Redemption of Telefónica, S.A. Loan Notes

Redemption of Telefónica, S.A. Loan Notes

If you were an O2 shareholder or you participated in any O2 share plans, you had the choice of receiving your proceeds of the sale of your shares in cash or in loan notes under the recommended offer for O2 from Telefónica.

Those who opted for loan notes would have received a loan note certificate (entitled "Telefónica, S.A. Floating Rate Loan Notes Due 2010"). Those who opted to receive cash were sent cheques in February 2006.

What are loan notes?
Loan notes are essentially IOUs between the holder and Telefónica, and can be redeemed in stages.  There are two redemption dates per year, 30 June and 31 December. 

Can the loan notes be redeemed?
Redeeming the loan notes means exchanging them for cash.  

Process for redeeming loan notes
On the reverse of the certificate is a Notice of Redemption which you must complete and return. However, there are some important points to note:

• You must return the whole certificate - do not detach the notice.  If you redeem only a part of your holdings, Equiniti (the Company’s Loan Note Registrars) will send you a certificate for the balance of the loan notes.
• Partial redemptions can only be in multiples of £1,000.
• Loan Notes can be redeemed on 30 June or 31 December each year up to the maturity date of 31 December 2010.  Please note that the notice of redemption must be received by Equiniti not less than 30 days before the redemption date.

Further information can be found on the reverse of the Loan Note certificate, or contact the Equiniti Redemptions & Repayments helpline on 0871 384 2030. From outside the UK: +44 121 415 7047.

Tax
You are reminded that redemption of all or part of your Loan Note holdings represents a disposal for Capital Gains Tax purposes. The amount of your gain will depend on the base cost of the shares you transferred into Loan Notes. You are advised to seek independent financial advice if you are unsure of your own circumstances. The annual exemption for the tax year to 6 April 2010 is £10,100 capital gain per person.

Telefónica Europe Group Secretariat