Offer Update

Telefonica SA
23 January 2006

                             For immediate release

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

23 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 in all respects

Further to Telefonica's announcements on 3 January 2006 in which it declared the
Offer unconditional as to acceptances and 10 January 2006 that the European
Commission had cleared its proposed acquisition of O2, Telefonica announces that
all of the remaining conditions of the Offer have now been either satisfied or
waived.  Accordingly, the Offer is hereby declared unconditional in all
respects.

Settlement

The consideration will be despatched (or credited through CREST) on 6 February
2006 to O2 Shareholders who have validly accepted the Offer on or before the
date of this announcement.  Thereafter, consideration will be despatched (or
credited through CREST) to O2 Shareholders who validly accept the Offer within
14 days of receipt of an acceptance valid in all respects.

De-listing

Shareholders should note that Telefonica intends to procure that O2 applies to
the FSA for the cancellation of O2's listing on the Official List of the FSA and
to the London Stock Exchange for the cancellation of the admission to trading of
O2 Shares on the London Stock Exchange's market for listed securities.

Level of Acceptances

Telefonica announces that as at 6.00 a.m. (London time) on 23 January 2006 valid
acceptances had been received in respect of a total of 5,964,008,947 O2 Shares,
representing approximately 67.98 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 83,810,617 O2 Shares, representing
approximately 0.96 per cent. of O2's issued share capital.)  None of these
acceptances were received from persons acting in concert with Telefonica.

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 747,606,107 O2 Shares representing
approximately 8.52 per cent. of O2's issued share capital.  Settlement of the
purchase of 312,000,000 O2 Shares included in this figure has yet to occur.
Prior to the Offer being made, 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 6.00 a.m. (London time) on 23 January 2006, Telefonica and
its wholly-owned subsidiaries owned (including the purchase of the 312,000,000
O2 Shares referred to above, settlement of which has yet to occur) or had
received valid acceptances in respect of a total of 6,711,615,054 O2 Shares,
representing approximately 76.51 per cent. of O2's issued share capital.

Acceptance of the Offer

O2 Shareholders who wish to accept the Offer and who have not already done so
should:
     
1.   in respect of O2 Shares in certificated form, complete, sign and return the 
     Form of Acceptance, in accordance with the instructions set out in the 
     Offer Document and in the Form of Acceptance, so as to be received by 
     Lloyds TSB Registrars (at Princess House, 1 Suffolk Lane, London EC4R 0AX) 
     as soon as possible;

2.   in respect of O2 Shares in uncertificated form (that is, in CREST), accept 
     electronically through CREST, in accordance with the instructions set out 
     in the Offer Document, so that the TTE instruction settles as soon as
     possible.  O2 Shareholders holding O2 Shares as a CREST sponsored member 
     should refer to their CREST sponsor as only the CREST sponsor will be able 
     to send the necessary TTE instruction to CREST; and
     
3.   in respect of holdings through the O2 Easyshare service, instruct O2 
     Easyshare NomineeCo to accept the Offer on their behalf, by completing, 
     signing and returning the Form of Instruction, in accordance with the 
     instructions set out in the Offer Document and in the Form of Instruction, 
     so as to be received by Lloyds TSB Registrars (at The Causeway, Worthing, 
     West Sussex BN99 6DA) as soon as possible.

Offer Document

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'
for the purposes of this announcement) shall have the same meanings in this
announcement.

                                    - ends -


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.


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