Offer Update

Telefonica SA
03 January 2006



   Not for release, publication or distribution in or into the United States,
                           Canada, Australia or Japan

3 January 2006

                             RECOMMENDED CASH OFFER

                                       BY

                          GOLDMAN SACHS INTERNATIONAL

                                      AND

                        CITIGROUP GLOBAL MARKETS LIMITED

                                  ON BEHALF OF

                              TELEFONICA, S.A.

                                      FOR

                                     O2 PLC



Offer Declared Unconditional as to Acceptances

Telefonica announces that as at 12 noon (London time) on 2 January 2006 valid
acceptances had been received in respect of a total of 5,501,443,814 O2 Shares,
representing approximately 62.72 per cent. of O2's issued share capital.  (Of
these valid acceptances, valid elections for the Loan Note Alternative had been
received in respect of a total of 79,181,421 O2 Shares, representing
approximately 0.9 per cent. of O2's issued share capital.)  None of these
acceptances were received from persons acting in concert with Telefonica. The
Offer has been declared unconditional as to acceptances. The Offer remains open
for acceptance until the next closing date which is hereby extended from 1.00
p.m. (London time) on 12 January 2006 to 1.00 p.m. (London time) on 20 January
2006.

The Offer remains subject to the conditions set out in paragraphs 2 to 11 of
Part A of Appendix I to the Offer Document.

On 31 October 2005 Telefonica announced that it had received irrevocable
undertakings to accept the Offer in respect of a total of 2,820,701 O2 Shares,
representing approximately 0.032 per cent. of O2's issued share capital. On 13
December 2005 Telefonica announced that valid acceptances have been received in
respect of all of these O2 Shares.

As a result of purchases, Telefonica holds 435,606,107 O2 Shares representing
approximately 4.97 per cent. of O2's issued share capital. Prior to making the
Offer, Casiopea Reaseguradora, S.A., a wholly-owned subsidiary of Telefonica and
deemed to be acting in concert with Telefonica, held 14,422 O2 Shares,
representing 0.0002 per cent. of O2's issued share capital (which are not
included in the paragraph below).

Accordingly, as at 12 noon (London time) on 2 January 2006, Telefonica and its
wholly-owned subsidiaries owned or had received valid acceptances in respect of
a total of 5,937,049,921 O2 Shares, representing approximately 67.69 per cent.
of O2's issued share capital.

As disclosed in the Offer Document, Goldman, Sachs & Co, which is deemed to be
acting in concert with Telefonica, held 40,006 O2 Shares, representing 0.0005
per cent. of O2's issued share capital.  As at the date of this announcement,
Goldman, Sachs & Co continues to hold 6 of these O2 Shares.(1)

As announced on 13 December 2005 the European Commission's review process of the
proposed Telefonica/O2 combination under the EC Merger Regulation is ongoing and
the provisional deadline for Phase 1 clearance is 10 January 2006.  Telefonica
still expects that the Offer will be declared wholly unconditional in January
2006.

O2 Shareholders who have not yet accepted the Offer and who hold O2 Shares in
certificated form are urged to complete, sign and return the Form of Acceptance
as soon as possible and, in any event, so as to be received by Lloyds TSB
Registrars by no later than 1.00 p.m. (London time) on 20 January 2006.

If you hold O2 Shares in uncertificated form (that is, in CREST), you are urged
to accept the Offer by TTE instructions as soon as possible and, in any event,
so as to be settled by no later than 1.00 p.m. on 20 January 2006. If you hold
O2 Shares as a CREST sponsored member, you should refer to your CREST sponsor as
only your CREST sponsor will be able to send the necessary TTE instruction to
CREST.

If you are an O2 Easyshare Shareholder, you are urged to instruct O2 Easyshare
NomineeCo to accept the Offer on your behalf by completing, signing and
returning the Form of Instruction as soon as possible and, in any event, so as
to be received by Lloyds TSB Registrars at The Causeway, Worthing, West Sussex
BN99 6DA no later than 1.00 p.m. on 20 January 2006.

Copies of the Offer Document are available from Lloyds TSB Registrars at
Princess House, 1 Suffolk Lane, London EC4R 0AX.

Terms defined in the offer document dated 21 November 2005 (the 'Offer 
Document') shall have the same meanings in this announcement.



ENQUIRIES

Lloyds TSB Registrars
             Tel:  [phone] (if calling from within the United Kingdom)
             Tel:  [phone] (if calling from outside the United Kingdom)

Telefonica   Tel:  [phone]

Investor Relations Office



Citigroup Global Markets Limited - London      Tel: [phone]
Mark Simonian
William Kennish
Matthew Smith



Citigroup Global Markets Limited - Madrid      Tel: [phone]
Ignacio Gutierrez Orrantia



Goldman Sachs International - London           Tel: [phone]
Luca Ferrari
Phil Raper (Corporate Broking)



Goldman Sachs International - Madrid           Tel: [phone]
David Jimenez-Blanco
Juande Gomez-Villalba



Hudson Sandler                                 Tel:  [phone]
Andrew Hayes                                   Fax: [phone]
Sandrine Gallien



Goldman Sachs International, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for
Telefonica 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 Telefonica 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
Telefonica 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 Telefonica 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.

This announcement does not constitute, or form part of, any offer for, or any
solicitation of any offer for, securities.  Any acceptance or other response to
the Offer should be made only on the basis of information referred to in the
Offer Document.

The availability of the Offer to persons who are not resident in the United
Kingdom may be affected by the laws of their relevant jurisdiction.  Such
persons should inform themselves of, and observe, any applicable legal or
regulatory requirements of their jurisdiction.  Further details in relation to
Overseas Shareholders are contained in the Offer Document.

Unless otherwise determined by Telefonica, the Offer is not being, and will not
be, made, directly or indirectly, in or into or by the use of the mails of, or
by any means or instrumentality (including, without limitation, telephonically
or electronically) of interstate or foreign commerce of, or through any
facilities of a national securities exchange of, the United States, Canada,
Australia or Japan or any other jurisdiction if to do so would constitute a
violation of the relevant laws of such jurisdiction, and the Offer should not be
accepted by any such use, means, instrumentality or facilities or from or within
the United States, Canada, Australia or Japan or any such other jurisdiction.
Accordingly, copies of this announcement are not being, and must not be mailed
or otherwise forwarded, distributed or sent in, into or from the United States,
Canada, Australia or Japan and all persons receiving this announcement
(including nominees, trustees and custodians) must not mail or otherwise
forward, distribute or send it in, into or from the United States, Canada,
Australia or Japan.  Doing so may render invalid any purported acceptance of the
Offer.  Notwithstanding the foregoing, Telefonica will retain the right to
permit the Offer to be accepted and any sale of securities pursuant to the Offer
to be completed if, in its sole discretion, it is satisfied that the transaction
in question can be undertaken in compliance with applicable law and regulation.
The Loan Notes will not be made available to O2 Shareholders in the United
States, Canada, Australia or Japan or any other jurisdiction in respect of which
the issue of Loan Notes would be unlawful.



--------------------------


(1) As a result of a change in investment mandate relating to the account
relating to the remaining 40,000 O2 Shares, Goldman, Sachs & Co no longer
exercises discretion over that holding.


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