Goldman Sachs International, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Telefónica and no one else in connection with the matters described in this announcement and is not advising any other person and accordingly will not be responsible to any person other than Telefónica for providing the protections afforded to clients of Goldman Sachs International or for providing advice in relation to the matters described in this announcement.

Citigroup Global Markets Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Telefónica and no one else in connection with the matters described in this announcement and is not advising any other person and accordingly will not be responsible to any person other than Telefónica for providing the protections afforded to clients of Citigroup Global Markets Limited or for providing advice in relation to the matters described in this announcement.

JPMorgan Cazenove, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for O2 and no one else in connection with the matters described in this announcement and is not advising any other person and will not be responsible to any person other than O2 for providing the protections afforded to clients of JPMorgan Cazenove or for providing advice in relation to the matters described in this announcement.

Merrill Lynch is acting exclusively for O2 and no one else in connection with the matters described in this announcement and is not advising any other person and will not be responsible to any person other than O2 for providing the protections afforded to clients of Merrill Lynch or for providing advice in relation to the matters described in this announcement

The Offer will not be made, directly or indirectly, in or into, or by use of the mails of, or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facility of any securities exchange of, the United States, Canada, Australia or Japan and will not be capable of acceptance by any such use, means, instrumentality or facility or from within the United States, Canada, Australia or Japan. Accordingly, neither this announcement nor the Offer Documentation is being, and must not be, mailed or otherwise forwarded, transmitted, distributed or sent in, into or from the United States, Canada, Australia or Japan. Doing so may render invalid any purported acceptance of the Offer. All O2 Shareholders or other persons (including nominees, trustees or custodians) who would or otherwise intend to, or may have a contractual or legal obligation to, forward this announcement or the Offer Documentation to any jurisdiction outside the United Kingdom, should refrain from doing so and seek appropriate professional advice before taking any action.

The Offer will only be capable of acceptance by persons outside the United States. Offering materials with respect to this Offer will not be, and may not be, distributed in or sent to the United States and may not be used for the purpose of solicitation of an offer to purchase or sell any securities in the United States. Any tenders received from persons resident in the United States or with United States mailing addresses will be rejected.

The Loan Notes have not been and will not be registered under the United States Securities Act of 1933, as amended or under the securities laws of any state of the United States and are not and will not be registered under the securities laws of any other country. Therefore, the Loan Notes may not be offered, sold or delivered, directly or indirectly, in the United States. Holders of O2 Shares in the United States, Canada, Australia or Japan or any other overseas jurisdiction in respect of which the issue of Loan Notes to them would be unlawful will not be entitled to elect to receive Loan Notes.

Any person who, acting alone or acting together with any person(s) pursuant to an agreement or understanding (whether formal or informal) to acquire or control securities of O2, owns or controls or becomes the owner or controller, directly or indirectly, of one per cent. or more of any class of securities of O2 is generally required under the provisions of Rule 8 of the City Code to notify a Regulatory Information Service as specified in the Listing Rules and the Panel by not later than 12:00 noon (London time) on the London business day following the date of the transaction of every dealing in such securities during the offer period to the date on which the Offer becomes or is declared unconditional in all respects or lapses or is otherwise withdrawn (or if implemented by way of a scheme of arrangement to the date of the relevant Court Meeting or the date on which the scheme is withdrawn). Dealings by Telefónica or O2 or by their respective ’associates’ (as defined in the City Code) in any class of securities of O2 until the end of such offer period must also be disclosed. If you are in doubt as to the application of Rule 8 to you, please contact an independent financial adviser authorised under the Financial Services and Markets Act 2000, consult the Panel´s website at www.thetakeoverpanel.org.uk or contact the Panel on telephone number +4420 7638 0129; fax +4420 7236 7013. The above provisions reflect the disclosure requirements as at the date of this announcement. Revised disclosure requirements will apply with effect from 7 November 2005 which will require the public disclosure of dealing by persons interested in one per cent. or more of any class of relevant securities in O2. If in any doubt about the effect of the changes you should visit the Panel´s website for further details of the revised disclosure requirements.

This announcement contains statements that constitute forward looking statements in its general meaning and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to Telefónica. The forward–looking statements in this announcement can be identified, in some instances, by the use of words such as "expects", "anticipates", "intends", "believes", and similar language or the negative thereof or by forward–looking nature of discussions of strategy, plans or intentions.

Such forward–looking statements are not guarantees of future performance and involve risks and uncertainties and actual results may differ materially from those in the forward looking statements as a result of various factors.

