O2 has agreed to be bought by Telefonica for £18bn as the Spanish telco looks to expand its operations into UK and Germany.

Mobile outfit O2 - which split from BT in 2001 - will retain its bubbly brand and keep its HQ in the UK. If all goes to plan and the deal get the thumbs up from regulators, it should be all wrapped up early next year.

Most recently O2 has been named as a possible take-over target for Dutch outfit KPN and German giant Deutsche Telekom, and it may be that today's announcement will be enough to flush out a rival offer.

Still, that's all in the future. For now Telefonica reckons that the buyout will give it greater presence in Europe's largest market - Germany and the UK - while delivering costs savings of around £200m a year.

Said O2 chief exec Peter Erskine in a statement: "Since the emergence of O2 as a listed company in 2001, it has enjoyed considerable operational success and, in the process, delivered real value to shareholders.

"This transaction brings together two companies which are growing strongly with highly complementary geographical activities." ®

Related stories

• O2 chalks up 27m mobile punters (23 January 2006)
• EC waves through O2 buy-out (11 January 2006)
• Swisscom's Eircom deal lies in tatters (25 November 2005)
• O2 ups revs and punters (14 November 2005)
• Kingston Comms confirms bid approach (10 November 2005)
• In brief Swisscom confirms Eircom acquisition talks (9 November 2005)
• 32,000 face axe at Deutsche Telekom (2 November 2005)
• Deutsche Telekom backs away from O2 counterbid (2 November 2005)
• Union demands assurances over O2 jobs (1 November 2005)
• Telefonica grabs O2 from under T-Mobile's nose (31 October 2005)
• O2 pushes ahead with super-fast mobile service (20 October 2005)
• Vodafone biffed in 'best bar none' scrap (13 October 2005)
• O2 posts upbeat trading update (27 September 2005)
• Deutsche Telekom 'eyeing up O2' (26 September 2005)
• Punters tune in to mobile TV trial (23 September 2005)
• O2 i-mode launch is 'imminent' (20 September 2005)
• KPN confirms O2 pullout (16 August 2005)
• Bid for O2 dead, or just sleeping? (15 August 2005)