Telefonica, the owner of O2, will announce a merger with Mr Li's Hutchison Whampoa, which runs Three, on Friday morning, The Telegraph understands.
The deal will create Britain’s biggest mobile phone company with 32m customers, overtaking EE and Vodafone, with 27m and 20m respectively.
Telefonica and Hutchison Whampoa have held talks since BT ended discussions to buy O2 last month in order to make a £12.5bn move for EE.
It is believed that Telefonica and Hutchison Whampoa want to present their deal to competition authorities in Brussels at the same time as BT unveils its potential purchase in a bid to ease fears of a reduction in the number of UK operators. This would allow them to argue that BT is shaking up the industry and would ease fears of a reduction in the number of UK operators.
European authorities are likely to approve the O2 sale.