Three has bought Telefonica's Irish arm - the mobile operator O2 - for €780m.

The combined firms will control almost 40% of the Irish mobile phone market and have 2 million active users. The two companies had combined revenues of €803m in 2012 last year.

Another payment of €70m could be paid for O2 if agreed financial targets are met.

The deal will need to be cleared by the European competition authorities.

Three is part of the global giant Hutchison Whampoa and was launched in Ireland in 2005. It said it has invested over €800m in building its Irish network.

O2 has a 28% market share in Ireland, while Three - having grown its sales by 78% in the last two years - now has 9% of the Irish market.

Last year Three failed in its €2 billion bid for rival Eircom, which was under court protection from creditors at the time.

The Spanish firm Telefonica is selling O2 Ireland as part of an attempt to cut €4.2 billion from its €51.2 billion debt pile by the end of 2013. At the same time, Hutchison Whampoa is pushing to consolidate telecoms assets in Europe.

In a statement, Three said it is now positioned to become the number one operator in the Irish market.

It has over 50 stores in Ireland, while O2 has almost 70 stores nationwide.

''This deal will allow significant investment to be made in building a state of the art network,'' commented Three's chief executive Robert Finnegan.

''The combined network will also deliver very real benefits to customers outside the major urban areas as the increased scale will allow Three to extend its rural network investment programme beyond 201,'' he added.

Mr Finnegan also said that Three will be the brand to ultimately take over from O2, with O2 being phased out over two years.

On jobs at O2, he said the firms are at the very early stages of planning. Approval could take anything from six to nine months, so for now it is business as usual for the two firms, he added.

Three customers experienced disruption to services today

With unfortunate timing, Three's networks for mobile calls, texting and internet services all suffered a nationwide failure shortly after its proposed O2 Ireland takeover was announced.

Tens of thousands of Three customers were forced to roam services on to O2 or Vodafone signals. Three's system breakdown lasted more than four hours.

The company said this was its first such national service failure since 2005. It blamed a "transmission link failure" by its business partner Virgin Media.