The deal would value Sprint shares at about $6.10 apiece-below their $6.50 close Friday in NY.
Under the terms being discussed, T-Mobile backer Deutsche Telekom would receive a 42 percent stake and 69 percent voting interest in the combined company, said the people, who asked not to be identified because the talks are private.
The sources also caution that negotiations between DT and Sprint majority owner SoftBank could break down at the last minute. T-Mobile shares rose 0.6 percent to $64.52, giving the company a market capitalization of $55 billion.
It was earlier this month when reports started to heat up again concerning a potential merge between T-Mobile and Sprint. Sprint pared some losses and was last trading down 8.3 percent. This isn't the first time we've heard this rumor, but latest claims say we could be getting an official announcement as soon as this Sunday.More news: Rask loses skate blade before Lightning goal in Game 1
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A tie-up between the companies, which operate the third- and fourth-biggest mobile networks in the United States, has been a possibility since 2013, when they first held merger talks.
Deutsche Telekom is the majority owner of T-Mobile, amassing an estimated 63 percent of the USA -based Magenta-clad carrier - while Japan's SoftBank Group owns 84.7 percent of Sprint, according to the report. Son soon after pursued a Sprint merger with T-Mobile, but the Obama administration made it clear that it wanted a US wireless market with four national players. But that deal faced an uphill battle with federal regulators and was eventually abandoned, leaving T-Mobile's future uncertain.
T-Mobile has grown rapidly due to the pricing and service innovation, while Sprint has been forced to adapt following a long period of decline. This signals USA regulators' growing concern about consumer prices. The deal would dramatically reduce competition in the wireless space by reducing the number of large carriers from four to three.
A bellwether could be the pending AT&T and Time Warner merger, Sharma said.