Telefónica has pulled the plug on the sale of its UK subsidiary following the failure of a proposed deal with rival Three and amid the UK's decision to leave the European Union.

The Spain-based operator released a regulatory filing that stated O2 UK’s operations would be “reclassified” into its next set of financial results.

According to the statement, Telefónica is continuing to explore “different strategic alternatives” that will be implemented “when market conditions are deemed appropriate”.

The statement read: “Telefónica informs that upon the publication of its 2016 first-half results, Telefónica’s operations in the UK will no longer be reported as discontinued operations within Telefónica Group and all its assets and liabilities will cease to be reported as “held for sale”, and will be reclassified back into full consolidation within Telefónica Group financial statements.”

The European Commission blocked the proposed £10.25 billion acquisition of O2 UK by CK Hutchison in May on competition grounds.

The Hong Kong-based owner of Three said it was considering a legal challenge amid criticism of the decision from across the industry.

Since then the UK’s financial markets have entered a period of huge volatility following the country’s decision to leave the EU.

The referendum has also led to political upheaval with the UK Prime Minister resigning and the opposition Labour party in turmoil as it bids to oust its leader.

[Read more: Telecoms industry regrets UK referendum result, but proclaims ‘business as usual’]

Telefónica said O2 UK remained “a leader” in customer satisfaction and brand recognition, with “very positive” financial results.

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