O2 sold to Three
Telefonica sells O2 network to Three owner Hutchison Whampoa for £10.25bnReuters

Spanish telecoms giant Telefonica has reached an agreement to sell the O2 mobile network to Hutchison Whampoa, the Chinese owner of Three, for £10.25bn ($15.23bn).

Once the takeover is complete, O2 will be merged with Hutchison's existing Three network to create Britain's largest mobile network, with more than 31 million subscribers. Hutchison Whampoa entered exclusive talks to buy O2 in January.

The selling price is made up of an initial payment of £9.25bn in cash, followed by up to £1bn later if the combined network resulting from merging O2 and Three meets cashflow targets, the Wall Street Journal reports. The buyout marks Hutchison's largest shareholder, Hong Kong billionaire Li Ka-shing's, biggest overseas acquisition to date.

A deadline for regulatory approval has been set at 30 June 2016, although this could be pushed back to September that year.

Ronan Dunne, chief executive of Telefonica UK, said the deal will create "the most customer-centric mobile operator in the UK".

The move comes during a time of major change for the UK mobile market. BT, former owner of O2, reached a preliminary agreement to buy the EE network - formerly T-Mobile and Orange - for £12.5bn in late 2014.

Telefonica, which is suffering from a huge debt burden, is looking to exit its UK operations. The company hired investment bank UBS Group AG to explore options for O2, including a share sale to the public.

Meanwhile, Hutchison is looking to increase its footprint in Europe. It already has operations in the UK, Italy, Sweden, Denmark, Austria and Ireland through its subsidiary, 3 Group Europe, which had sales of $4bn in the first half of 2014, a 3% rise from the previous year.