Hutchison Whampoa and Telefónica to finalise £10.5bn O2 deal soon

Hong Kong billionaire Li Ka-Shing's Hutchison Whampoa and Spain's Telefónica are expected to finalise a deal over the sale of UK mobile carrier O2 as early as 24 March, the Financial Times reported, citing people familiar with the matter.

Hutchison will pay about £10.5bn (€14.4bn, $15.7bn) for O2, which will subsequently be merged with its existing UK mobile group, Three, to create Britain's largest mobile network with more than 31 million subscribers.

Hutchison Whampoa and Telefónica were in talks over the deal, and sources told FT the two companies encountered no major issues during the two months of due diligence.

However, one person cautioned that the merger had not been finalised and the timing could still slip.

Hutchison has spoken to sovereign wealth funds from Qatar, Singapore and Canada to help finance the deal, according to one person with the knowledge of the transaction. The company is looking to sell about 30% of the group, worth about £3bn, to outside investors.

The deal comes as the UK's mobile market has been going through a period of consolidation: BT, former owner of O2, reached a preliminary agreement to buy peer EE for £12.5bn in late 2014.

Telefónica, which is suffering from a huge debt burden, is looking to exit its UK operations. The company hired investment bank UBS Group AG to explore options for O2, including a share sale to the public.

Hutchison meanwhile, is looking to increase its footprint in Europe. It already has operations in the UK, Italy, Sweden, Denmark, Austria and Ireland through its subsidiary 3 Group Europe, which had sales of $4bn in the first half of 2014, a 3% rise from the previous year.