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Hutchison Whampoa buys O2 for £10bn

Hong Kong-based Hutchison Whampoa will become the UK's largest mobile phone operator after agreeing a deal to buy O2.

European phone operator Telefonica had been in talks with Hutchison Whampoa Ltd (HWL) for weeks, and tonight said it has reached an agreement to sell its British arm, O2, to the conglomerate for £10.25 billion.

Spain-based Telefonica said that the deal was reached after due diligence over O2 was completed. It added that the completion of the sale is subject to regulatory approval.

HWL already owns the Three network and in acquiring O2 will become the UK's biggest mobile operator ahead of EE, itself recently the subject of a takeover.

O2, formerly known as BT Cellnet, was spun off from BT in 2001 before being bought by Telefonica for £17.7 billion in 2005.

HWL will pay £9.25 billion initially, followed by an extra £1 billion when the operation meets a cash flow target.

Telefonica said it would use the proceeds of the sale to pay off debts.

Last month BT announced it had agreed terms for a £12.5 billion takeover of EE, having turned down regaining control of O2 .

The telecoms giant said it would swallow up EE in a cash and shares deal that it hopes to complete by the end of the summer should regulators give the all-clear .

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