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Annual Review 2005

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Surprisingly for a mobile communications

company, we’re not about technology.
We’re about people. How we can continue
to make people’s lives easier, to engage
their imaginations and deliver even greater
experiences, through our products, services
and know-how.

This report is based on our commitment

to listen to people’s wants and needs,
to respond to them, and to bring the
resulting benefits to all our customers,
employees and shareholders.

Listen

Respond
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Benefit

Contents
2 Introduction by the Chairman and Chief Executive Officer
4 Listen
6 Business review
8 Respond
10 Business review continued
12 Benefit
14 Board of Directors
15 Summary Directors’ report
17 Summary Directors’ remuneration report
19 Summary financial statement
20 Independent auditors’ statement
20 Additional information for shareholders

Please see cautionary statement regarding forward-looking

statements on page 21. o2.com 1
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Introduction by the
Chairman and Chief Executive Officer
• Strong revenue and profit growth
• First dividend earlier than planned
• Focus on enhanced customer experience
• Accelerated investment in Germany
• Building a sustainable business
Welcome to our fourth annual review, and our first
as O2 plc. One of our first acts as O2 will be to pay
a dividend to our shareholders.
As a shareholder in mmO2, you have exchanged
your existing shares for shares in O2 plc. We are
delighted that you have joined us and are confident
about our Company’s future prospects.
As part of our reorganisation, mmO2 was delisted
from the New York Stock Exchange. There is no
intention to seek a US listing for O2 shares.
Strategy
Our strategic framework for the coming year is
driven by the same high aspirations that have
delivered such strong momentum to our business
since demerger. To continue to meet those
aspirations, we will be addressing some key
priorities in 2005/06.
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Revenue and profit growth superior to our
competitors Despite the competitive landscape,
O2 UK continues to focus on winning and retaining
more high-value customers in order to drive further
revenue improvement. In Germany, there is
significant room for growth and our accelerated
network investment programme will provide a
springboard to achieve this. In addition, O2 Airwave
will make a strong financial contribution in its first
full year of operation.
Best customer experience to express the iconic
O2 brand Quality, value and innovation are the keys
to maintaining the strength of the O2 brand, and
differentiating us from our competitors. To maintain
the loyalty and trust of our customers, we must
give them the service that they want and products
that work – which is why we have been cautious in
the timing of our 3G launch. We do not necessarily
want to be the first to market but we do want to
be the best. Our aim is keep the O2 brand fresh,
with fewer, better services, all designed to enhance
the customer experience. We are investing in the
systems and people to achieve this.
An operationally efficient, agile and innovative
organisation We will be driving our businesses to
realise efficiency gains, using our growing insight
into our customers’ needs and behaviour to align
our costs more closely to what customers value
most. We have innovative joint ventures with Tchibo
in Germany and Tesco in the UK, and other, multi-
territory, partnerships.
Mobile data services that our customers really
value Texting has become a way of life – whether
in person-to-person messages, texting questions
to the Prime Minister or voting off Big Brother
contestants. We carried a record 50 million texts on
Christmas Day 2004 and texting continues to grow
in all markets. Driven by O2 Active, our award-
winning mobile internet portal, we are also starting
to see significant growth in non-text data usage,
revenues from which have increased by 50 per cent
over the past 12 months.
With a powerful new relationship now in place
with NTT DoCoMo, we are poised for even more
dramatic growth, as we develop new mobile data
products and value-added services.
Leading technology
3G A high-speed network, as provided by 3G, is
the key to future mobile data services, enabling
customers to migrate to advanced, content-rich
applications. During 2004/05, we launched 3G
consumer and business services in Germany and
the UK, with Ireland to follow later this year.
We are rolling out the 3G network across all our
territories, matching capacity to known mobile data
demand. We have also invested in training and
billing systems, and developed highly specified,
well-functioning devices.
Mobile internet To complete the picture, we
signed a long-term agreement with NTT DoCoMo
Inc, Japan's largest mobile communications provider,
to launch a mobile internet service branded i-mode®
in the UK and Ireland in Autumn 2005. A similar
service will be available in Germany from Spring
2006. This service, which will complement O2
Active, has a proven track record in Western Europe
of lifting uptake, usage and revenue from data
services, due to its ease of use and huge breadth
and depth of tailored internet content.
Corporate responsibility
We have a responsibility to the communities in
which we operate. We believe that companies who
respond to the needs of those communities, and of
the wider world, are more likely to maintain long-
term success. We produce a separate report
detailing our CR strategy and activities; here are
some highlights from 2004/05.
Industry recognition O2 was the top-scoring
mobile operator in the Dow Jones Sustainability
Indexes, which track the financial performance of
the leading sustainability-driven companies world-
wide. In addition, we were included in the
FTSE4Good Index, the Business in the Community
Corporate Responsibility (CR) Index and the Top 100
Global Sustainability Reporters list.
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Board changes
David Arculus joined the Board as a non-
executive Director in April 2003 and became
Chairman of mmO2 plc at the conclusion of its
Annual General Meeting in July 2004, when
David Varney stood down to take up a new
position as Executive Chairman of HM Revenue
& Customs.
There have been other important changes over
the past year. David McGlade, Chief Executive
Officer of O2 UK, stepped down from the
Board and left the Company at the end of the
financial year to take up a new opportunity in
his native America. David led the turnaround in
O2 UK’s performance since demerger, and the
successful establishment of the O2 brand in
the UK. He has been succeeded as CEO of
O2 UK by the former UK Chief Financial
Officer, Matthew Key, who has also been
appointed to the Executive Committee of O2.
We are delighted to welcome Patrick Lupo,
Kathleen O’Donovan and Rudolf Lamprecht to
the Board as non-executive Directors. All have
held senior executive and non-executive
positions for a number of major international
companies, and bring to the Board a wealth
of financial and business management
experience. They will make a major
contribution to our strategy.
Three non-executive Directors, Paul Myners,
Neelie Kroes and Ian Meakins, stepped down
from the Board. Paul Myners decided to
become Chairman of Marks & Spencer,
Neelie Kroes left following her nomination
by the Dutch government as their new EU
Commissioner and Ian Meakins is devoting
himself to his role as CEO of Alliance UniChem.
Paul, Neelie and Ian have all contributed to the
successful establishment of O2 as a FTSE 100
company with a strong balance sheet and a
powerful brand.
Page 3
Group turnover1 £m Group EBITDA1 £m
02 03 04 05 02 03 04 05
4,076 4,611 5,646 6,683 484 858 1,367 1,768
1 Continuing operations.
Community activities Our activities are focused on
programmes that aim to improve the conditions
and prospects for children and young people
around the world.
A number of community projects and programmes
that support employee fund raising and giving have
been successfully developed under our “Can Do in
the Community” programme. Across the Group,
we contributed £1.7 million in charitable donations,
over £600,000 of which came from UK-based
companies, and £500,000 to the Tsunami appeal.
Our employees continue to give their time and
imagination to a wide range of fundraising schemes.
Health and safety issues We are sensitive to
public concerns over health issues such as the siting
of masts, and issues concerning mobile phone use,
including the protection of the vulnerable. To help
parents and others make informed choices, we
have introduced measures such as age verification,
parental controls, filters and barring. In addition, we
help fund on-going research and are committed to
effective, responsible communications, producing
leaflets on subjects ranging from health issues to
advice to parents on personal safety, bullying and
We aim to grow our dividend towards
50 per cent of underlying earnings, reflecting
our confidence in the Company.
internet grooming. These are available in our retail We aim to grow the dividend towards our medium-
outlets and online. term target pay-out ratio of 50 per cent of
underlying earnings, reflecting our confidence in
Looking ahead the Company’s ability to continue to increase
We are financially strong and have built a powerful, revenue, earnings and cash-flow, and our
iconic O2 brand. Revenue is growing fast, the commitment to deliver attractive returns to
Company has modest debt and, led by a strong shareholders.
management team, we have so far outperformed
most City expectations. O2 is in a good position.
Taking the Company forward and further
strengthening its position in the United Kingdom,
Germany and Ireland will be challenging but
achievable. We will: David Arculus
• continue to focus on gaining a closer Chairman
understanding of our customers’ needs and
behaviour, in order to further improve their
satisfaction and loyalty;
• work even harder to differentiate our business by
delivering intuitive, easy-to-use and fairly priced
products and services – particularly in the data
field – that our customers value highly, and that Peter Erskine
are based on proven technology; Chief Executive Officer
• continue to ensure that we work to make a
difference to the communities in which we operate,
building a sustainable business for the future.
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Listen
Consulting the experts
What business wouldn’t say that it listens to its
customers? It’s a “given”.

