News 

Rumours of a takeover surfaced recently, with Dutch operator KPN Mobile and Germany's Deutsche Telekom as well as the Spanish company circling the company.

The £17.7bn cash offer values shares in O2 at £2, well above yesterday's close of 164.25p. Shares in O2 are now trading at 206p after the news broke, a rise of more than a fifth.

The cash deal has been agreed by both boards and will allow O2 to continue under its brand. It will also retain its current management, although Sir David Arculus and Peter Erskine will

ADVERTISEMENT

join the Board of Directors of Telefónica. The deal is expected to complete in January next year.

For Telefónica, acquisition of O2 gives it beach heads in two of the most lucrative mobile markets in Europe, the UK and Germany.

The Chairman of Telefónica, César Alierta said: 'O2 is an excellent company ... Its integration in the Telefónica group will enhance our growth profile, it will allow us to gain economies of scale, it will open the group to the two largest European markets with sizeable critical mass and it will balance our exposure across business and regions.'

O2 was spun off from BT as a separate company in 2001. It closed its Dutch operations in April 2003 but retains networks in the UK, Germany and Ireland, as well as running networks for the mobile offerings of Tesco in the UK and Tchibo Mobilfunk in Germany. Its roughly 25m customers generated revenues of £6.7bn in its most recent fiscal year. Most recently, it has launched NTT DoCoMo's i-Mode data services into the UK.

Telefonica runs mobile and fixed line networks in Europe, Africa and Latin America with 145m customers.