AT&T's quest to purchase T-Mobile USA keeps hitting roadblocks.

The Dallas-based company's plan to sell off some of its assets in order to gain regulatory approval for its $39 billion merger are falling flat, people close to the matter tell the Wall Street Journal. This could spell trouble for the merging parties as they try to convince regulators that a merger wouldn't concentrate too much power in the wireless industry.

News reports surfaced last month indicating that AT&T and T-Mobile were looking to sell assets to San Diego-based Leap Wireless. Lawyers involved in those discussions estimated a 60 percent to 70 percent chance of a successful sale.

However, the plan fell through over concerns that the asset sale wouldn't sway regulators, sources tell the Journal.

AT&T and T-Mobile announced the merger back in March. However, the plan attracted antitrust scrutiny almost immediately. The U.S. Department of Justice in August filed suit against the merger, arguing that the merger hinders competition in the wireless market. Carriers Sprint Nextel and C Spire Wireless have also filed suit against the merger.

The Federal Communications Commission in November called for an administrative hearing into the matter and slammed the merger as a plan that would raise consumer prices and limit service. AT&T and Germany-based Deutsche Telekom, the parent company of T-Mobile, have withdrawn their application for merger and plan to reapply following the Justice Department trial.

If the merger were called off, AT&T would have to pay a $4 billion breakup fee to Deutsche Telekom. The fee would include $3 billion in cash and $1 billion worth of wireless spectrum.

AT&T and Deutsche Telekom have also considered a joint venture that would pool network assets from the two wireless carriers in case the $39 billion merger falls through. It is unclear whether a breakup fee would be paid in this scenario.

Shares of AT&T are up 0.03 percent to $28.86 in late morning trading.