But at O2, we believe it’s vital that we know

exactly what our customers are thinking, and
understand their needs, likes and dislikes.
What may be a barely-formed wish or niggle
in a customer’s mind now can have a huge
impact in an industry as competitive as ours
– in a surprisingly short time.

O2’s advantage is that we’re structured to be

agile: to monitor and respond quickly to
emerging trends from a solid base.

We have a range of mechanisms for listening

to customers around the Group. O2 Germany
has “scouts” – opinion leaders who help us test
and develop new products and services such as
O2 Active. In the UK, we worked extensively
with customers to fine-tune our 3G services
ahead of launch,and O2 Ireland redesigned
the online shop in line with feedback from
customer focus groups.

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Most of our consumer insights come from

ongoing research. Overwhelmingly, this is
what people tell us they want:

“Simplicity – not confusing, myriad offers, or

technology I have to jump through hoops for.”

“Value for money – I don’t necessarily want

the cheapest deal, but I do want to know and
appreciate what I’m paying for.”

“Network quality – so I can make a call

whenever, wherever, and always get through.”

“Clear, accurate bills. And mistakes put right

quickly, without fuss.”

“A company that acts like it values my custom –

rewarding my loyalty and treating me as an
individual.”

“A company I can trust to behave well in the

wider world.”

Further on, we’ll show how we’ve responded to

what our customers are telling us.

