UK’s second-largest mobile provider O2 is set to be bought by the owner of competitor Three for up to £10.25bn.
Hong Kong-based Hutchison Whampoa is in talks to buy the operator from Spain’s Telefonica, in a move which will create the UK’s biggest mobile group.
However, the deal has raised concerns about reduced competition as it would cut the number of major operators from four to three, which might be detrimental for consumers and prices.
Another telecommunications company, BT Group, is in talks to buy rival operator and current market leader EE. The former was the result of a merger between Orange and T-Mobile in 2009, leaving O2 in second place in the market domination, followed by Vodafone and Three.
Telefonica said in a statement: “This operation marks another step in Telefonica’s transformation process, initiated by the company to become a leading digital telecom and accelerate sustainable long-term growth while maintaining an attractive remuneration policy.”
“We are confident that an agreement will mutually benefit the customers of both companies, as well as drive better value, quality and investment in one of the most digitally competitive countries in the world,” added O2 UK on its website.
If a deal is signed it could face tough scrutiny from competition regulators in Brussels.
"This would be a significant change to the market and one that will need careful consideration by the competition authorities to ensure that consumers are protected from higher prices or poorer service,” said Richard Lloyd, executive director at Which?.
"Fewer players in an essential market like telecoms is rarely a good thing for consumers and competition, and both O2 and Three already have work to do to improve their customer satisfaction ratings."