Vodafone looks set to announce a mega-merger with rival Three in a move that will create the UK's largest mobile operator.

According to the This is Money website, the FTSE 100 telecoms giant and Three's Hong Kong owner CK Hutchison are in the final stages of a drawn-out negotiations to combine the latter with Vodafone's UK business.

A tie-up is expected to see Vodafone control 51% of the business, with Hutchison owning 49%. The announcement is expected tomorrow or early next week.

Analysts expect the new entity to be valued at around £15bn, slightly larger than BT, which owns the EE network.

The new operator will have around 28 million customers, more than EE and Virgin Media O2, which is co-owned by US telecoms giant Liberty Global and Spanish firm Telefonica.

The two sides are thought to have been in talks for around a year as they tried to finalise details around possible cost savings and streamlining.

Analysts have said a merger could transform Three, which has been struggling to compete against its larger rivals and failed to make headway from its position as Britain's fourth-largest mobile operator.

Any deal is likely to face intense scrutiny from regulators following a blocked takeover of O2 by Three in 2016.

Simon Gardner, sales manager of Stonehouse-based Lister Unified Communications, said: "From a UK point of view, it's been on the cards for quite a while now. The reason they want to consolidate is the cost of implementing and building the 5G network is a big drain on the networks and therefore they are looking at ways to consolidate and Vodafone have been talking with Three and they have finally got together.

"It will probably have to go to Ofcom and the Competition and Markets Authority because not so long ago O2 and Three were going to merge and it was thrown out. Ofcom has always been concerned for business customers that there will be less competition.

"Three has been predominantly a consumer network, winning on low cost, and Vodafone has been a 'traditional business network'. It will be quite interesting how they merge."