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Hong Kong tycoon and chairman of Hutchisn Whampoa Ltd., Li Ka-shing, right, and his son Victor Li, react during a press conference in Hong Kong Friday, Jan. 9, 2015.Vincent Yu/The Associated Press

Billionaire Li Ka-shing's Hutchison Whampoa Ltd. agreed to acquire Telefonica SA's O2 unit in the U.K. for more than $15-billion to create the country's biggest wireless provider by customers.

The £10.25-billion ($15.3-billion U.S.) price includes an initial sum of £9.25-billion in cash, with the remainder to be paid when certain financial targets are met, Telefonica said Tuesday. O2 said regulatory approval may take a year, while Madrid-based Telefonica said it expects the transaction to be completed by June 2016. A Hutchison representative confirmed the accord, reached after two months of exclusive talks.

The deal paves the way for Hutchison to merge its Three business with O2 – the carriers together have more than 30 million subscribers – in a move that would reduce the number of U.K. wireless networks to three from four. Hutchison is betting on size to compete, taking on rivals that are adding services such as TV and Internet access to lure customers.

"They can drive a lot of synergies," said James Britton, an analyst at Nomura Holdings Inc. in London. "Whether that really equips them to be fully competitive in a converged U.K. market remains to be seen."

With more wireless subscriptions than people, carriers in the U.K. have been busy preparing for consolidation. Last month, former phone monopoly BT Group Plc agreed to buy Deutsche Telekom AG and Orange SA's mobile venture EE Ltd. for £12.5-billion. BT had also held talks with O2.

Singapore, Canada Pay-TV provider Sky Plc struck a deal with O2 in January to resell its mobile service and offer bundled TV-mobile-broadband packages, while people familiar with the matter have said Vodafone Group Plc is considering options including a combination with cable billionaire John Malone's Liberty Global Plc.

Hutchison is selling 30 per cent of the enlarged business, a stake it values at as much as £3-billion, people familiar with the matter said, asking not to be named because the matter is private. Hutchison is in talks with investors including Singapore's GIC Pte and Canada Pension Plan Investment Board, and has also held discussions with potential partners including Qatar's sovereign-wealth fund, they said.

Li's Empire

The deal comes at a time when Li, Hutchison's 86-year-old chairman and Asia's second-richest man, is overhauling a business empire spanning across industries ranging from phones to infrastructure and retail. Li is merging his two biggest companies and spinning off their real estate assets into a separate unit by later this year.

That hasn't stopped Hutchison from pursuing other deals as Europe's telecommunications firms combine to gain more pricing power and amid sluggish economies that restrain the industry's growth. In Italy, the company is in talks to merge its local operations with those of VimpelCom Ltd., according to people familiar with the matter.

Revenue from telecommunications services in Europe will probably decline 1.5 per cent this year after falling 2.2 per cent last year, according to researcher Ovum. Besides mergers and acquisitions, carriers are pushing for more lenient regulation and introducing faster networks.

O2's sale will help Telefonica reduce its debt pile, which doubled in the past 10 years as the company expanded across Europe and Latin America. Telefonica in February reported net debt of €45-billion.

Telefonica agreed to sell its Irish unit to Hutchison for as much as €850-million in 2013.

Antitrust scrutiny

Telefonica and Hutchison's next hurdle would be getting the accord past regulators, who are keen to prevent price increases for customers in a market with fewer competitors. Frank Sixt, Hutchison's finance director, has said the deal's approval will probably rest with European authorities in Brussels, rather than U.K. officials.

The U.K.'s 83 million mobile customers paid about £15.63 a month on average for a mobile subscription in 2013, 49 pence less than a year earlier, according to a report by the Ofcom regulator. That compares with average monthly bills of about $70 in the U.S., according to GSMA Intelligence.

UBS Group AG advised Telefonica while Moelis & Co. and HSBC Holdings Plc worked with Hutchison.