AP
Margrethe Vestager, the European Commissioner for Competition.
Hutchison agreed to acquire O2 a year ago and merge it with Three, its own UK business. The telco deal was valued at £10.5 billion.
The deal would have created the largest mobile operator in the UK and Hutchison argued that it was necessary to ensure there was a company that could compete with BT after it bought EE last year for £12.5 billion.
But Margrethe Vestager, the European Commissioner for Competition, has taken a more cynical view, saying it would reduce the number of major UK mobile operators from four to three.
She tweeted that the deal had been blocked in the interests of UK consumers on Wednesday, adding that it will ensure affordable prices and innovation.
Commission has decided to block Hutchison's plan to take over O2 in the UK. Why? To serve UK consumers - affordable prices and innovation.
- Margrethe Vestager (@vestager) May 11, 2016
The deal would have reduced the number of major operators in the UK from four (O2, Three, Vodafone and EE) down to three.
Matthew Howett, practice leader at analyst firm Ovum, highlighted in a statement on the company's website that the European Commission's decision was widely anticipated even though Hutchison had made a number of concessions designed to address competition concerns.
"Hostility from the national regulator (Ofcom) and competition authority (CMA) coupled with an unsympathetic EU Competition Commission always made this a tricky one to get through," wrote Howett. "Although an appeal of the decision is possible, Three and O2's attention should now turn to how they can best compete in the market against an enlarged BT/EE given the increasing propensity for convergence."
Any appeal by Hutchison or Telefonica would last around 12 months if fast-tracked, or two years if not, according to Matt Evans, antitrust partner at law firm Jones Day.