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Hutchinson in Talks with O2

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Reports have emerged in the mainstream media over the weekend that Hutchinson Whampoa, owners of Three in the UK, are in talks with Telefonica about a possible merge between O2 UK and Three.

The news comes after Telefonica failed to close a deal with BT for their UK mobile operation.

Three is currently the smallest mobile Group in the UK and has been linked with possible deals since news surfaced about BT’s intentions to re-enter the mobile market.

Telefonica has hired investment bank UBS to explore options for O2. The company, which is looking for ways to exit the U.K. to help pay off debts, may also consider selling shares of O2 to the public. Hutchison has hired Moelis & Co (MC) to look for possible deals in the U.K.

Hutchison Whampoa has a vast war chest which would be easily capable of striking a deal of this size after reorganising its business in Hong Kong recently. Canning Fok, Managing Director of Hutchison Whampoa, told journalists in Hong Kong that European telecoms consolidation was “a top priority” following the corporate restructure. Since the announcement analysts have said the UK would likely be near the top of its list and O2 the most obvious deal to pursue at this time.

Figures emerging regarding the deal has put the Chinese firm paying £9 billion for the UK outfit.

Doubts have already been aired that a deal will go ahead as Ofcom could block a deal which would see the number of UK operators fall from four to three.