Hutchison Whampoa Limited (SEHK:13), investment vehicle of Li Ka-shing is said to be in early talks with Telefónica, S.A. (BUSE:TELEFONICA) to bid for Telefónica UK Limited. Any deal between O2 and Hutchison Whampoa could cause regulatory concerns for the UK industry watchdog Ofcom. Hutchison, which owns the Three mobile network in the U.K., may pay O2's owner Telefonica S.A. as much as £9 billion.

Telefonica has hired investment bank UBS AG to explore options for O2, according to the Times. Hutchison has hired Moelis & Co. to look for possible deals in the U.K., the newspaper said.

Telefónica and Hutchison declined to comment.