The collapse of CK Hutchison’s proposed ￡10.5bn acquisition of UK mobile network O2

The collapse of CK Hutchison’s proposed ￡10.5bn acquisition of UK mobile network O2

deals a blow to the global ambitions of Hong Kong tycoon Li Ka-shing, who controls the conglomerate

CK Hutchison already has far reaching interests in the UK and across Europe, from ports and water supply investments to health and beauty retailer Watsons

But Europe’s competition commissioner on Wednesday blocked the conglomerate’s attempt to merge Telefónica’s O2 with its own British mobile business, Three

, on the grounds it would have cut the market from four companies to three

The intervention marks the latest defeat for Mr Li. Last year, the 87-year-old sought to merge two companies he controls, CK Infrastructure

The business empire underwent its largest-ever restructuring last year, spinning off infrastructure and property businesses

Assets such as telecoms and energy were injected into the flagship holding company, now called CK Hutchison, which was seen as giving greater focus on these parts of the business

Telecoms has been a major focus for Mr Li’s company in the past decade. The O2 deal would have significantly boosted its European business as it makes plans to merge its Italian business and eyes possible deals in Scandinavia. 2015

The ￡30bn deal spree, which includes the UK and Italy, but not possible deals in Denmark and Sweden, would have catapulted Hutchison into becoming Europe’s largest mobile-only operator. Canning Fok, co-managing director of CK Hutchison, told the Financial Times last year the deal would allow Hutchison “to compete with the giants”

Telecoms has become a major contributor to the conglomerate’s global income. Three’s income has expanded rapidly in recent years, growing about 70 per cent in 2015 to hit HK$1.5bn

Hutchison’s European businesses generated 56 per cent of it earnings before interest and tax in 2015 or about $4.5bn. Of that, the UK businesses constituted 37 per cent

The telecoms businesses, including operations in Italy, brought in a third of European earnings before interest and tax last year. O2

People familiar with Hutchison’s thinking have played down any wider impact from the O2 ruling on its other business interests in the UK

However, executives are angry at what they see as a blinkered view at the national telecoms regulator, Ofcom, which urged Brussels to reject the deal

The merger would have created the UK’s largest mobile provider. Had the deal gone through, Hutchison would have taken up to 40 per cent of the market. Now it is left with a market share of just 12 per cent. People familiar with the group’s thinking say it will seek a legal appeal to the decision

Moody’s Investors Services noted yesterday Three “exhibits increasing revenue, rising profitability and improving cash flow”, notching revenue growth of

6 per cent last year. Still, its position in the market, where it offers lower prices than dominant players, may become increasingly difficult to maintain

Hutchison’s mobile business suffers from a lack of crucial airwaves needed to connect mobile calls and provide wireless internet services

And prices are going up, according to Hutchison executives, as the conglomerate cannot afford to take on too many more customers given the constraints on their smaller network

Outside the UK, Hutchison will also worry about the precedent set for its other proposed deal, a ￠20bn plan to merge its Italian telecoms business with rival Wind. Fastweb, which is owned by Swisscom , is expected to be among potential partners for the deal