A $15 billion merger between Vodafone Australia and TPG has been given the green light, but the consumer watchdog says it will cause mobile data prices to rise.
The Australian Competition and Consumer Commission opposed the merger between the telecommunications companies in May last year on the grounds it would discourage competition in the market.
But Federal Court Justice John Middleton said the multi-billion dollar deal would not have that effect.
"To now leave Vodafone and TPG in its current state would not promote competition in the retail mobile market," he said in his judgment on Thursday.
"A merger would not now, and would not likely in the relevant future, substantially lessen competition in the supply of retail mobile services in Australia."
Instead he said the "rational and business-like solution" was for the companies to merge and be a "stronger competitive force" against giants Telstra and Optus.
"It is not for the ACCC or this court to engineer a competitive outcome," the judge said.
The ACCC will consider whether to appeal.
Vodafone chief executive Inaki Berroeta said all users, whether they be customers of Telstra, Optus, Vodafone or TPG, would benefit.
"The consumer in Australia wins with this decision," he said.
"We'll have a stronger player in the market with the ability to enter quickly the 5G market."
The ACCC has argued TPG was well-placed to become Australia's fourth player in mobile communications.
Instead, the merger will concentrate power among Optus, Telstra and Vodafone, the ACCC says.
However Mr Berroeta said competition was not just a matter of the number of competitors.
The ability to compete was also important, he said.
Vodafone has been building a 5G network and its first sites are due to offer service later this year.
The carrier will not work with TPG until the merger is clear of legal challenges.
Mr Berroeta said: "We will not do anything jointly until this thing is fully clear and we combine both companies.
"We do have standalone 5G plans and these are the plans we're working on."
He expected the iiNet, TPG and Vodafone brands would continue.
TPG executive chairman David Teoh was similarly upbeat following the court's decision.
"TPG is very pleased with the Federal Court decision and looks forward to combining with VHA to create Australia's newest fully integrated telecommunications operator," Mr Teoh said.
"We will work to finalise the other conditions to the merger as soon as possible."
The share prices of TPG and Vodafone Australia's joint owner Hutchison skyrocketed after their respective trading halts were lifted following the announcement.
Hutchison stock was 14.29 per cent higher at 16 cents in the final hour of trade on Thursday, having been as high as 18.5 cents after the halt, while TPG shares were up 10.88 per cent at $8.105.
ACCC chairman Rod Sims lamented the judgment as a "lost opportunity for lower prices for Australians".
He said it would further entrench the dominance of giants Optus and Telstra, as well as Vodafone.
"They will all want to keep prices in a way that suits the three of them," Mr Sims said.
He added the ACCC would continue to oppose mergers that it believed would lessen competition and it was successful in more than 80 per cent of cases.
"The future without a merger is uncertain. But we know that competition is lost when main incumbents acquire innovative new competitors," Mr Sims said.
Australian Associated Press