Hutchison lines up network-sharing deals to smooth way for O2 takeover

© Reuters. Hutchison lines up network-sharing deals to smooth way for O2 takeover

By Foo Yun Chee and Paul Sandle

BRUSSELS/LONDON - CK Hutchison Holdings (HK:0001) has agreed to strike network-sharing deals with British pay TV company Sky (L:SKYB) and Virgin Media to head off EU regulatory concerns over its planned takeover of O2, three people familiar with the matter said.

The proposed 10.3 billion pound takeover would combine Hutchison's Three Mobile with Telefonica 's (MC:TEF) O2 to create Britain's biggest mobile operator and is seen as a test case for how tough European Competition Commissioner Margrethe Vestager will be towards telecoms consolidation.

Hutchison has moved to counter regulatory concerns by entering informal agreements to sell 20 percent of its enlarged UK network capacity to Sky and 10 percent to Liberty Global's (O:LBTYA) Virgin Media for ten years, the sources said on Thursday.

Cable company Virgin Media currently piggybacks on the EE network to provide its mobile service.

The sector was given a clue on Vestager's stance six months ago, when her tough demands scuppered a merger of TeliaSonera (ST:TLSN) and Telenor (OL:TEL) in Denmark.

Hutchison last month told the European Commission that it was prepared to sell 30 percent of capacity to one or several rivals to allay concerns that its deal would harm competition by reducing the number of UK network operators from four to three.

Companies typically have to gain regulatory clearance for buyers of their assets in return for merger approval.

Hutchison, Sky and Virgin Media declined to comment.

The European Commission is scheduled to give its decision on the O2 deal by May 19.