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(Reuters) - T-Mobile US Inc and Sprint Corp said on Sunday they had agreed to a $26 billion all-stock deal and believed they could win over skeptical regulators because the merger would create thousands of jobs and help the United States beat China to creating the next generation mobile network.

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Smartphones with the logos of T-Mobile and Sprint are seen in this illustration taken September 19, 2017. REUTERS/Dado Ruvic/Illustration

The agreement caps four years of on- and off- talks between the third and fourth largest U.S. wireless carriers, setting the stage for the creation of a company with 127 million customers that will be a more formidable competitor to the No.1 and No.2 wireless players, Verizon Communications Inc and AT&T Inc.

U.S. regulators, which have challenged in court AT&T’s $85 billion deal to buy U.S. media company Time Warner Inc, are expected to grill Sprint and T-Mobile on how they will price their combined wireless offerings.

The merger will create the highest capacity network in the United States, lower prices, create jobs and improve service in rural areas, said John Legere, the current chief executive of T-Mobile and the new head of the proposed combined company.

The companies said the merger would allow them to accelerate upgrading their networks to accommodate the next generation 5G wireless technology, which is expected to have the speeds necessary to power drones and self-driving cars.

T-Mobile and Sprint said they expected to complete their deal no later than the first half of 2019, an ambitious goal given the intense U.S. regulatory scrutiny it will be subjected to. T-Mobile will not be liable to pay Sprint a breakup fee should regulators block the deal, according to sources who asked not to be identified because that detail in their contract

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