The Offer, which will be made by Goldman Sachs International and Citigroup on behalf of Telefónica (or a wholly–owned subsidiary of Telefónica), will be subject to the following conditions:

1. valid acceptances being received (and not, where permitted, withdrawn) by not later than 3.00 pm on the first closing date of the Offer (or such later time(s) and/or date(s) as the offeror may, subject to the rules of the City Code, decide) in respect of not less than 90 per cent. (or such lesser percentage as the offeror may decide) in nominal value of O2 Shares to which the Offer relates, provided that this condition will not be satisfied unless the offeror (and/or any of its wholly–owned subsidiaries) shall have acquired, or agreed to acquire, whether pursuant to the Offer or otherwise, and whether directly or indirectly, O2 Shares carrying, in aggregate, more than 50 per cent. of the voting rights then normally exercisable at general meetings of O2.

For the purposes of this condition:

1. O2 Shares which have been unconditionally allotted shall be deemed to carry the voting rights they will carry upon being entered in the register of members of O2; and
2. the expression "O2 Shares to which the Offer relates" means (i) O2 Shares unconditionally allotted or issued on or before the date the Offer is made and (ii) O2 Shares unconditionally allotted or issued after that date but before the time at which the Offer ceases to be open for acceptance (or such earlier date, not being earlier than the date on which the Offer becomes unconditional as to acceptances or, if later, the first closing date of the Offer, as Telefónica may, subject to the City Code, decide) but excluding any issued O2 Shares which are held in treasury, except to the extent that they are transferred out of treasury whilst the Offer remains open for acceptance and any O2 Shares which, on the date the Offer is made, are held or (otherwise than under such a contract as is described in s.428(5) Companies Act 1985) contracted to be acquired by Telefónica and/or its associates (within the meaning of s.430E Companies Act 1985);

2. to the extent that the acquisition of all the O2 Shares by Telefónica constitutes a concentration with a Community dimension within the scope of Council Regulation (EC) 139/2004 (the "ECMR"):

1. the Commission of the European Communities (the "European Commission") adopting a decision under Article 6(1)(b) of the ECMR in terms satisfactory to Telefónica declaring such acquisition to be compatible with the common market; or
2. such acquisition being deemed to have been declared compatible with the common market pursuant to Article 10(6) of the ECMR; or
3. in the event that a request is made under Article 9(2) of the ECMR by a European Union state, the European Commission indicating, in terms satisfactory to Telefónica, that it does not intend to refer such acquisition or any aspect of it to the competent authorities of such state in accordance with Article 9 of the ECMR and no such referral being deemed to have been made pursuant to Article 9(5) of the ECMR;

3. the receipt of evidence in a form and substance satisfactory to Telefónica that, if required, all filings have been made and all the waiting periods relating to the Offer have expired or been terminated pursuant to the Hart–Scott–Rodino Antitrust Improvements Act of 1976 (as amended);
4. the waiting period under any other applicable anti–trust or competition laws of any other affected jurisdictions expiring, and all related consents, licences, registrations, or declarations of, or filings with, any competent authority in any such jurisdictions required to be obtained or made prior to the implementation of such acquisition having been obtained or made on a basis satisfactory to Telefónica;
5. no government or governmental or quasi–governmental authority (whether supranational, national, regional, local or otherwise) or statutory or regulatory or investigative body or other authority (including any anti–trust or merger control authority), court, tribunal, arbitrary body, trade agency, association, institution or professional or environmental body or (without prejudice to the generality of all the foregoing) any other person or body in any jurisdiction (each a "Relevant Authority") having decided to take, institute, implement or threaten any action, proceedings, suit, investigation, enquiry or reference, or made, proposed or enacted any statute, regulation, order, decision or judgment, or taken any other steps which would or might reasonably be expected to:

