Sprint is abandoning its pursuit of T-Mobile, as the regulatory challenges of the deal are too steep, a source told CNBC on Tuesday. Inability to jointly bid on spectrum was the last straw in concluding that the deal would not receive regulatory approval, the source said. Sprint is expected to announce a new CEO in place of Dan Hesse on Wednesday. In early June, Japan's Softbank Corp., which controls Sprint, and Deutsche Telekom, which owns T-Mobile, agreed to a deal where Sprint would pay around $40 per share for T-Mobile. Analysts have voiced concerns about the regulatory challenges facing the companies since the deal was announced. The Federal Communications Commission and the Department of Justice have expressed a desire to have at least two more network operators competing against AT&T and Verizon. Earlier Tuesday sources told Reuters that French telecom firm Iliad was in talks with investors to improve its $33 per share bid for 56.6 percent of T-Mobile as it expects Deutsche Telekom to reject the offer. Sprint declined to comment when contacted by CNBC.