Li Ka-shing, chairman of CK Hutchison Holdings Ltd, speaks during a news conference in Hong Kong on March 17. Photo: CFP

The European Commission is set to deny a proposed merger between CK Hutchison Holdings Ltd (CKHH) and British mobile operator O2, and experts said on Wednesday the move sends a warning signal to Chinese enterprises to carefully study local monopoly laws and regulations before seeking to enter the EU market via a merger.

According to The Wall Street Journal, 28 EU commissioners are set to approve the denial decision made by the European Commission at a weekly meeting, preventing CKHH from buying O2, an affiliate of Spain-based Telefonica Europe Plc, for around $14 billion.

The Wall Street Journal report on Tuesday cited two people familiar with the matter. They said the companies failed to address regulator's concerns the deal would lead to higher prices and less choice for UK consumers.

CKHH owns Hutchison 3G UK Ltd (Three), a mobile network operator (MNO) in the UK. O2 UK is active as an MNO in the UK, offering mobile communications services.

The merger, proposed in 2015, would have created the biggest mobile operator in the country if completed.

"On the whole, the reasons for rejection are somewhat farfetched," Li Xiaogang, director of the Foreign Investment Research Center at the Shanghai Academy of Social Sciences, told the Global Times on Wednesday. "There would be still three major operators in the UK market after the merger, making it difficult to manipulate market prices."

"Whether the merger case will be approved or not will be determined by the degree of market concentration, since the EU has very strict and detailed rules about the extent of monopolization for different industries," said He Weiwen, co-director of the China-US/EU Study Center at the China Association of International Trade.

The merger was also opposed by authorities in the UK, where the proposed deal was to have taken place.

The Competition and Markets Authority urged in a letter sent on April 11 to the European Commission to prevent the merger, saying the transaction threatens to significantly affect competition in the UK retail mobile and wholesale mobile markets, according to the gov.uk website.

But Li, the director in Shanghai, noted that the merger could also bring many benefits, including better services for UK consumers, strengthening the UK mobile infrastructure and boosting local employment.

Li said if the merger is ultimately denied, it won't have much to do with the China factor. It's "mostly due to the market factor."

Some market analysts said the denial shows that EU regulators are taking a tougher approach toward consolidation in the telecom industry.

He, the co-director, suggested Chinese enterprises must carefully study relevant local monopoly laws and regulations before they execute M&A transactions in EU countries.