1. make the Offer, or its implementation, or the proposed acquisition of any O2 Shares by Telefónica or any of its subsidiaries, subsidiary undertakings, associated undertakings or any joint venture, partnership, firm or company in which any of them has a substantial interest (together, the "Wider Telefónica Group") or the subscription by, or allotment to, any member of the Wider Telefónica Group of O2 Shares or any matter arising therefrom or relating thereto, void, illegal or unenforceable under the laws of any relevant jurisdiction or otherwise, directly or indirectly, restrain, prohibit, restrict or delay the Offer, its implementation or such proposed acquisition by any member of the Wider Telefónica Group or any matter arising therefrom or relating thereto or impose additional conditions or obligations with respect thereto, or otherwise challenge or interfere therewith;
2. result in a delay in the ability of any member of the Wider Telefónica Group, or render any member of the Wider Telefónica Group unable, to acquire all or some of the O2 Shares or other securities in O2 or require, prevent or delay a divestiture by any member of the Wider Telefónica Group of any such shares or securities;
3. require, prevent or delay the divestiture or surrender by Telefónica or any member of the Wider Telefónica Group or by O2 or any of its respective subsidiaries, subsidiary undertakings, associated undertakings or any joint venture, partnership, firm or company in which any of them has a substantial interest (together, the "Wider O2 Group") of all or any material portion of their respective businesses, assets or properties; or of any consent, licence, permission or approval necessary to carry on their respective businesses or which would or might impose any material limitation on the ability of any of them to conduct all or any material portion of their respective businesses or own all or any material portion of their respective assets or properties;
4. impose any material limitation on the ability of Telefónica or any other member of the Wider Telefónica Group or of the Wider O2 Group to acquire, or to hold or exercise effectively, directly or indirectly, any rights of ownership in respect of shares or other securities (or the equivalent) in any member of the Wider O2 Group or to exercise management control over O2 or any other member of the O2 Group;
5. otherwise materially adversely affect the business or profits of any member of the Wider Telefónica Group or of the Wider O2 Group, the effect of which is material in the context of the Offer;
6. except pursuant to Part XIII A of the Companies Act, require any member of the Wider Telefónica Group or any member of the Wider O2 Group to acquire, or offer to acquire, any O2 Shares or other securities (or the equivalent) in any member of the Wider O2 Group owned by any third party;
7. result in any member of the Wider O2 Group ceasing to be able to carry on business under the name which it presently does so; or
8. result in any member of the Wider Telefónica Group having to dispose of any shares or other securities (or the equivalent) in any member of the Wider O2 Group or the Wider Telefónica Group, the effect of which is material in the context of the Offer.

and all applicable waiting and other time periods during which any Relevant Authority could decide to take, institute, implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or otherwise intervene having expired, lapsed or been terminated;

6. all necessary filings and applications in connection with the Offer or its implementation having been made, all appropriate waiting periods (including extensions thereof) in respect of the Offer or its implementation under any applicable legislation or regulations of any jurisdiction having expired, lapsed or been terminated and all authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals ("Authorisations") necessary or reasonably considered necessary or appropriate for or in respect of the Offer and the proposed acquisition of any O2 Shares or other securities in, or control of, O2 by the Wider Telefónica Group, or which are necessary for any member of the Wider O2 Group to carry on its business, having been obtained in terms and in a form satisfactory to Telefónica from all appropriate Relevant Authorities or other bodies with whom any member of the Wider Telefónica Group or the Wider O2 Group has entered into contractual arrangements in each case where the absence of such authorisation is material in the context of the Offer and all such Authorisations remaining in full force and effect at the time at which the Offer becomes otherwise unconditional and all appropriate waiting periods (including extensions thereof) under any applicable legislation and regulations of any jurisdiction having expired, lapsed or been terminated and no intimation or notice of an intention to revoke or not to renew any of the same having been received, and all necessary statutory or regulatory obligations in connection with the Offer and its implementation in any relevant jurisdiction having been complied with;
7. since 31 March 2005 and except as disclosed in O2´s annual report and accounts for the year then ended or as publicly announced by O2 prior to 31 October 2005 (by the delivery of an announcement to a Regulatory Information Service) (such information being "publicly announced") or as can reasonably be demonstrated to have been fairly disclosed to Telefónica prior to 31 October 2005 by or on behalf of O2 in the course of negotiations, there being no provision of any material arrangement, agreement, licence, permit, franchise or other instrument to which any member of the Wider O2 Group is a party or by or to which any such member or any of their assets is or are or may be bound, entitled or subject or any circumstance which, as a consequence of the making of the Offer or the acquisition or proposed acquisition by any member of the Wider Telefónica Group of some or all of the share capital or other securities in O2 or because of change in control or management of O2 or otherwise, could or might reasonably be expected to result in, in any case to an extent which is or would be material in the context of the O2 Group taken as a whole:

