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

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

The deal is expected to be announced as early as Tuesday morning, and could be completed in 2016 assuming no major regulatory problems are raised.

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.

Telefonica had entered into an exclusivity agreement with Hutchison Whampoa on January 23 for the sale of its UK mobile business. This allowed the companies to negotiate definitive agreements, while the necessary due diligence process on O2 UK is completed. The two companies have not reportedly encountered any major issues during the two months of due diligence.

Hutchison Whampoa is also reportedly concluding talks with sovereign wealth funds from Qatar, Singapore and Canada to help finance the deal.

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.

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 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 was acquired by UK's biggest fixed-line operator BT Group plc (BT_A.L, BT) in early February. EE was 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 Monday's regular trading session at $14.74, up $0.31 or 2.15% on a volume of 0.93 million shares.