Sir Li Ka-shing GBM, KBE, JP Hong Kong business magnate in talks to buy O2 for £10bn

Hong Kong tycoon Li Ka-shing is worth an estimated £22bn according to Forbes

Asia's richest man Li Ka-shing is in talks to buy Britain's second-largest mobile provider O2 for up to £10.25bn ($15.4bn) from Spain's Telefonica.

His firm, Hong Kong-based Hutchison Whampoa, already owns the Three mobile network, and combining it with O2 would create the UK's biggest mobile group.

However, the move could face tough scrutiny from competition regulators.

It would reduce the number of major operators in the UK from four to three, which might not benefit consumers.

Further consolidation within the telecommunications industry is already on the cards, with BT Group in talks to by rival operator EE.

Competition issue

If a deal is agreed it would have to be approved by competition regulators in Brussels.

Currently the UK mobile market is dominated by O2, EE, Vodafone and Three.

However, Hutchison Whampoa group finance director, Frank Sixt, pointed to deals in other countries, including Ireland, which were given the green light and which also reduced the number of competitors in the market from four to three.

"The European Commission has taken a positive view of four-to-three consolidations of mobile in three cases now...and we believe that the precedents that they have set in those transactions will apply for this transaction," he said.

Mark Newman, chief research officer at telecoms consultancy, Ovum, thinks there may still be grounds for concern.

"The big question we should be asking ourselves is whether the consolidation will result in prices going up," he said.

"It's worth looking at the Austrian market which has gone from five operators a few years ago to three today. It appears as though prices have gone up in the Austrian market."

O2 said in a statement: "Three is known for campaigning on behalf of its customers, much like O2.

"We are confident that an agreement will mutually benefit the customers of both companies, as well as drive better value, quality and investment in one of the most digitally competitive countries in the world."