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Business review
All our businesses performed well in 2004/05.
Here we report on their activities in the past
year, and look at their challenges for the future.
O2 UK
Our performance
Increasing profitability In a highly competitive
market, O2 UK delivered a strong operating and
financial performance. Customer numbers, service
revenue, average revenue per user (ARPU) and
EBITDA all showed continued growth. Success was
driven by innovative new services and customer
propositions, a series of successful marketing
campaigns and further improvements in network
quality.
Total customer numbers grew by 1.1 million to
14.4 million, helping to drive a 14 per cent growth
in net service revenue to £3,627 million. The quality
of our customer base also continued to improve,
with blended ARPU reaching £281 at year end, an
increase of £9 over the previous year. This occurred
despite the impact of a significant regulatory
price cut in September 2004. Overall EBITDA,
one of our key indicators of profitability, reached
£1,183 million, a 14 per cent year-on-year increase.
Leading technology
As part of our on-going investment in service
capability, we rolled out the first phase of our 3G
network in the UK, launching initial services to
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business customers in October 2004 and consumers
in February 2005. Our approach to 3G is an
evolution of our successful data services strategy.
Because it offers faster speeds, 3G allows customers
to enjoy richer entertainment content and new
interactive services. As 3G is a new technology,
we believe services will initially appeal to early
adopters, building towards mass-market adoption
over the next year.
Building on text success
We retained our focus on mobile data (i.e. non-
voice services). The volume of text messages carried
on our network hit 1 billion texts per month by the
end of 2004/05. This continued focus on text and
other messaging services such as e-mail and picture
messages, as well as non-voice services like music,
content downloads and information services,
helped data services revenue reach 24.2 per cent
of O2 UK service revenue, an increase of 3.8 per
cent over last year.
O2 Active – better than ever
Further developments of O2 Active, the simple-to-
use portal for news, information and downloads,
helped drive this success. A revamped, more
intuitive homepage, including a scrolling ticker of
news headlines, received positive customer
feedback and drove higher usage. As at 31 March
2005, O2 Active was available on 100 different
handsets.
Increasing our own retail sales
The percentage of total sales delivered through
O2’s own channels (O2 stores, O2 Online store and
direct sales) continued to increase and we expect
this trend to be maintained in 2005/06. We believe
this will enable us to deliver a better customer
relationship. The number of O2 retail stores grew
by 26 to reach 257 by the year end.
Strengthening business customer relationships
In the business market, we grew our direct sales
force and introduced new pricing and service
propositions for our customers. These initiatives
helped us acquire many new corporate customers
such as DHL as well as growing business with
customers including Superdrug and West
Yorkshire Police.
In October 2004, we launched O2 Connection
Manager, the UK’s first integrated mobile
connection software to incorporate 3G, Wireless
LAN (WLAN) and GPRS. This provides a simple
interface that automatically connects business
users to the fastest available network. Following
agreements signed with WLAN operators, O2 now
offers WLAN access in over 6,700 UK locations
including hotels, airports, coffee shops, bars
and pubs.
Improving customer service
Providing our customers with a superior quality of
service is one way that we aim to differentiate the
O2 brand. This commitment is demonstrated by
O2 X4, built for 3G and equipped with the new-improved O2 Active
portal offers greater access to compelling content and services.
our investment in a single billing and Customer
Relationship Management (CRM) system in the UK.
Now roughly two-thirds towards completion, the
programme will enable us to predict and meet
customer needs in a more consistent manner by
better aligning our billing, customer service and
CRM activities to an individual customer’s
behaviour. Work already completed has enabled
“online” customers to view their bills online. In
addition, a new web-based tool in retail stores
allows new customers’ mobile phones to be
activated on the spot. Finally, we are recruiting
2,000 additional retail and customer service staff
and opening a fourth major UK call centre to
further improve our response levels.
Differentiating our brand The distinctive appeal
of our brand and market propositions – aided by
our sponsorship of the World Cup winning England
rugby team, the 2004 Football Association Premiership
champions Arsenal, Capital Radio’s drive-time
programme and a host of music events – continued
to help us differentiate against our competitors.
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Data services now generate revenues
of over £1.4 billion per year.
Recognising the impact of the O2 brand on our customers as mobile penetration exceeds 100 per
business performance, O2 UK won the Institute cent. A key priority will be customer retention
of Practitioners in Advertising’s (IPA) prestigious including through marketing initiatives aimed at
Grand Prix award for 2004. We also won The increasing customer loyalty. We will nonetheless
Mobile Data Association’s “Best Network of the continue to focus on improving profitability.
Decade” award for being the most innovative in
“encouraging the uptake of mobile data over Taking care of customers The cornerstone of our
the past ten years”. strategy going forward is simple – to attract and
retain high-value customers by giving them the best
Extending our reach Tesco Mobile, our 50/50 joint possible experience. This will be achieved through,
venture with Tesco, has shown sustained growth. among other things, further improvements in
Tesco Mobile addresses sections of the family market service quality, the launch of innovative new
not currently targeted by O2 through Tesco’s services and loyalty programmes, significant
nationwide network of supermarkets and smaller investment in customer service and CRM, and
“Metro” shops. In December 2004, 14 months after continued development of the O2 brand.
its launch, it had attracted over half a million
customers. i-mode® As reported in the Chairman and CEO’s
statement, we plan to launch a mobile internet
Market dynamics service based on i-mode® capability later this year,
Our strong in an exclusive agreement for the UK. This will give
performance was users access to the most comprehensive and flexible
achieved against a internet service available on mobile phones, and
backdrop of stiff has proven to generate higher revenues than any
and increasing other competing technology or platform.
competition, with
ten operators now
active in a highly O2 Germany
saturated market.
Our performance
Looking ahead An exciting year O2 Germany has established
We expect itself as the most dynamic and innovative operator
competition to in the German market – the largest in Europe. In
intensify in 2005/06, 2004/05, both revenues and customer numbers
coinciding with accelerated throughout the year, outstripping both
Happy Hour offered O2 customers slowing overall our expectations and our competitors, and leading
free texts and picture messages
between 7-8pm every day. growth in new to further growth in market share.
After an extremely strong first half, growth
continued over the rest of the year. Service revenue
was up by 28 per cent to €2,474 million and
EBITDA increased to €500 million. This was
driven by a rapid increase in the customer base –
O2 Germany has a very attractive range of products
and services and markets them aggressively.
We added 890,000 new post-pay customers,
accounting for 45 per cent of net new customers
in Germany. O2 Germany has market-leading
blended ARPU of €363, driven largely by our
unique O2 Genion Homezone service.
Attracting high-value customers By attracting a
significant proportion of high-value customers and
tightly controlling operating costs, O2 Germany
has translated rapid growth in subscribers into a
substantial improvement in profitability. Over the
next five years, we will step up investment in our
network to reduce national roaming costs, enhance
customer experience and secure population
coverage to rival that of the market leaders.
Improving the customer experience Our
customers’ personal experience of the O2 brand is
central to our growth strategy. Our O2 Online shop
has continued to show a strong performance,
bringing us new customers with good ARPU at low
cost. Customers also value the opportunity for face-
to-face interaction and the first ‘flagship’ O2 store
was opened in Munich in December 2004.
In October 2004, O2 Germany launched a 50/50
joint venture, Tchibo Mobilfunk, with Tchibo – a
well-established consumer brand known for its
value-for-money offers. This additional and exclusive
sales channel complements O2’s target segments
and by the year-end had added more than 250,000
new pre-pay customers.
Our unique O2 Genion service continues to attract
new customers. O2 Genion’s advanced technology
offers reduced tariffs in the customer’s chosen
geographical area – usually near the home or
workplace. With its higher revenues and
considerably lower churn rate compared to other
mobile products, O2 Genion is key to our focus on
more profitable customers.
Improving our offer
to business
customers Our
Business Unit team has
been winning major
new business
customers and forging
new partnerships with
sales channels and
software suppliers. We
also extended our
range of tariffs and
services, offering
packages tailored to
the specific needs of
business customers.
We acquired a number
of new high-profile
O2 surf@home – enabling customers
customers, including to connect to the internet from
MTU Aero Engines, their homes at fixed line rates.
Tchibo and Christian
Dior, and strengthened relationships with long-
standing customers such as BMW.
Mobile data goes from strength to strength
Revenues from mobile data products grew strongly,
with the volume of text messages sent during the
year increasing by a third. At the same time, non-
text data usage made an increasingly important
contribution, with nearly a quarter of our customers
now using these services.
The launch of high-speed 3G services last year
should raise mobile data revenues further. We
launched our 3G service in April 2004, offering a
laptop card to business users, following this with
laptop and 3G handset surfing for consumers. In
addition to fast mobile internet access, our 3G
customers can make video calls and use a broad
range of video streaming.
The appeal and impact of our O2 Active portal
service has already won external recognition.
Europe’s best-selling telecom magazine Connect
gave O2 Active two awards – from both readers and
experts – as the best mobile portal in Germany. An
advanced version of the O2 Active portal was
launched in November 2004.