1. any monies borrowed by or other indebtedness (actual or contingent) of any member of the Wider O2 Group which is not already repayable on demand being or becoming repayable or being capable of being declared repayable immediately or prior to the stated maturity date or repayment date or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited;
2. the creation of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any member of the Wider O2 Group or any such security (whenever arising or having arisen) becoming enforceable;
3. any such arrangement, agreement, licence, permit, franchise or other instrument, or the rights, liabilities, obligations or interests or business of any member of the Wider O2 Group under any such arrangement, agreement, licence, permit franchise or other instrument, being terminated or adversely modified or adversely affected or any material action being taken or any material obligation arising thereunder;
4. otherwise than in the ordinary course of business, any assets or interest of any member of the Wider O2 Group being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged;
5. the interest or business of any member of the Wider Telefónica Group or the Wider O2 Group in or with any person, firm, company or body (or any arrangements relating to such interest or business) being terminated or adversely modified or affected;
6. any member of the Wider O2 Group ceasing to be able to carry on business under any name under which it presently does so; or
7. the value of, or the financial or trading position or prospects of, any member of the Wider O2 Group being prejudiced or adversely affected;

8. no member of the Wider O2 Group having since 31 March 2005 (except as disclosed in the annual report and accounts of O2 for the year then ended) and unless publicly announced or as can otherwise reasonably be demonstrated to have been fairly disclosed to Telefónica prior to 31 October 2005 by or on behalf of O2 in the course of negotiations:

1. issued, agreed or authorised or proposed the issue of additional shares of any class, or securities convertible into, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities (save as between O2 and its wholly owned subsidiaries and save for shares issued or options or other subscription rights granted under the O2 Share Option Schemes);
2. recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution other than the interim dividend 1.54 pence per O2 Share or to O2 or a wholly–owned subsidiary of O2;
3. other than a transaction between O2 and a wholly–owned subsidiary of O2 or between such wholly–owned subsidiaries merged with any body corporate or acquired or disposed of, or transferred, mortgaged or charged or created any security interest over, any assets or any right, title or interest in any asset (including shares and trade investments), or authorised, proposed or announced any intention to propose any merger, demerger, acquisition, disposal, transfer, mortgage, charge or security interest (other than in the ordinary course of business);
4. except as between O2 and its wholly–owned subsidiaries or between such wholly–owned subsidiaries issued, authorised or proposed the issue of any debentures or incurred or increased any indebtedness or contingent liability which in any case is material in the context of the O2 Group taken as a whole;
5. purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or redeemed or reduced or made any other change to any part of its share capital to an extent which (other than in the case of O2) is material in the context of the O2 Group taken as a whole;
6. entered into, or varied, or authorised, proposed or announced its intention to enter into or vary any contract, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise) which is of a long–term, onerous or unusual nature or magnitude, or which involves or is reasonably likely to involve an obligation of such nature or magnitude and which in any case is material in the context of the O2 Group taken as a whole;
7. except as between O2 and its wholly–owned subsidiaries or between such wholly–owned subsidiaries implemented, authorised, proposed or announced its intention to implement or enter into any reconstruction, amalgamation, commitment, scheme or other transaction or arrangement otherwise than in the ordinary course of business;
8. entered into or made an offer (which remains open for acceptance) to enter into or vary the terms of any service agreement or any other agreement or arrangement with any directors or senior executives or any connected person of any such person (within the meaning of s.346 Companies Act 1985);
9. waived or compromised any claim other than in the ordinary course of business which is material in the context of the O2 Group taken as a whole;
10. been unable, or admitted in writing that it is unable, to pay its debts or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally;
11. except as between O2 and its wholly–owned subsidiaries or between such wholly–owned subsidiaries made or authorised or proposed or announced an intention to propose any change in its share or loan capital;
12. entered into any contract, transaction or arrangement which is or is reasonably likely to be restrictive on the business of any member of the Wider Telefónica Group or the Wider O2 Group and which is material in the context of the O2 Group taken as a whole;
13. (save for O2) made any alteration to its Memorandum or Articles of Association or other incorporation documents which is material in the context of the Offer; or
14. entered into or made an offer (which remains open for acceptance) to enter into an agreement or commitment or passed any resolution or announced or made any proposal with respect to any of the transactions or events referred to in this sub–paragraph (H);

9. save as publicly announced prior to 31 October 2005 or as can otherwise reasonably be demonstrated to have been fairly disclosed to Telefónica prior to such date by or on behalf of O2 in the course of negotiations, since 31 March 2005:

