Telefónica poised to sell O2 to Hutchison Whampoa for £10 billion

Li Ka-shing’s Hutchison Whampoa has entered into exclusive talks to buy the British mobile business of Telefónica for £10.25bn, a move that would create the UK’s largest mobile group.

Hutchison confirmed that the two companies have entered “several weeks” of negotiations over the potential acquisition, although Frank Sixt, Hutchison’s finance director, said there was “still work to do” to reach a definitive agreement. The proposed deal would involve Hutchison paying £9.25 billion in cash and a further £1bn in deferred payments. Assuming regulatory approval, the tie-up would be completed around mid-2016. The merger would transform the British mobile market. Ofcom, the industry regulator, has long sought to maintain at least four competitors to keep prices low for consumers. Hutchison’s Three network, in particular, has been crucial in setting the lower end of pricing with cheap tariffs giving large bundles of data and calls.