The European Commission has blocked the proposed acquisition of O2 by Three in the UK, leaving CK Hutchison to consider the possibility of mounting a legal challenge.

Brussels said the £10.25 billion deal, first announced in March last year, would have reduced choice, raised prices and harmed innovation.

Three’s parent CK Hutchison has made a number of concessions over the past few months amid opposition to the deal.

However, the Commission said the proposed remedies did not resolve the structural problems created by the disruption to the current network sharing agreements in the UK, were not capable of replacing the weakened competition and raised significant uncertainty as regards their effective implementation and monitoring.

Commissioner Margrethe Vestager, in charge of competition policy, said: “We want the mobile telecoms sector to be competitive, so that consumers can enjoy innovative mobile services at fair prices and high network quality. 

“Allowing Hutchison to takeover O2 at the terms they proposed would have been bad for UK consumers and bad for the UK mobile sector.

“We had strong concerns that consumers would have had less choice finding a mobile package that suits their needs and paid more than without the deal.

“It would also have hampered innovation and the development of network infrastructure in the UK, which is a serious concern especially for fast moving markets.

“The remedies offered by Hutchison were not sufficient to prevent this."

In response, CK Hutchison said it was “deeply disappointed” with the decision and was considering its options, including a legal challenge.

“We strongly believe that the merger would have brought major benefits to the UK, not only by unlocking £10 billion of private sector investment in the UK’s digital infrastructure but also by addressing the country’s coverage issues, enhancing network capacity, speeds and price competition for consumers and businesses across the country and dealing with the competition issues arising from the current significant imbalance in spectrum ownership between the UK’s MNOs,” the statement read.

The company is also awaiting a decision on its proposed acquisition of Wind in Italy.

[Read more: Telefónica has several options if the O2-Three UK deal fails]

O2 UK Chief Executive Ronan Dunne tweeted: "At @O2 our customers are our priority and we will continue to differentiate, compete fiercely and remain successful long into the future."

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