Telefonica to sell British unit to Hutchison for $15 bln -source

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MADRID, Jan 23 (Reuters) - Telefonica has agreed to sell its British unit O2 to Hutchison Whampoa Ltd in a deal valued at more than 10 billion pounds ($15 billion), a source with direct knowledge of the operation said on Thursday.

The agreement, first reported by the Financial Times and set to be announced on Friday, is the latest move toward telecoms consolidation in Britain, where the market is split between four mobile network operators and four separately owned fixed-line broadband providers.

In December, former state monopoly BT had entered exclusive talks with the owners of EE, Britain's biggest mobile operator.

BT had preferred EE over O2, which was acquired by Spain's Telefonica in early 2006 and is the country's second-largest mobile operator with about 22 million subscribers.

Sources had told Reuters that Hutchison (HKSE: 0013-OL.HK - news) , the owner of Britain's smallest mobile network Three, has been waiting in the wings to buy whichever group BT spurns.

Analysts have said other competitors, including Vodafone , Liberty Global (NasdaqGS: LBTYA - news) , Sky (Other OTC: BSYBF - news) and TalkTalk , may also have to review their strategy and consider potential moves.

Telefonica had said in November the British market was a core one for the company but it had set as higher priority to reduce its big debt pile and protect a fat dividend.

It also needed fresh cash to consider potential acquisitions in Brazil, its biggest market with its home country, where it is investing massively to build an optic fibre network.

($1 = 0.66661 pounds) (Reporting by Julien Toyer; Editing by Chris Reese and Lisa Shumaker)