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Doing fewer things, better

Having a really clear idea of what our
customers want has transformed our business.
Here are the key ways in which we’ve
responded to what they’ve told us.

“Simplicity”
When it comes to technology, we’re focusing
on products that give the customer better, not
just more choice. And we only launch a new
product when we’re absolutely sure it works.
Take 3G. We’re not rushing to be first to
market. Instead, we’re focusing our coverage
on areas of greatest demand; and we’re
working with customers to ensure we get
3G-capable phones “right first time”.

We will continue to hone our tariffs and

promotions to make them the clearest on the
market, with no hidden charges or reams of
small print.

“Value for money”

With our tailored price plans, such as O2 Bolt-
Ons in the UK, customers can talk and text
in the way that suits them best – so no nasty
surprises when the bill comes. We've also
teamed up with the best retailers – Tesco in
the UK and Tchibo in Germany – to launch
simple, value-for-money mobile services.

“Network quality”
With an almost 100 per cent call success rate,
we’re the network choice for millions of
customers; and as a founder of the Starmap
Mobile Alliance, we’re delivering a ”home-
away-from-home“ experience across Europe too.

Respond
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“Clear, accurate bills; mistakes quickly put right”

Our Customer Relationship Management (CRM)
systems are streamlining the billing process.
We’re also expanding the number of our UK
call centres, so that customers are served
promptly and effectively.

“A company that values my custom”

When it comes to rewarding loyalty, O2 UK
leads the way. Since Spring 2005, pre-pay
customers get 10 per cent of their O2 Top Ups
back every three months, while post-pay
customers get 50 per cent extra minutes and
texts on renewing their contract. These and
future loyalty initiatives are backed by a major
advertising campaign delivering the key
message: the longer you stay with O2, the
better it gets.

Across all our businesses, CRM is bringing us

closer to our customers – giving us information
about their usage and preferences that will
help us meet their needs even more precisely.

Face-to-face contact really matters to

customers, and we are going to expand our
high-street presence. In Ireland, three
O2 Experience Stores, which encourage
customers to try out the latest technology and
chat to advisors, were launched with great
success in the past 12 months.

“A company I can trust”

We are committed to behaving responsibly as
a business. We respond to public concerns in
a number of areas affecting our industry –
particularly in health, education and child
protection. For example:

• O2 Germany runs a number of programmes

with educational organisations. Its “Polly and
Fred” information pack promotes responsible
mobile phone use by young people.

• O2 UK produces a wide range of literature on

mobile-related topics for children, parents,
teachers and drivers, and on general health
issues – all of which is available in stores and
online.

• O2 Ireland launched the O2 Ability Awards,

to recognise organisations that see disability
and diversity as part of their success.

