AT&T announced Monday it plans to drop the $39 billion merger with T-Mobile, citing too much government opposition.

The agreement would have made AT&T the largest mobile phone company in the United States, potentially creating a duopoly with the second-largest carrier Verizon.

AT&T said in a statement Monday that it will enter a roaming agreement with Deutsche Telekom. According to the terms of the offer, AT&T must pay Deutsche Telekom a $3 billion breakup fee in cash, transfer radio spectrum to T-Mobile and strike a more favorable network-sharing agreement. Deutsche Telekom has valued the breakup package at as much as $7 billion.

The withdrawal came after FCC Chairman Julius Genachowski asked the commission on Nov. 22 to send the proposal to an agency judge for a hearing. The Department of Justice also opposed the deal, filing suit in September. The nation’s third-largest carrier, Sprint also joined the legal battle, suing to block the merger in concurrence with the Justice Department.