1. there having been no adverse change, and no other circumstance having arisen which would or might be likely to result in any adverse change, in the business, assets, financial or trading position or profits or prospects of any member of the Wider O2 Group which in any case is material in the context of the O2 Group taken as a whole;
2. there not having been instituted or remaining outstanding any litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the Wider O2 Group is a party (whether as claimant or defendant or otherwise) and no such proceedings having been announced or threatened against any such member and no investigation by any government or governmental, quasi–governmental, supranational, statutory, regulatory or investigative body, authority or court (including, other than as a result of the Offer, any anti–trust or merger control authority) against or in respect of any such member or the business carried on by any such member having been threatened in writing, announced, instituted or remaining outstanding by, against or in respect of any such member which, in any case is material in the context of the O2 Group taken as a whole;
3. there having been no receiver, administrative receiver or other encumbrancer appointed over any of the assets of any member of the Wider O2 Group or any analogous proceedings or steps having taken place under the laws of any jurisdiction and there having been no petition presented or resolution passed for the administration of any member of the Wider O2 Group or any analogous proceedings or steps taken place under the laws of any jurisdiction; and
4. no contingent or other liability having arisen, become apparent or having been incurred which would or might reasonably be expected adversely to affect any member of the Wider O2 Group and which, in any case, is material in the context of the O2 Group taken as a whole;

10. Telefónica not having discovered prior to the date when the Offer would otherwise become unconditional that:

1. any financial, business or other information concerning O2 or the Wider O2 Group publicly disclosed at any time is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make the information contained therein not misleading and which was not corrected prior to 31 October 2005 by being publicly disclosed or fully and fairly disclosed in writing to Telefónica by or on behalf of O2 prior to such date; or
2. any member of the Wider O2 Group is subject to any liability, contingent or otherwise, existing at 31 March 2005, which is not disclosed or reflected in the audited accounts of O2 for the financial year ended on that date and which in any case, is material in the context of the O2 Group taken as a whole; and

11. Telefónica not having discovered other than as publicly disclosed prior to 31 October 2005 or otherwise fully and fairly disclosed in writing to Telefónica by or on behalf of O2 prior to such date, by or on behalf of O2 in the course of negotiations prior to the date when the Offer would otherwise become unconditional that:

1. any member of the Wider O2 Group has not complied with all applicable legislation and regulations of any jurisdiction, with regard to the disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health or otherwise relating to environmental matters, or that there has otherwise been any such disposal, discharge, spillage, leak, or emission (whether or not the same constituted a non–compliance by any person with any such legislation or regulations and wherever the same may have taken place) from any land or other asset now or previously owned, occupied or made use of by any past or present member of the Wider O2 Group which would be likely to give rise to any liability (whether actual or contingent) on the part of any member of the Wider O2 Group and which, in any case is material in the context of the O2 Group taken as a whole;
2. there is, or is reasonably expected to be, any liability (whether actual or contingent) to make good, repair, reinstate or clean up any property now or previously owned, occupied or made use of by any past or present member of the Wider O2 Group or in which any such member may now or previously had an interest under any environmental legislation, regulation, notice, circular or order of any Relevant Authority or third party or otherwise which is material in the context of the O2 Group taken as a whole; or
3. circumstances exist whereby a person or class of persons would be likely to have any claim or claims in respect of any product or process of manufacture or materials used therein now or previously manufactured, sold or carried out by any member of the Wider O2 Group which claim or claims would be likely materially and adversely to affect any member of the Wider O2 Group which is or would be material in the context of the O2 Group taken as a whole.

Subject to the requirements of the Panel, Telefónica reserves the right to waive, in whole or in part, all or any of conditions (B) to (K) inclusive. If Telefónica is required by the Panel to make an offer for O2 Shares under the provisions of Rule 9 of the City Code, Telefónica may make such alterations to the above conditions, including condition (A), as are necessary to comply with the provisions of that Rule.

The Offer will lapse if the European Commission initiates proceedings under Article 6(1)(c) of Council Regulation (EC) 139/2004 or, following a referral by the European Commission under Article 9 of such Regulation, the proposed acquisition of O2 by Telefónica, or any matter arising therefrom, is referred to the UK Competition Commission in either case before 3.00 pm on the first closing date of the Offer or the time and date when the Offer becomes declared unconditional as to acceptances, whichever is the later.

