EU blocks mega sale of Britain's O2 to Hutchison

The European Commission on Wednesday shot down Telefonica's blockbuster sale of British telecom giant O2 to Hong Kong group Hutchison on fears it would inflict higher prices on British consumers.

Hutchison is controlled by one of the richest men in Asia, Li Ka-shing, and his buyout of O2 from Spain's Telefonica for £10.25 billion (14 billion euros; $15.2 billion) would have created Britain's biggest mobile phone company.

"Today the commission has decided to block Hutchison's plan to takeover O2 in the UK," EU competition commissioner Margrethe Vestager told a news briefing in Brussels.

"Our investigations revealed significant competition concerns with this deal," she added. "It would very likely have led to higher prices and less choice for UK consumers."

The decision deals a major setback for telecom companies in Europe which have lobbied Brussels to relax anti-trust rules in order to help build world-beating telecom champions.

Vestager, the former Danish economy minister, has already grabbed headlines for taking on Internet giant Google over anti-trust violations on its search engine and Android mobile phone platform.

Hutchison in a statement said it was "deeply disappointed" by the decision.

"We will study the commission?s decision in detail and will be considering our options, including the possibility of a legal challenge," it added.

- 'No politics' -

The blow lands at an especially sensitive moment as it could intensify accusations in the UK of Brussels meddling in national affairs ahead of a June 23 referendum on whether Britain will remain in the EU.

But Vestager said her work remained outside politics.

There "is a lot of work that goes into this. We can not let politics interfere into this," she said, adding that the decision would have to stand up in court.

Hutchison owns operator Three and hoped to merge the company with O2.

The tie-up would have reduced the national market in Britain to three players from four, in a downsized landscape the EU believes hurts competition.

Last year, Scandinavian groups TeliaSonera and Telenor abandoned plans to merge their Danish mobile operations ahead of an almost-certain veto by the EU's anti-trust chief.

Hutchison and Telefonica's O2 in March offered concessions to push through the deal but the EU said these were insufficient.

Another Hutchison-owned unit in Italy is also the subject of an EU investigation, which would similarily reduce the national market to three actors.

But Vestager said the EU worked on a "case-by-case basis" and was not motivated by keeping national markets to any particular size.

"O2 will ideally still look for a buyer and Virgin Media who are owned by Liberty Global certainly could step in," said Imran Choudhary, an analyst at Kantar Worldpanel, a consumer research group.