Telefonica plans to sell its Irish unit, O2, to Hong Kong-based Hutchison Whampoa for up to 850 million euros ($1.1 billion), the Spanish company said Monday.

The proposed transaction, which requires regulatory approval, calls for Hutchison Whampoa's Irish subsidiary, Three Ireland, to pay 780 million euros in cash up front and an additional 70 million euros later if specified financial targets are met.

Telefonica said the prospective deal would help it achieve its goal of reducing net debt to less than 47 million euros by the end of 2013.

The Spanish giant bought the 02 cellphone division - with operations in Britain, Ireland and Germany - from British Telecom in 2005.

Telefonica's Irish unit is Ireland's No. 2 cellphone service provider, with 31.6 percent of the market, while Three Ireland's market share is only 7 percent.

The combined company, to be called Three-02, would have 2 million clients, compared with 2.2 million for market leader Vodafone.

Ireland is home to 4.6 million people. EFE