Several publications are citing anonymous sources saying that Sprint (S) and T-Mobile (TMUS) have agreed on the framework of a deal. Neither company has yet conducted due diligence, but an announcement about an acquisition could come sometime as late as August, the New York Times reports.

Sprint would pay roughly $40 in cash and stock for each T-Mobile share, which would represent a premium of about 17% over the target’s Wednesday closing price. The potential deal would leave T-Mobile’s current majority owner, Deutsche Telekom, with a roughly 20% stake in the combined company.

Reaction to the news in Germany, where Deutsche Telekom AG is based, was muted, suggesting that the deal was valued largely in line with market expectations.

Masayoshi Son, CEO of Softbank, Sprint’s majority owner, has made no secret of his plans to build a global mobile and Internet juggernaut. The Japanese company paid $21.6 billion for a controlling stake in Sprint last year, and it also holds a 34% stake in China’s Alibaba. The latter asset should be worth quite a bit after Alibaba goes public this year, an initial public offering that is expected to be the largest-ever market debut for a tech company.

A Sprint acquisition of T-Mobile would face a tough regulatory approval process. In 2011, an attempted $39 billion takeover of T-Mobile by AT&T (T) was blocked by the U.S. Justice Department on antitrust ground, for example.

The combined Sprint-T-Mobile would create a much larger mobile company to better compete with the top two company’s: Verizon and AT&T. It would also mean fewer choices for consumers, a point that may cause regulators to think twice.

(Update: An earlier version of this article incorrectly stated that a combined Sprint and T-Mobile would form a larger company than rivals Verizon and AT&T. The combined company would be smaller than Verizon and AT&T, but would be in a better position to compete with them. The story has been updated to reflect this correction.)