AP source: Government blocks AT&T-T-Mobile merger

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WASHINGTON (AP) -- The Justice Department is blocking AT&T's $39 billion deal to buy T-Mobile USA, saying the acquisition of the No. 4 wireless carrier in the country by No. 2 AT&T would reduce competition and raise prices. That's according to a person familiar with the matter.

The person spoke on condition of anonymity because the agreement wasn't announced yet.

The deal has faced tough opposition from consumer groups and No. 3 carrier Sprint since it was announced in March.

AT&T could challenge the Justice Department's action in court.

A failure of the deal puts T-Mobile in a difficult position. It's struggling to compete with the larger carriers, and owner Deutsche Telekom AG has said it's not willing to invest more in the venture.