Britain's competition watchdog has hit out at a probe by Brussels into Three's takeover of O2, claiming that the proposed deal could threaten choice in the UK's mobile phone market.

Hutchison, the owner of Three, agreed to buy rival operator O2 for £10.25bn last year but it has sparked an in-depth investigation by the European Commission, which has since issued a statement of objections stretching to hundreds of pages.

In response, Hutchison put forward deals worth £3bn to appease the regulator, including offering airwaves and mobile masts to Sky and Virgin Media. The Chinese company is also in talks with Tesco Mobile, which is interested in buying a stake in O2, the network it uses to provide its services.

However, the Competition and Markets Authority has said this latest deal falls "well short" of the remedies needed to prevent harming choice in the UK mobile market. It comes after the UK regulator failed in its attempts for the merger to be considered on home soil, rather than in Europe.

Both authorities are concerned that the deal leaves Britain's mobile market with only three mobile operators instead of four: Three-O2, EE, and Vodafone. A separate study by the telecoms regulator Ofcom found that prices are 10-20pc higher in markets with three operators.