Li Ka Shing's Hutchison said to near $20 billion purchase of UK's mobile carrier O2

LONDON 9BLOOMBERG) - Hong Kong billionaire Li Ka Shing's Hutchison Whampoa is close to a deal to buy Telefonica's UK wireless carrier, O2, for more than £10 billion (S$20.10 billion), two people with knowledge of the matter said.

An agreement, which would create the country's largest mobile operator, could be announced as soon as Friday, the people said, asking not to be identified discussing private information. Together, O2 and Hutchison Whampoa's Three would have more than 31 million subscribers.

The UK is primed for more deals after wireless-market leader EE began exclusive talks last month to be acquired by BT Group, leaving smaller carriers looking for ways to compete. O2 had been in talks about a combination with BT, and was left out after the former U.K. phone monopoly chose EE.

Hong Kong-based Hutchison was studying other options in Europe including merging its Italian mobile unit with a local competitor, people familiar with the matter said this week, asking not to be identified because the deliberations are private.

Hutchison shares were suspended from trading on Friday (Jan 23) in Hong Kong.

The proceeds will help Telefonica reduce its net debt, which more than doubled in the decade through September as it went on a buying spree in Europe and Latin America. The £17.7 billion takeover of O2 in 2006 is its most expensive acquisition on record.

The Spanish carrier said in early 2014 that it would keep its debt below 43 billion euros (S$66 billion).

Europe's telecom industry is headed for further consolidation. A lighter regulatory stance toward consolidation and competition among wireless services may encourage deals in Italy, France, Spain and the Netherlands, according to Bloomberg Intelligence.

Mr Li, Asia's richest man, is reorganizing his empire, which ranges from Asian real estate to ports and telecommunications businesses across Europe. Earlier this month, he announced a US$24 billion (S$32 billion) proposal to merge his two main holdings companies - Cheung Kong Holdings and Hutchison Whampoa - and spin off the real estate business.

Less than two weeks later, Li companies announced they'll spend at least £1.03 billion to buy the UK's Eversholt Rail Group.

Mr Li, 86, may just be getting warmed up. On Jan. 9, his long-time deputy, Mr Canning Fok, signaledl that the Cheung Kong- Hutchison deal would provide more flexibility to invest in new businesses.