Hutchison to buy O2 for €14bn

Billionaire Li Ka-shing’s Hutchison Whampoa Ltd has agreed to buy O2, Telefonica’s wireless carrier in the UK, for £10.25bn (€14bn) as consolidation heats up in Britain’s phone market.

A definitive agreement was reached after the completion of due diligence, Telefonica said yesterday in a statement. The price consists of an initial payment of £9.25bn and an additional deferred payment of £1bn. The terms are similar to what the companies said when they first disclosed their plans in January.

The deal paves the way for Hutchison to merge its Three business with O2 to create a carrier with more than 30 million subscribers, Britain’s biggest, and reduce the number of competitors in the UK. Hong Kong-based Hutchison is betting on size to compete, taking on competitors which are adding services such as TV and internet access to lure customers.

With more wireless subscriptions than people, carriers in the UK are busy preparing for consolidation. In February, former UK phone monopoly BT Group Plc and EE Ltd agreed to a £12.5bn merger.

Pay-TV company Sky Plc struck a deal with O2 to resell its mobile service and offer bundled TV/mobile/broadband packages, while people familiar with the matter have said Vodafone Group is considering options including a combination with Liberty Global Plc.

The Hutchison deal comes as its 86-year-old chairman, Asia’s second-richest man, is overhauling a business empire spanning industries ranging from phones to retail. Li is in the process of merging his two biggest companies and spinning off their real estate assets into a separate company.