Telefónica Acquires UK Mobile Operator O2

The combination with O2 is a logical step for Telefónica in pursuing its strategic goal of providing its shareholders with both growth and cash returns. Telefónica believes that the combination with O2 will :

accelerate Telefónica’s superior growth profile relative to its peers provide enhanced scale by entering two of Europe’s largest markets, Germany and the UK, with critical mass balance Telefónica’s portfolio across businesses and regions generate an estimated run-rate of EUR 293 million (£199 million) of quantified annual operating cost and capital expenditure synergies by 2008 be immediately accretive to earnings per share, cash earnings per share and free cash flow per share1

enable Telefónica to preserve its stated shareholder remuneration policy based on dividends and share buy backs.

telephonica.doc

http://www.3g.co.uk/PR/Nov2005/2135.htm