EU approves Telefonica's O2 bid

Telefonica sees 02 as a stepping stone to expanding its business

The European Union (EU) has approved Telefonica's £17.7bn ($31.6bn) takeover of UK mobile phone company O2 after the Spanish firm agreed competition terms.

The approval is conditional. In order for the deal to go through, Telefonica has agreed to withdraw from an international mobile phone alliance.

The watchdog was concerned that the takeover would distort roaming charges.

Telefonica wants to get a foothold in two of Europe's largest mobile phone markets - the UK and Germany.

The two firms are betting that O2's businesses in the UK, Germany and Ireland will dovetail well with Telefonica's operations in Latin America and Spain.

Telefonica has about 145 million customers and about 173,000 staff.

Regulators had been worried that if Telefonica remained in the alliance, 02 would also have become part of it, making the company less likely to accept roaming calls from firms that were not members.

Also in the roaming alliance are Deutsche Telecom, France Telecom and Telecom Italia.