Hutchison Whampoa close to buying British mobile unit O2 for $15.7 bn

Hutchison Whampoa, controlled by Hong Kong billionaire Li-Ka Shing, is close to finalising a deal to buy British mobile unit O2 from Spanish telecom giant Telefonica SA for £10.5 billion ($15.7 billion), the Financial Times today reported.

The deal, which is the largest overseas acquisition by Hutchison, comes two years after it acquired Telefonica's O2 Irish business for €780 million ($1 billion). (See: Hutchison Whampoa acquires Telefonica's Irish business for €780 mn)

The two companies did not come across any major issues during the two months of due diligence, which should allow the deal to be announced as early as today, the report said.

Hutchison plans to rope in outside investors to help fund the deal and may sell about 30-per cent stake worth about £3 billion to outside investors, the report added.

Hong Kong-based Hutchison Whampoa, whose diverse businesses includes port, retail, property development, energy, infrastructure and telecommunication, had in January said that it was in exclusive talks to buy O2 for £9.25 billion ($13.84 billion) in cash, and an additional £1 billion in deferred payments if the merger of O2 with Hutchison's existing British carrier, Three, met cash-flow targets.

Three, which is 100-per cent owned by Hutchison Whampoa, operates 3G services in Ireland, the UK, Austria, Denmark, Hong Kong, Italy, Macau and Sweden.

British telecom giant BT Group Plc had said late last year that it was in talks to buy O2, but opted to buy EE mobile phone network in the UK from its joint venture partners Orange of France and Deutsche Telekom of Germany (See: BT raises £1 bn from investors to fund EE takeover).

O2, then known as Cellnet, was formed as a 60:40 joint venture in 1985 between BT and British telecom company Securicor. BT acquired Securicor's 40-per cent stake in Cellnet in 1999 and renamed it BT Cellnet and later to O2.

O2 runs 2G, 3G and 4G networks across the UK, as well as O2 Wifi and owns half of Tesco Mobile. It has over 450 retail stores, over 23 million customers and holds 26.2 per cent market share.