FT: Tycoon Li Ka-shing's Hutchison Whampoa Nears $15 Bln Deal To Buy U.K.'s O2

(RTTNews) - Spanish telecom operator Telefonica S.A. (TEF, TDE.L) is nearing a deal to sell its UK mobile business, Telefonica UK or O2, to Hong Kong billionaire Li Ka-shing's Hutchison Whampoa Ltd. (HUWHY, HUWHF) for about 10 billion British pounds or $15 billion, according to a report in the Financial Times on Thursday. The deal is expected to be announced as early as Friday morning.

Trading in shares of Hutchison Whampoa was suspended on Friday morning in Hong Kong due reportedly to the impending announcement of the deal. Hutchison is said to have announced a trading halt from 9:30 a.m. although some shares were traded in pre-market action.

The move will be the latest in a wave of consolidation sweeping through the European telecoms industry. Mobile and fixed-line operators are scrambling to join forces as bundled packages of television, broadband and calls have become popular with consumers.

The Sunday Times had reported on Sunday that Hutchison Whampoa was in early discussions with Telefonica to buy its O2. The report had pegged the value at as much as 9 billion pounds or $13.6 billion.

Telefonica has hired investment bank UBS AG to explore options for O2, while Hutchison has hired Moelis & Co to look for possible deals in the U.K., according to the Times.

The deal will see the combining of Britain's second-largest wireless provider O2 with Britain's fourth-largest wireless carrier Three UK, which has about 27 million subscribers and is owned by Hutchison. O2, which has about 22 million subscribers, was acquired by Spain's Telefonica in early 2006.

The combined entity will become the largest wireless carrier in the U.K. based on number of subscribers, topping the current market leader EE Ltd., which is in talks to be acquired by UK's biggest fixed-line operator BT Group plc (BT_A.L, BT). EE is jointly owned by Germany's Deutsche Telekom AG (DTEGY) and French telecom giant Orange SA (ORAN).

O2 was also said to have been in highly preliminary stage talks recently to be acquired by BT Group, which turned down a takeover of O2 and entered into exclusive talks in mid-December to acquire EE for 12.5 billion pounds, or $19.6 billion.

Despite saying in November that the British market was a core one for the company, Telefonica is eager to close the deal and use the proceeds to reduce its large debt pile. It is also looking to enlarge its presence in more core countries such as Brazil through acquisitions there.

TEF closed Thursday's regular trading session at $14.56, up $0.10 or 0.69% on a volume of 1.45 million shares.