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Business review continued
Our aim is to keep the O2 brand fresh, with
fewer, better services, all designed to enhance
the customer experience.
Market dynamics
The German mobile phone market grew by 9 per
cent and market penetration rose to 83 per cent in
March 2005. As a result, the market has become
increasingly competitive.
Looking ahead
Extending sales channels In the coming year,
we will focus on our target of profitable growth.
We will extend our sales channels, including service
providers and Tchibo. We have launched an
innovative, high-speed 3G data service,
O2 surf@home, that directly complements
O2 Genion. This will enable O2 customers to
connect to the internet from their homes at fixed
line rates. The combination of O2 Genion and
O2 surf@home will enable complete fixed-line
substitution and increase customer value and loyalty.
Innovative tariff models such as bundles and pre-
paid top-up vouchers will give customers greater
control of costs, while driving revenues for O2.
Keeping our customers satisfied We aim to
increase customer satisfaction by meeting the
expectations of those wanting more simplicity
on the one hand, and those demanding advanced
data services on the other. We will continue to
attract and retain high-value customers, supporting
this with superior quality of service at the point of
sale and beyond.
Investing for growth Building on our success to
date, we are stepping up capital expenditure with
the aim of becoming a full network operator,
extending and accelerating the roll-out of our 3G
network and reducing national roaming. This will
enhance the customer experience by delivering
higher coverage and faster services, while reducing
our operating costs. We will also seek more
aggressive growth with new products.
O2 Ireland
Our performance
It’s all about the customer Throughout 2004/05,
O2 Ireland has continued to improve its business
performance, maintain current market share and
build on the strength of the O2 brand.
Competitive services and tariffs are driving growth
in customers in this mature market. Mobile phone
usage in Ireland is over 50 per cent higher than in
our other territories – resulting in continued strong
blended ARPU of €565. 142,000 new customers
joined the O2 network during the year – representing
a 10 per cent increase in the customer base over
the previous year. This growth led to another year
of robust financial performance, with service
revenues up by 13 per cent to €816 million and
EBITDA 9 per cent higher at €327 million.
We have focused on offering customers the best
possible experience, with products that work first
time, superior service and an efficient, customer-
friendly, high-street presence.
Customer Care satisfaction scores improved
throughout 2004/05, and O2 Retail excelled among
its peers. It has been a particularly successful year
for acquiring customers, but we also succeeded in
retaining them – despite a range of competitive
tariffs in the market, and the ease with which users
can change networks in Ireland.
Raising brand awareness O2 brand recognition
continues apace, bolstered by a groundbreaking
advertising campaign. “Network Powered Ireland”
was named Best Integrated Campaign by Marketing
magazine.
Brand awareness was further supported by high-
level sponsorships and associations. These included
O2 in the Park, the Smurfit European Open golf
tournament and our association with golf and
rugby sporting stars. In the business arena, we
undertook joint initiatives with Dublin Chamber of
Send and receive messages while on the
move with the new BlackBerryTM 7100x.
Commerce – sponsoring “E-Week” – and continued
to support regional Chambers of Commerce.
Another important development was the opening
of three O2 Experience Stores. With its exciting
styling, friendly service and “try before you buy”
offer, this new retail concept has proved highly
effective in bringing us closer to customers.
Exciting new products and services that make
life easier Business customers can save time and
money with the Fujitsu-Siemens Work Everywhere
Package, O2 Instant and the O2 Connection
Manager – all of which have been well received
in the business and corporate markets. Consumer
customers benefited from the introduction of
reduced tariffs in 2004, and an appealing range
of handsets and devices including the new
BlackBerry™.
Maintaining network quality Our success is
underpinned by our networks, which are rated
among the best in the world. We continue to build
our network in a cost-efficient and environmentally
friendly way and, where possible, to share existing
sites with other mobile operators and utilities
providers.
Our 3G network now extends to over 35 per cent
of the population. Limited trials of the service
began in mid-2004, and we plan to bring
commercial 3G services to Ireland in mid-2005.
Market dynamics
The Irish mobile market continues to be highly
challenging, with close to 100 per cent of the
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The Network Powered campaign was rated as the “Best Integrated
Campaign”* in Ireland. * Marketing Magazine Media Awards in January 2005
population now owning a mobile phone. O2 Ireland
holds the second largest share of the market, with
around 40 per cent. Last year, Meteor made further
gains in market share, while “3” entered the market
in January 2004 and began to roll out its 3G
network. Potential competitors have also expressed
an interest in the mobile market, following
proposed measures by ComReg (the Irish
communications regulator) to encourage and allow
MVNOs (Mobile Virtual Network Operators) to
access the networks of existing operators.
Looking ahead
O2 Ireland will concentrate on maintaining its edge
in a highly competitive and increasingly regulated
environment. We will continue to put our
customers first and to build on the growing
demand for data services.
We will be the first and only mobile operator in
Ireland to offer a mobile internet service based on
i-mode® capability – a completely new experience
for Irish consumers – from Autumn 2005.
We aim to build on last year’s success by meeting
our growth targets for revenue, EBITDA and
customer numbers.
O2 Airwave
Our performance
Promising results for a unique service The
Airwave network was completed, on time and
on budget, at the end of March 2005. The O2
Airwave service – designed to make communities
safer by enabling the emergency services to
communicate freely with each other – has now
Page 11
been delivered to all police forces in England,
Scotland and Wales.
The network, under the terms of a £2.9 billion,
19-year contract with the Home Office signed in
2000, has been built in less than five years. Over
99 per cent of mainland Great Britain is covered by
the service, with 100 per cent population coverage.
The service has won more than 75 new public
safety customers outside the Home Office contract,
including the British Transport Police, MoD and
the Highways Agency. O2 Airwave has been
shortlisted for similar contracts to provide
nationwide communications for the ambulance
and fire services.
The invisible lifeline Airwave is a fully encrypted
digital radio system. It will enable police forces to
communicate with each other and with other
emergency services, even from radio “cold spots”,
for the first time in their history. In addition,
Airwave delivers major benefits to the health service
– allowing ambulance crews to transmit patient
vital signs directly to hospital staff, so they can
authorise the administration of life-saving drugs.
Growth opportunities
The continued threat of terrorism, the incidence of
major accidents and heightened awareness of the
impact of natural disasters all demonstrate the
increasing importance of secure, “joined-up”
communications in both urban and remote areas.
Going underground Although Airwave was not
originally specified to operate in the London
Underground, we have tested interim solutions with
the Police Information Technology Organisation
(PITO) and London Underground; and are exploring
ways in which we can improve underground
communications for the emergency services.
Mobile data on the beat In December 2004,
O2 Airwave and the Lancashire Constabulary
embarked on the largest ever mobile data trial with
the police in the UK. This gave Lancashire police
officers secure, continuous access to databases
while on the move. Now many police forces can
access the Police National Computer from their
handsets, allowing them to check names and
vehicle registrations in seconds.
O2 Airwave, the invisible lifeline – designed
to make communities safer by enabling the
emergency services to communicate freely
with each other.
The growth opportunities in mobile data – reducing Manx Telecom has continued its major investment
paperwork for officers and thus increasing the time programme to make broadband available to as many
available for policing – are considerable. Airwave customers on the Isle of Man as possible, increasing
represents a secure, nationwide and resilient coverage to around 99 per cent of homes and
network solution for these requirements. businesses.
Looking ahead Work is well under way on a major contract,
The government is increasingly investing in new announced last year, to build a new island-wide
technology to improve crime prevention and network infrastructure for the Isle of Man
detection and public safety measures, giving Government.
O2 Airwave a significant opportunity to help
safety organisations develop their services. Looking ahead
We look forward to offering our customers the
chance to experience the exciting video-based
Manx Telecom applications and services that super-fast 3G can
offer. And we will continue to support the Isle
Trialling future technology of Man Government’s e-business strategy of
Manx Telecom is a wholly owned subsidiary of O2 developing a world-class telecommunications
on the Isle of Man, licensed to run fixed and mobile infrastructure to attract companies and investment
telephony and internet services. An Internet Service to the island.
Provider in its own right, Manx Telecom has a
portfolio of quality internet access and hosting
products and services.
Because of its successful track record as the first
company in Europe to launch a live 3G service (in
December 2001), Manx Telecom was chosen by
O2 to run Europe’s first super-fast 3G trial, in
partnership with Lucent Technologies. This will offer
the possibility of communication speeds up to three
times faster than current commercial 3G services.
Extending our service With the installation of a
pre-pay Intelligent Network platform in November
2004, we can offer a range of new services to our
pre-pay customers. Picture messaging was launched
in December 2004, and mobile web access became
available in March 2005. We plan to launch
outbound pre-pay roaming early in 2005/06.
O2 Xda IIi – more advanced, more powerful with high-speed
internet and e-mail on the move and built in wi-fi capability.
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Benefit
Making a difference
The commercial benefits of listening to our
customers are evident in our performance
figures and business growth. But it doesn’t
end there. By listening to what people tell us
and acting upon it, we will:

