investors gave the thumbs up to AT&T's purchase of Deutsche Telekom's T-Mobile USA Monday, sending shares in both firms higher.

AT&T's share price was up 1.2 percent at the close, as traders welcomed the prospect of the firm becoming the largest US mobile phone company.

In Frankfurt, Deutsche Telekom stock traded up 11.3 percent at the close, outperforming the benchmark DAX 30.

The deal would enable AT&T to leapfrog Verizon as the biggest US cellphone provider, giving it 34 million more subscribers. After the deal, two out of five US mobile customers would be under its roof.

According to market researcher comScore, AT&T, Verizon, and T-Mobile USA, the fourth-ranked firm in the market, account for 70 percent of subscribers. Third-ranked Sprint has just 12 percent.

Sprint's shares sank 13.5 percent on Wall Street. The deal is a double whammy for the firm: Killing speculation it might merge with T-Mobile and creating a more powerful rival.

Verizon shares were up 1.7 percent.

The deal announced late Sunday would give Deutsche Telekom $25 billion in cash and $14 billion in AT&T shares, an eight-percent stake based on the US firm's current stock price. It would also receive a seat on the US giant's board.

But the transaction needs approval from US regulators, who might have concerns that it would leave the market dominated by too few operators, analysts said.

Consumer group Public Knowledge described the deal as "unthinkable."

"We know the results of arrangements like this -- higher prices, fewer choices, less innovation," said president Gigi Sohn.

Democratic Senator Jay Rockefeller, who chairs the Senate commerce committee, said watchdogs should "leave no stone unturned in determining what the impact of this combination is on the American people."

But Wall Street expressed confidence that the deal could pass, with some conditions.

"We think (AT&T) has a compelling case for regulatory approval given wireless competition and spectrum use, but some divestitures are likely," said Standard & Poor's Equity Research analyst Todd Rosenbluth recommending clients buy the stock.

Deutsche Telekom investors were delighted that the former monopoly was drawing its 11-year foray into the cut-throat US market to an end, allowing it to slash debt and free up funds for expansion elsewhere.

Its 40-billion-euro purchase in 2000 at the height of the dotcom boom of Voicestream, later re-branded T-Mobile USA, was a part of an ambitious expansion that left Deutsche Telekom saddled with huge debts.

For years T-Mobile USA was Telekom's main growth-driver. But in recent years it was seen as too small to compete without massive investments that the German firm was not prepared to make.

The market also liked the fact that alongside 13 billion euros being used to pay off debts, Deutsche Telekom would also be buying back five billion euros of its own stock on the open market.

Analysts at German bank Commerzbank upgraded Deutsche Telekom to "buy", saying they had long been "fans of a radical solution in the US."

WestLB also advised clients to snap up the stock, calling the sale price "excellent."

The bank's analyst Tarkan Cinar said it expected Deutsche Telekom to turn to growth markets in Eastern Europe, possibly including a bid to buy Telekom Srbija in Serbia.