3 Mobile is in talks to buy O2

Hutchison Whampoa, which operates Irish mobile network 3, is in advanced talks to buy O2, four people with knowledge of the negotiations said.

An agreement may be struck before rival bidders are even due to pitch offers on July 5, according to three of the people, who asked not to be named as the talks are private.

Telefonica, which owns O2, is eager to secure an accord before it publishes interim results at the end of next month, the people said.

Telefonica, Europe’s most indebted telephone company, may raise more than €700m from the sale of its O2 Ireland unit.

The Madrid-based company has said it wants to cut its net debt to less than €47bn by year end from about €51.2bn.

European telecommunications firms areseeking to consolidate as growth in mobile-data usage slows and heavy regulation slices profits.

If Hutchison and Telefonica’s local units merge, Ireland would join Austria and Britain among countries that haverecently seen the number of mobile operators shrink.

Three Ireland, the third-largest operator in the country, failed in its €2bn bid last year for Eircom Group, Ireland’s largest phone company, when the latter was under court protection from its creditors.

Some €1.8bn, or 40%, of Eircom’s debt was written off during the process.

Three Ireland declined to comment.

Telefonica also declined to comment on anytalks.

The Spanish company is being advised by Bankof America and Barclays.

Other potential bidders — including Eircom Group and Liberty Global’s UPC Ireland — have also received information on the sale.

Telefonica continues to court the other suitors, having given them access to additional data in the past few days, following O2 management presentations in Dublin last week.

Officials at Eircom and Liberty Global declined to comment.