Conditions (B) to (K) inclusive must be fulfilled, determined by Telefónica to be or remain satisfied or (if capable of waiver) be waived by midnight on the twenty–first day after the later of the first closing date of the Offer and the date on which condition (A) is fulfilled (or in each case such later date as Telefónica may, with the consent of the Panel, decide) failing which the Offer will lapse. Telefónica shall be under no obligation to waive (if capable of waiver), to determine to be or remain satisfied or to treat as fulfilled any of conditions (B) to (K) (inclusive) by a date earlier than the latest date specified above for the fulfilment of that condition, notwithstanding that the other conditions of the Offer may at such earlier date have been waived or fulfilled and that there are, at such earlier date, not circumstances indicating that any condition may not be capable of fulfilment.

If the Offer lapses it will cease to be capable of further acceptance. O2 Shareholders who have accepted the Offer and Telefónica shall then cease to be bound by acceptances delivered on or before the date on which the Offer lapses.

The Offer will not be made, directly or indirectly, in or into, or by use of the mails, or by any means or instrumentality (including, without limitation, facsimile transmission, telephonically or electronically) or interstate or foreign commerce of, or any facilities of any securities exchange of, the United States, Canada, Australia or Japan and will not be acceptable by any such use, means, instrumentality or facility or from within the United States, Canada, Australia or Japan.

The Offer will be capable of acceptance only by persons outside the United States. Offering materials with respect to this Offer will not be, and may not be, distributed in or sent to the United States and may not be used for the purpose of solicitation of an offer to purchase or sell any securities in the United States. Any tenders received from persons resident in the United States or with United States mailing addresses will be rejected.

The Loan Notes have not been and will not be registered under the United States Securities Act of 1933, as amended or under the securities laws of any state of the United States and are not and will not be registered under the securities laws of any other country. Therefore, the Loan Notes may not be offered, sold or delivered, directly or indirectly, in the United States. O2 Shareholders in the United States, Canada, Australia or Japan or certain other overseas jurisdictions, including those, in respect of which the issue of Loan Notes to them would be unlawful.

The availability of the Offer to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Persons who are not resident in the United Kingdom should inform themselves about and observe any applicable requirements.

The acquisition contemplated by this announcement will be governed by English law and be subject to the jurisdiction of the English Courts and to the terms and conditions set out in this announcement and in the Offer Documentation.

Telefónica reserves the right to implement the acquisition of O2 Shares contemplated by the Offer by way of a Scheme of Arrangement under section 425 of the Companies Act. In such event, the Scheme of Arrangement will be implemented on the same terms (subject to appropriate amendments), so far as applicable, as those which would apply to the Offer. In particular, condition (A) will not apply and the Scheme of Arrangement will become subject to the following further conditions which are not intended to be capable of waiver:

The following definitions apply throughout this announcement, unless the context requires otherwise:

For the purposes of this announcement, "subsidiary", "subsidiary undertaking", "undertaking" and "associated undertaking" have the meanings given by the Act (but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A of the Act).

• The value placed by the Offer on the existing issued share capital of O2 is based on 8,766 million O2 Shares in issue on 28 October 2005, being the last dealing day prior to the date of this announcement. In addition, 142 million O2 shares were under option at 30 September 2005 (of which approximately 2.5 million were covered by existing issued O2 Shares), and have been taken into account (net of proceeds of notional option exercise at the Offer price) in determining the to be issued share capital of O2
• The closing middle market price for an O2 Share on 28 October 2005, being the last dealing day prior to the date of this announcement, is taken from the Official List
• The market capitalisation for Telefónica is based on 4,921.1 million Telefónica shares in issue and the closing price of EUR 13.62 on 28 October 2005, being the last dealing day prior to the date of this announcement
• Unless otherwise stated, the financial information relating to Telefónica is extracted from the audited consolidated financial statements of Telefónica for the relevant year
• Unless otherwise stated, the financial information relating to O2 is extracted from the audited consolidated financial statements of O2 for the relevant year in UK GAAP
• An exchange rate of EUR/GBP 1.47 has been used throughout this announcement

• Unless otherwise stated, the comparative statements regarding Telefónica´s current and prospective financial performance relative to its peers and its market position have been arrived at from information contained in recent brokers´ research reports

• Comparative statements regarding O2´s current and prospective financial performance relative to its competitors and its market position have been arrived at from the information contained in recent brokers´ research reports:

The offer referred to in this announcement is neither being made in the United States of America nor to U.S. persons. The offer may only be accepted by non-U.S. persons and by persons outside the U.S. Offering materials with respect to this offer are not being, and may not be, distributed in or sent to the U.S. and may not be used for the purpose of solicitation of an offer to purchase or sell any securities in the U.S. Any tenders received from persons resident in the U.S. or with U.S. mailing addresses will be rejected.