The deal would have combined O2 and Three, leaving the UK with just three mobile network operators.

The European Commission said the reduced competition in the market “would likely have resulted in higher prices for mobile services in the UK” and “less choice for consumers”.

Europe Commissioner in charge of competition policy, Margrethe Vestager, 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. The goal of EU merger control is to ensure that tie-ups do not weaken competition at the expense of consumers and businesses.

“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.”

The decision follows research by Ofcom  published in March which suggested that the cost of mobile phone contracts could increase by up to 20% if the merger of O2 and Three went ahead.

CK Hutchison said it was “deeply disappointed by the Commission’s decision” and is considering a legal challenge.

The UK currently has four mobile network operators: BT’s mobile business EE, Telefónica’s O2, Vodafone and Hutchison’s Three.