Li Ka-shing
Li Ka-shing

His firm, Hong Kong-based Hutchison Whampoa, already owns the Three mobile network, and combining it with O2 would create the UK?s biggest mobile group.

However, the move could face tough scrutiny from competition regulators.

It would reduce the number of major operators in the UK from four to three, which might not benefit consumers.

Li Ka-shing
Li Ka-shing

Further consolidation within the telecommunications industry is already on the cards, with BT Group in talks to by rival operator EE.

Competition issue

If a deal is agreed it would have to be approved by competition regulators in Brussels.

Currently the UK mobile market is dominated by O2, EE, Vodafone and Three.

However, Hutchison Whampoa group finance director, Frank Sixt, pointed to deals in other countries, including Ireland, which were given the green light and which also reduced the number of competitors in the market from four to three.

?The European Commission has taken a positive view of four-to-three consolidations of mobile in three cases now?and we believe that the precedents that they have set in those transactions will apply for this transaction,? he said.

Mark Newman, chief research officer at telecoms consultancy, Ovum, thinks there may still be grounds for concern.

?The big question we should be asking ourselves is whether the consolidation will result in prices going up,? he said.

?It?s worth looking at the Austrian market which has gone from five operators a few years ago to three today. It appears as though prices have gone up in the Austrian market.?

O2 said in a statement: ?Three is known for campaigning on behalf of its customers, much like O2.

?We are confident that an agreement will mutually benefit the customers of both companies, as well as drive better value, quality and investment in one of the most digitally competitive countries in the world.?

Spending spree

Hutchison said in a statement that the exclusive negotiations with Telefonica will take a period of several weeks.

?Shareholders and potential investors of the company should note that such negotiations may or may not result in any transaction, and accordingly are advised to exercise caution when dealing in the shares of the company,? it said in a filing to the Hong Kong stock exchange.

Hutchison shares jumped 4% on the announcement after they resumed trading in Hong Kong. They had been suspended on Friday morning pending the statement.

Mr Li has spent more than ?20bn on overseas acquisitions in recent years. Earlier this week, he agreed to buy the UK?s Eversholt Rail Group for ?1.1bn.

The 86-year old is also undertaking a major reorganisation of his business empire, which has interests in property, energy, ports and telecoms.

The conglomerates Cheung Kong Holdings and Hutchison Whampoa are both controlled by Mr Li. He plans to merge them and spin off their property assets into a new company, also to be listed in Hong Kong.

Source: BBC

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