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Sprint Corporation (S - Analyst Report) has abandoned its long-pending quest to take over rival T-Mobile U.S. Inc. (TMUS - Snapshot Report) over regulatory resistance. The Federal Communication Commission’s (FCC) attempt to prevent Sprint and T-Mobile from jointly bidding in the upcoming spectrum auction was the last nail in the coffin that has ended the months of negotiation between the two carriers, at least for the time being.    

The non-culmination of the deal will affect Sprint owner SoftBank Corp.’s attempt to form a new force within the U.S. telecom space that would be capable to take on runaway leaders AT&T Inc. (T - Analyst Report) and Verizon Communications Inc. (VZ - Analyst Report). Sprint’s stock nosedived more than 15% in after-hours trading on Tuesday on the NYSE.

Softbank’s hankering for the U.S. telecom sector is no secret. In July 2013, the company had acquired a 78% stake in Sprint for $21.6 billion after gaining shareholders’ approval and clearing all competition-related concerns expressed by the FCC.

Reportedly, Japanese telecom giant SoftBank was planning to buy stake in excess of 50% in T-Mobile from Deutsche Telekom for around $16 billion (1.7 trillion yen), thus valuing T-Mobile at around $32 billion. A successful amalgamation would have created a company with more than 100 million customers besides rendering SoftBank a solid foothold in the world’s largest economy.

However, the deal faced closed scrutiny from both the FCC and the U.S. Department of Justice (DOJ) in context of anti-competitive issues. The regulator seeks a minimum of four national carriers within the country as it will ensure sufficient choices for the customers. Softbank, on the other hand, argued that the combined entity would improve the quality of mobile services while also reducing prices for customers.  

Sprint’s backing out from the bid does not come as a surprise as initially in 2011, the FCC had rejected AT&T’s bid for T-Mobile U.S., stating that it wants at least four nationwide telecom operators to remain competitive.

However, scrapping of the said deal now throws light on French carrier Iliad SA’s recent $15 billion bid for a 56.6% stake of T-Mobile U.S. Although T-Mobile intends to turn down Iliad’s bid, the French carrier is currently negotiating with U.S. cable and satellite companies to improve on its previous offer.

DISH Network Corp. (DISH - Analyst Report) can come back into the fray, having earlier stated that it would be interested in T-Mobile if Softbank’s deal fell through. We believe Iliad and DISH Network have a higher chance of getting the FCC clearance as the number of telecom operators in the country will remain at four even if either of the two deals is materialized.

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