AT&T Inc. said it was buying T-Mobile USA from Deutsche Telekom AG for $39 billion in cash and stock, a move that would create the nation’s largest wireless carrier and shift the competitive landscape of the U.S. industry.

In stitching together the second- and fourth-largest U.S. mobile carriers, AT&T is showing a fearless attitude toward U.S. regulators, who will be heavily scrutinizing what is the largest planned merger deal of 2011. T-Mobile has long been an antagonist to AT&T and chief rival Verizon Wireless, offering low prices that kept pressure on rates.

The carriers would be able to make an estimated $40 billion in cost cuts, AT&T said. The moves would probably involve thousands of job losses; AT&T employs 267,000 people, while T-Mobile USA employs about 38,000.

AT&T agreed to buy T-Mobile USA for $39 billion in cash and stock, in a deal that combines the No. 2 and No. 4 U.S. wireless carriers. WSJ’s Dennis Berman and Lauren Goode discuss whether the tie-up will pass regulatory scrutiny and who the winners and losers of the deal are.

AT&T plans to retire the T-Mobile name in the U.S., giving AT&T nearly 130 million customers. That is about a third more than the current market leader by revenue, Verizon Wireless, and more than twice as many as No. 3 Sprint Nextel Corp., which will have an even harder time competing. Deutsche Telekom will continue to use the T-Mobile name for operations in Europe.

The deal has been approved by the boards of both AT&T and Deutsche Telekom. If it goes through, Sprint could be forced to find a buyer of its own, potentially a big cable operator. Alternatively, it could bulk up, such as by acquiring a smaller carrier.

Sprint was critical of the deal, saying the industry would be “dominated overwhelmingly” by two companies that control almost 80% of the U.S. wireless contract market. The company says both AT&T and Verizon also own the ground infrastructure that other carriers rely on to deliver their wireless traffic around the country. The company plans on raising those concerns with the FCC and Justice Department, said Bill White, spokesman for Sprint.

AT&T customers have been disgruntled about the quality of the company’s network, especially for voice calls made over Apple Inc.’s iPhone.

In the months prior to the deal, T-Mobile pummeled AT&T in a marketing campaign claiming superiority of its wireless coverage over what it argued was AT&T’s overburdened network.

On Sunday, AT&T pitched the deal as a way to solve network congestion, by combining two operators using the same technology and alleviating a spectrum shortage that would keep T-Mobile from building a next-generation network.

AT&T also said the combination would mean better wireless broadband service in rural areas, a priority of the Obama administration, pledging to cover 95% of the population.

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