Hutchison expected to seal O2 deal in coming days

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Reports suggest Three-owner Hutchison Whampoa will finalise £10.25bn deal to buy O2 from Telefonica this week

The £10.25 billion purchase of O2 by Three-owner Hutchison Whampoa will be sealed in the next few days, according to reports in the Financial Times.

Hutchison has been in exclusive talks with O2 owner Telefonica since January about buying its UK assets in a move that would create the UK’s biggest mobile operator with around 34 million subscribers.

Quoting sources close to the deal, the FT said that the two companies had encountered no major issues during the two months of due diligence, and that a deal could be announced as early a today (March 24).

O2 is the UK’s second largest network (behind EE) with 24.47 million customers as of February. Three is fourth, behind Vodafone, with 10.29 million.

Telefonica has been looking to sell O2 as early as December, entering talks with BT about a potential sale before the broadband provider opted to buy rival EE in a £12.5 billion agreement.

In order to fund the deal, Hutchison is looking to sell around 30 per cent of the group to outside investors for around £3 billion.

Any agreement to merge O2 and Three would likely face close regulatory scrutiny as it would bring the number of mobile operators in the UK from four to three.

Similar consolidation in Ireland, where Three also bought O2, Germany and Austria has achieved approval, albeit with some concessions such as giving up spectrum in order to support new MVNOs.

The agreement will be Hutchison acquire O2 for more than £9 billion in cash, with a further £1 billion made to Telefonica in deferred payments.

“Subsequent to the announcement made by the company on 23 January 2015 on the potential acquisition of O2 UK, the company and Telefonica continue to be in exclusive negotiations on the definitive agreements for the transaction,” the Hong Kong-based firm said in a statement to the stock exchange.

O2 and parent company Telefonica declined to comment.

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