• provide products and services that customers

really want;
• deliver increased revenues for the business,
producing a strong company able to sustain
dividends for shareholders;
• play an active role in the communities in
which we operate;
• create a rewarding environment for
employees.

These commitments will drive our evolution as

an innovative, sustainable business. Here are
just some examples of its benefits in practice.

Technology for our times

In developing Airwave – our secure, reliable
communication network for the police, fire
and ambulance services – we’re setting
performance standards in line with our
customers’ Key Performance Indicators, giving
them tangible benefits. For example:

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• Hereford & Worcester Ambulance Trust crews

have saved more than 150 lives since Airwave
was introduced in May 2002. The timely use
of clot-removing drugs by paramedics
dramatically improves the chances of survival
and recovery after a heart attack.

• The Airwave response to incidents caused

by bad weather – such as Boscastle, Cornwall,
in August 2004 and Carlisle in Cumbria in
January 2005 – proved the network’s
resilience. It kept going when other
communications networks failed, and was
used by all the emergency services dealing
with these major incidents.

Research by the Police Information Technology

Organisation (PITO) shows the benefits Airwave
has brought to police forces. Respondents
report huge improvements on the previous,
analogue service, in every aspect from security
to voice quality and interference levels.

An agent for change

In 2004/05, O2 Ireland, in conjunction with
The Aisling Foundation, launched The O2
Ability Awards. This is the first awards
programme to recognise Irish businesses that
demonstrate best practice in the employment
of people with disabilities – an issue currently
high on the Irish social agenda.

Rewarding employees
In 2004/05, we introduced a new package of
benefits following feedback from the “Reflect”
employee survey. Meanwhile, our “Balance”
programme is helping our people maintain a
healthy work-life balance. We were also voted
“Best Large Company to Work For” in Ireland,
and listed among the top 15 medium-sized
employers in Germany.

