Spanish telecommunications company Telefonica has agreed to takeover Britain's O2 mobile phone group for £17.7 billion. Through the deal, Telefonica will acquire a huge customer base in two of Europe's largest markets, the UK and Germany.

O2 will be allowed to maintain its existing brand name, and the company's headquarters will remain in the United Kingdom. O2 was also approached by Holland's KPN and Germany's Deutsche Telekom in recent weeks.

Telefonica said of the deal: "The combination with O2 is a logical step for Telefonica in pursuing its strategic goal of providing its shareholders with both growth and cash returns.