Fund Giants Dial Up £1bn O2 Mobile Stakes

Two of the world's biggest investment funds are close to snapping up £1bn stakes in the company that is poised to become Britain's leading mobile communications provider.

Sky News understands that the Canada Pension Plan Investment Board (CPP) and the Government Investment Corporation of Singapore (GIC) are in advanced discussions about acquiring minority shareholdings in the new holding company of O2 and Three.

The two fund giants could sign a provisional agreement to invest the money as early as this week, insiders said on Monday, although it is unclear whether there will be an announcement about their deal before the merger completes.

The combined group, which will be created if Hutchison Whampoa completes a planned takeover of O2 for £10.25bn, would have an enterprise value of approximately £15bn.

It would be the UK's biggest mobile telecoms operator by number of customers.

The new company would carry debts of roughly £6bn, and Hutchison has signalled that it will sell about 30% of the entity - worth in the region of £3bn - to institutional investors.

Sky News revealed in February that demand for the roughly £2.8bn of equity being sold had exceeded £5bn, with three or four purchasers likely to be selected.

Sovereign funds from Qatar and China have also expressed an interest in backing the tie-up of the two UK mobile networks.

The appetite from sovereign investors underlines the continuing interest in UK companies following the Qatari takeover of London's Canary Wharf business district and the recent acquisition of a 9.9% stake in British Airways' parent by Qatar Airways.

Hutchison Whampoa secured a period of exclusivity to negotiate a takeover of O2 with Telefonica, its Spanish parent, in January.

The deal is the second major transaction in the UK mobile sector in quick succession, with BT having announced a £12.5bn takeover of EE - currently the country's biggest network.

The mergers have sparked concerns about the prospect of higher charges for mobile phone customers, with Three's status in the market as a 'challenger' to its bigger rivals seen by analysts as unsustainable if its owner's takeover of O2 is completed.

The Competition and Markets Authority (CMA) has been lobbying the Government and European counterparts to argue that the takeover of O2 should be overseen by domestic regulators rather than by Brussels.

Earlier this year, Sky plc, the owner of Sky News, struck a deal with Telefonica UK to offer mobile voice and data services for the first time.

Like rivals BT, Vodafone and TalkTalk, the move will enable Sky to provide the 'quad-play' of fixed and mobile telecoms, broadband and pay-TV to its customers.

The O2 purchase is the latest in a series of takeovers led by Li Ka-shing, the Hutchison chairman who is Asia's wealthiest man and who has entrenched his position as the UK's biggest foreign direct investor.

In addition to 3, Mr Li's businesses own the high street retailer Superdrug, the container port at Felixstowe and the Eversholt rail company.

Telefonica had been in talks to sell O2 to BT before the British telecoms group decided instead to pursue talks with EE, which is jointly owned by Deutsche Telekom and France Telecom.

CPP declined to comment while GIC could not be reached.