Three buying O2 would have reduced the oligopoly from 4 to 3 which would have meant less competition and rising prices for end users. The various shenanigans in the UK mobile industry have shown that 4 is likely the magic number - enough operators to ensure some useful inkling of competition but not so many that they can't build viable networks with sensible coverage.
Lets not forget Three, as a new entrant, got the biggest 3G spectrum allocation back in 2000. Spectrum and coverage don't have the direct relation you imply - you also have to consider the number of cell sites. More smaller cell sites means the same spectrum can be reused more often which increases capacity but also increases costs.
Lets say CKH/LKS decided to chuck half that £10bn at improving an unmerged Three UK. £1bn would pay to move the call centres back to the UK for 10 years plus general customer service improvements. That reduces churn and means less spent on acquiring new customers. The remaining £4bn buys a LOT of new cell sites, increasing capacity through more spectrum reuse, filling in gaps etc. If it was spent through MBNL (and thus involved EE) it would go even further.
My point is if he has £10bn burning a hole in his pocket he should spend it on Three UK not on reducing what competition we have, as what's left only just keeps the four operators on their toes. If his numbers only stack up through a significant increase in his pricing power then perhaps he should sell Three UK to someone else that DOES want to invest in it.
PS - from what I hear from O2 users, it may have given them the coverage but it wouldn't have given them much more in the way of capacity and even if it did that would soon reduce when Three+O2 went through the inevitable cell site de-dupe operation that EE did when it integrated the Orange and T-Mobile networks. Let's also remember that BT were sniffing around O2, turned their nose up and went after EE instead. Says a lot about the quality of O2 TBH.