The European commission is likely to block Telefonica’s sale of the British telecom business O2 to Hutchison group in Hong Kong due to fears it would inflict higher prices on British consumers, a source told AFP on Wednesday.



“We expect the European competition commissioner, Margrethe Vestager, to block the sale,” said a source close to the matter, indicating that a decision was expected this month.

A spokesman for the commission declined to comment, saying only that the EU’s executive branch has until 19 May to make a ruling.

Hutchison is controlled by one of the richest men in Asia, Li Ka-shing, and his buyout of O2 from Spain’s Telefonica for £10.25bn would create Britain’s biggest mobile phone company.

In case of approval of the deal by Brussels, it would be especially sensitive as it could revive accusations in the UK of meddling by the EU before a 23 June referendum on whether Britain will remain in the bloc.

It would also be a major setback for telecom companies in Europe, which have lobbied Brussels to relax anti-monopoly rules.

The deal would reduce the national market in Britain to three players from four, which the EU believes would hurt competition. Hutchison owns Three and hopes to merge the company with O2.

Last year, Scandinavian groups TeliaSonera and Telenor abandoned plans to merge their Danish mobile operations before an anticipated veto by the EU’s competition commissioner.

Vestager, the former Danish economy minister, has already grabbed headlines for taking on Google about anti-competition issues on its search engine and the Android mobile phone platform.

In March Hutchison and Telefonica offered concessions to push through the deal. Telefoncia’s debt stood at €50.2bn at the end of March and the company is hoping the deal would shore up its finances after years of spending billions of euros in acquisitions and capital investments.

“We think that the strictly legal analysis will justify a clear decision,” Telefonica’s CEO, José María Álvarez-Pallete López, said last week when the company presented its first quarter results. “But a negative decision cannot be disregarded, probably due to political reasons especially in the context of Brexit, which is basically contaminating all debates, and also the strong opposition shown by the national regulatory authorities,” he added.

If the sale of O2 foundered, the company would find other solutions, including new buyers for the company, he said.

Shares in Telefonica closed down 1.58% at €9.10.