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1 2
Board of Directors
1. David Arculus (58) Chairman (b),(d)
David Arculus was appointed to the Board in 2003 and
became Chairman on 28 July 2004 at the conclusion of
mmO2’s 2004 Annual General Meeting. Mr Arculus is
Chairman of the Better Regulation Task Force and a non-executive
Director of Barclays. He has also served as Chairman of Severn
Trent. Mr Arculus was previously Chairman of IPC Group
Limited and, before that, Group Managing Director of EMAP.
EXECUTIVE DIRECTORS
2. Peter Erskine (53) Chief Executive Officer (b),(c)
Peter Erskine was appointed to the Board in 2001 as Chief
Executive Officer. He joined the Company from BT where, since
March 1993, he held a number of senior positions including
Director of BT Mobile, President and Chief Executive of
Concert, and, from 1998, Managing Director of BT Cellnet.
Prior to joining BT, he was European Vice President of Sales
and Customer Service for Mars and Senior Vice President Sales
and Marketing for UNITEL. Mr Erskine is also a member of the
Advisory Board of the University of Reading Business School.
3. David Finch (49) Chief Financial Officer (b),(c)
David Finch was initially appointed to the Board in 2001.
Mr Finch is the Company’s Chief Financial Officer and
has extensive experience in financial management, having
previously held senior finance positions at Exel, Novar (formerly
Caradon) and Grand Metropolitan. In addition to Group
Finance, he has direct responsibility for the Group Treasury
and Investor Relations functions.
7 8
3 4
4. Rudolf Gröger (50) CEO O2 Germany (c)
Rudolf Gröger was appointed to the Board in 2003. He joined
the Company in October 2001 as Chief Executive Officer of O2
Germany. Prior to this, he was Managing Director of T-Systems
International GmbH, a subsidiary of Deutsche Telekom, from
1999 to 2001. He played a key role in the acquisition of Debis
Systemhaus GmbH and its integration into Deutsche Telekom.
He has also worked for Siemens and was head of its German
information and communication product operations.
NON-EXECUTIVE DIRECTORS
5. Stephen Hodge (63) (a),(d),(e)
Stephen Hodge was appointed to the Board in 2001. Mr Hodge
was Director of Finance of the Royal Dutch/Shell Group, prior to
his retirement in September 2001, where he had responsibility
for all financial and investor relations issues for the Shell Group
and its parent companies. He has extensive knowledge of the
financial management of international companies, having
worked throughout the world including Australia, the
Netherlands, Venezuela and Argentina in a variety of financial
positions. He is Chairman of Shell Pensions Trust Limited and
Deputy Chairman of the Franchise Board of Lloyd’s of London.
Mr Hodge was appointed as non-executive Deputy Chairman
and senior independent Director on 1 January 2005.
6. David Chance (48) (a),(d)
David Chance was appointed to the Board in 2003. Mr Chance
was Deputy Managing Director of BSkyB until June 1998 and
is Chairman of Modern Times Group and Top Up TV Limited,
and is a non-executive Director of ITV and Sunderland AFC.
He previously held senior marketing and business development
roles at US telecoms companies, Scientific Atlanta and Grass
Valley Group, and European satellite broadcaster, SES.
9 10
5 6
7. Rudolf Lamprecht (56)
Rudolf Lamprecht was appointed to the Board on 30 March
2005. He is presently a member of the Management
Committee of Siemens with responsibility for Osram (lighting),
the Fujitsu joint venture and household appliances. He was
previously a Board member at Siemens and held a number
of senior positions, including President of information and
communications products. He is highly experienced in complex
business-to-business technology, sales cycles and multiple
channels to market.
8. Patrick Lupo (54) (e)
Patrick Lupo was appointed to the Board on 10 August 2004.
Mr Lupo was previously Chief Executive and then Executive
Chairman of DHL Worldwide Express. He is currently a non-
executive Director of Hilton Group and was also, until March
2004, a non-executive Director of WH Smith. Patrick Lupo
held a number of senior positions at DHL Airways Inc and DHL
Worldwide Express between 1984 and 2001, where he was
instrumental in establishing it as the global market leaders in
international express and logistics.
9. Kathleen O’Donovan (47) (a)
Kathleen O’Donovan was appointed to the Board on 30 March
2005. She currently chairs both the audit committee of the
Court of the Bank of England and the pension fund of
Invensys, the engineering group where she was previously
Chief Financial Officer. She is also Deputy Chairman and senior
non-executive Director of Great Portland Estates, and holds
non-executive directorships at Prudential and EMI Group.
10. Andrew Sukawaty (49) (d),(e)
Andrew Sukawaty was appointed to the Board in 2001.
Mr Sukawaty was the non-executive Deputy Chairman of the
Company and senior independent Director until 31 December
2004. He is Chairman and Chief Executive Officer of Inmarsat
Group. He is President of Cable Partners Europe LLC, which
invests in and operates cable television services in Europe. He is
Chairman of Xyratex Group Limited. He is a former Chairman
of Telenet. He has considerable experience in the mobile
telephone industry and telecommunications industries in the
United States and Europe, having at different times in those
periods held the offices of Chief Executive and President of
Sprint PCS, Chief Executive Officer of NTL, and Chief Operating
Officer of Mercury One2One. He has also been a former
Chairman of the Cellular Telephone and Internet Association
(CTIA) in the United States.
COMPANY SECRETARY AND GENERAL COUNSEL
11. Philip Bramwell (48)
Philip Bramwell joined the Company from BT, where he was
employed since 1998, initially as Legal Manager, Group Strategy
and Development and then as Chief Counsel, Corporate
Development. Before joining BT, he was a partner in DDV, a
European specialist telecommunications consultancy firm.
Prior to this, he held the position of Vice President and
General Counsel at BellSouth Europe and Legal Advisor at
SmithKlineBeecham Pharmaceuticals international division.
He was called to the Bar in 1983.
Key to membership of Board Committees:
(a) Audit Committee
(b) Chairman’s Committee
(c) Executive Committee
(d) Nomination and Governance Committee
(e) Remuneration Committee
All of the non-executive Directors are considered independent
of the management of the Company.
11
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Summary Directors’ report
The Directors have pleasure in presenting their summary Directors’ report and financial statement for the
year ended 31 March 2005.
This financial statement is a summary of the information in the Group’s full annual report and financial
statements (Annual Report). It does not contain sufficient information to allow as full an understanding
of the results of the Group and the state of affairs of the Company or the Group as the Annual Report.
Members can view the Annual Report on the Company’s website – www.o2.com – or obtain a copy, free
of charge, by contacting the registrar as detailed on page 20. In addition, members can elect to receive the
Annual Report in future years by writing to the registrar.
New holding company O2 plc was incorporated on 10 December 2004 and it became the holding
company of mmO2 plc and the mmO2 group of companies on 14 March 2005 pursuant to a scheme
of arrangement under section 425 of the Companies Act 1985 (the Scheme).
Scheme of Arrangement The Scheme was overwhelmingly approved by shareholders at a Court Meeting
and Extraordinary General Meeting of mmO2 plc held on 14 February 2005. Under the Scheme, shares in
mmO2 plc were exchanged for shares in O2 plc on a one-for-one basis. Shareholders also had the option
of electing to receive, in exchange for their existing shares in mmO2, either new shares in O2 plc or cash
consideration under the Cash Alternative. Shareholders who took no action were deemed to have elected
for the Cash Alternative. The O2 plc shares of holders who successfully elected for the Cash Alternative
were placed in the market. This was limited to 300,000,000 O2 plc shares.
References to the Company and the Board throughout this Annual Review refer to O2 plc from 14 March
2005 onwards and prior to that to mmO2 plc. References to the Group refer to O2 plc and its subsidiaries
from 14 March 2005 onwards and, prior to that, to mmO2 plc and its subsidiaries.
As part of the Scheme, mmO2 ADRs were delisted from the New York Stock Exchange on 11 March 2005
and neither an ADR programme nor a US listing has been established for the shares in O2 plc.
The Board is currently pursuing deregistration of O2 plc shares from the Securities and Exchange Commission.
In order to facilitate this deregistration process, the O2 Articles of Association include temporary provisions
to limit ownership of O2 plc shares by US resident shareholders.
Activity The Group is a leading provider of mobile communications services in Europe and has traded
through its wholly owned subsidiaries in the UK, Germany, Ireland and the Isle of Man throughout the year.
The Group also provides a nationwide mobile radio service designed to serve the needs of the police and
other emergency services in England, Wales and Scotland through O2 Airwave. O2 UK has a 50 per cent
interest in a joint venture, Tesco Mobile, to sell exclusively Tesco branded mobile services in Tesco stores
across the UK, using O2’s technology and network. In addition, O2 Germany has a 50 per cent interest
in Tchibo Mobilfunk, a joint venture with Tchibo GmbH, which is selling an O2 pre-pay mobile service in
Germany. It is also a founding member of the Starmap Mobile Alliance, a group of independent mobile
phone operators who have joined forces in readiness for the international roll-out of 3G services.
Dividend The Directors are pleased to recommend an inaugural final dividend of 2.25 pence per share
for the year ended 31 March 2005. This dividend will be paid on 26 August 2005 to shareholders on the
register on 5 August 2005.
Directors The names and biographical details of the current Directors of O2 plc are given on page 14.
All the Directors of mmO2 plc who held office on 4 January 2005 were appointed to the Board of O2 plc by
shareholders’ resolution on 4 January 2005. Rudolf Lamprecht and Kathleen O’Donovan were additionally
appointed on 30 March 2005 and Ian Meakins and David McGlade resigned on 30 March 2005 and
31 March 2005 respectively. Peter King and Adrian Knight were Directors of O2 plc from incorporation
until their resignations on 5 January 2005.
During the year, David Varney retired as a Director and Chairman of mmO2 plc on 28 July 2004 at the
conclusion of the 2004 Annual General Meeting and David Arculus became Chairman from that time.
Paul Myners and Neelie Kroes resigned from the Board on 10 August 2004 and 31 August 2004
respectively and Patrick Lupo, who was appointed to the Board on 10 August 2004, was elected a
Director of the Company by shareholders at the Extraordinary General Meeting of mmO2 plc held on
14 February 2005.
In addition, Stephen Hodge replaced Andrew Sukawaty as Deputy Chairman and senior independent
Director. The Deputy Chairman is recognised as the senior independent Director to whom concerns can
be conveyed independently of the Chairman, Chief Executive Officer or Chief Financial Officer by other
Directors or by shareholders.
The Company’s Articles of Association provide that Directors are required to retire by rotation every three
years. It is the Board’s intention that shareholders will be given the opportunity to re-elect Directors within
that timescale. David Chance and Rudolf Gröger will retire by rotation this year and are proposed for
re-election at the 2005 Annual General Meeting together with David Arculus who changed his role during
the year. In addition, any Director appointed during the year is required to retire and seek election by
shareholders at the next Annual General Meeting. Rudolf Lamprecht and Kathleen O’Donovan will seek
election at the forthcoming Annual General Meeting.
Substantial shareholdings At 10 May 2005, the following notifications had been received by the
Company in respect of holdings of three per cent or more of the Company’s issued share capital:
Number of Percentage of
O2 plc issued ordinary
Shareholder ordinary shares share capital
The Capital Group Companies, Inc 649,424,088 7.46
Legal & General Investment Management Limited 308,947,551 3.54
Corporate governance The Board supports high standards in corporate governance. The application
during the financial year of the principles in Section 1 of the July 2003 Combined Code on Corporate
Governance (the Combined Code) is described in the report on corporate governance in the Annual
Report. The Directors consider that the Company has fully complied with the provisions set out in Section 1
of the Combined Code, except in the following respects. David Arculus was also Chairman of Severn Trent
at the time of his appointment on 28 July 2004. Mr Arculus confirmed before his appointment that he
would relinquish his chairmanship of Severn Trent by 31 December 2004 and has done so. The service
contract in respect of Rudolf Gröger is now terminable on 12 months’ notice. However, in the event of
termination of Mr Gröger’s employment within 12 months of a change of control of O2 plc or its German
business, the employer is obliged to make a cash payment equal to two times his base salary and a
payment equal to the bonus expected for an on-target performance.
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Summary Directors’ report continued

