'Hutchison may offer $13.6 billion for UK's O2'

Hutchison Whampoa Ltd, the conglomerate controlled by Hong Kong billionaire Li Ka-shing, is in early talks to bid for UK mobile operator O2, the Sunday Times reported, citing sources it didn't name.

Hutchison, which owns the Three mobile network in the UK, may pay O2's owner Telefonica SA as much as 9 billion pounds ($13.6 billion) for the carrier, the newspaper said.

Telefonica has hired investment bank UBS AG to explore options for O2, according to the Times. The company, which is looking for ways to exit the UK to help pay off debts, may also consider selling shares of O2 to the public. Hutchison has hired Moelis & Co to look for possible deals in the UK, the newspaper said.

The UK is primed for more deals as mobile operator EE holds talks to merge with BT Group Plc, the largest fixed-line company, leaving smaller carriers looking for ways to compete.

O2 had also been in talks about a combination with BT, and was left out after the former UK phone monopoly chose its bigger rival.

Li is consolidating his holdings, which range from Asian real estate to telecommunications businesses across Europe, and is making more acquisitions outside of his home market. He bought Telefonica's Irish unit for as much as 850 million euros ($980 million) to combine with Three Ireland.

Spokesmen for Hutchison and O2 didn't immediately respond to Bloomberg calls and e-mails seeking comment. A spokesman for Three referred questions to Hutchison. A spokesman for Telefonica declined to comment.

UBS and Moelis declined to comment to the Times.