The European Commission is to open an investigation into the proposed takeover of the O2 mobile phone network by competitor Three.

Authorities in Brussels say the takeover could reduce competition for mobile phone services.

It also says that 'virtual networks' like Tesco Mobile would also have fewer options when choosing a host network for their services.

The Commission has until the end of March next year to decide whether it will block the takeover.

Three Ireland says the decision to open the investigation "is not unexpected in the context of previous statements by the Commission that it would take a close look at in-country telecoms mergers and does not in any way prejudge the final outcome of the Commission’s review".

Three says it believes that the merger with O2 Ireland "will be good for both competition and consumers in Ireland and is confident that the merger will be approved by the Commission".

The firm says it expects to continue to work closely with the Commission to obtain clearance for the acquisition.