Sprint is working toward a possible bid for rival T-Mobile, people familiar with the matter said, setting the stage for a giant telecom merger that if permitted by regulators would leave the US wireless market dominated by three big companies.

Sprint, led by CEO Dan Hesse, is studying regulatory concerns and could launch a bid in the first half of next year. A deal could be worth more than $20 billion, depending on the size of any stake in T-Mobile that Sprint tries to buy.

A merger of the third- and fourth-largest US carriers would create a sizable competitor to industry leaders Verizon Wireless and AT&T.

But it would likely face tough opposition from antitrust officials, who worry consumers could suffer without a fourth national competitor to keep a check on prices.

T-Mobile shares rose 8.6 percent, to close at $27.64, marking the biggest one-day gain since October 2012. The stock has climbed 39 percent this year.