The consolidation of Britain’s telecoms industry continues with the announcement that Hutchison will buy Telefónica’s UK unit. Hutchison Whampoa Ltd. is an investment holding company based in Hong Kong and is one of the largest companies listed on the Hong Kong Stock Exchange.

Telefónica’s British mobile unit, O2, will be bought for up to £10.25bn. The deal will make Hutchison the top mobile operator in Britain since it already owns the Three mobile network.

O2 UK is being valued at a similar rate to rival EE when plans for its takeover by BT were revealed just a few weeks ago. This latest deal will reduce the number of major operators in the UK to three. The wave of telecommunications mergers and acquisitions is a result of the growing range of services that these companies provide. However, lack of competition can result in rising costs for the consumer.

Investors have welcomed the news. Hutchison shares rose 3% in Hong Kong while Telefónica's shares gained 2.8% in Madrid. In a filing to the Hong Kong Stock Exchange, Hutchison said, "Shareholders and potential investors of the company should note that such negotiations may or may not result in any transaction, and accordingly are advised to exercise caution when dealing in the shares of the company."

Negotiations are expected to take a period of several weeks.

The purchase of O2 would be the largest overseas acquisition yet for Hutchison owner Li Ka-shing. The richest person in Asia, Li has spent more than £20bn on overseas acquisitions in recent years. Earlier this week he agreed to buy the UK's Eversholt Rail Group for £1.1bn.