By Greg Roumeliotis and Arno Schuetze
(Reuters) - T-Mobile US Inc (O:TMUS) is close to agreeing tentative terms on a deal to merge with peer Sprint Corp (N:S), people familiar with the matter said on Friday, a major breakthrough in efforts to merge the third and fourth largest U.S. wireless carriers.
The development follows more than four months of on-and-off talks this year between T-Mobile and Sprint, and comes as the U.S. telecommunications sector seeks ways to tackle investments in 5G technology that will greatly enhance wireless data transfer speeds.
Japan's SoftBank Group Corp (T:9984), which controls Sprint, will own 40 to 50 percent of the combined company, while T-Mobile majority owner Deutsche Telekom (DE:DTEGn) will own a majority stake, two of the sources said.
Once terms are finalised, due diligence by the two companies will follow and a deal is expected by the end of October, though talks may still fall through, the sources said.
The deal would also face regulatory scrutiny over concerns that the U.S. wireless market is becoming too concentrated.
A successful merger would create a business with more than 130 million subscribers, just behind Verizon Communications Inc (N:VZ) and AT&T Inc (N:T). Revenues would top $70 billion (£51.66 billion) and, say analysts, there would be massive scope to cut costs.
Sprint shares jumped 5 percent in premarket trading in New York, while T-Mobile rose 1 percent.
The sources asked not to be identified because the negotiations are confidential. Sprint and Deutsche Telekom declined to comment. T-Mobile and SoftBank did not immediately respond to requests for comment.
T-Mobile has a market capitalization of $52 billion, while Sprint has market capitalization of $32 billion.
SoftBank founder Masayoshi Son abandoned an earlier attempt to acquire T-Mobile for Sprint in 2014 amid opposition from anti-trust regulators concerned that consumers could lose out.
That deal would have put SoftBank in control of the merged company, with Deutsche Telekom becoming a minority shareholder.
Since then, T-Mobile has outperformed Sprint under Chief Executive John Legere, who the sources said would lead the combined company.
Last month, Sprint’s Chief Executive Marcelo Claure said an announcement on merger talks should come in the “near future.”
Earlier this year, Sprint approached cable company Charter Communications Inc (O:CHTR) about a potential merger, but it quickly abandoned that effort.