The Board as a whole is collectively responsible for the success of the Company and provides The Executive Committee, chaired by Peter Erskine, and comprising the other executive Directors and his
entrepreneurial leadership of the Company within a framework of prudent and effective controls which senior executive team, is responsible for the executive day-to-day running of the Company, the preparation
enables risk to be assessed and managed. It sets out the Company’s values and standards and ensures that and maintenance of strategic plans for the Group, and monitoring day-to-day performance of the Group
its obligations to its shareholders and other stakeholders are understood and met. as a whole.

Board Committees The Board has delegated authority to the Committees described below on specific
matters. The Committees have formal terms of reference. Minutes of meetings are formally recorded.
The terms of reference of the Audit, Nomination and Governance, and Remuneration Committees are
posted on the Company’s website and are available, on request, from the Company Secretary and
General Counsel.
The membership of the Committees is shown alongside the biographical details of the Directors on page 14.
Details of the attendance by Directors at Board and principal Board Committee meetings held during the
year ended 31 March 2005 are contained in the report on corporate governance in the Annual Report. The
Board reviews the membership of the Committees on an annual basis at the start of each financial year or
more frequently as circumstances require.
The Chairman’s Committee, chaired by David Arculus since he became Chairman on 28 July 2004,
advises and assists the Chairman in the preparation for Board meetings. It also acts on behalf of the Board
between scheduled Board meetings, in exceptional circumstances, where it is not possible or practicable to
convene a meeting of the Board.
US corporate governance compliance The Company is required to comply with those provisions of the
Sarbanes-Oxley Act of 2002 implemented by the Securities and Exchange Commission as applicable to
foreign issuers during the period it remains registered with the Securities and Exchange Commission.
Internal control The Board is responsible for the maintenance of the Group’s system of internal control
and for reviewing its effectiveness. It has established an on-going process for identifying, evaluating and
managing key risks. There is a formal six-monthly review of key risks by the Executive Committee, Audit
Committee and the Board. The Audit Committee undertakes a six-monthly review of reports submitted by
senior executives on internal controls, risk management and reports from Internal Audit. These procedures
are designed to identify and manage those risks that could adversely impact the achievement of the
Group’s objectives. Whilst they do not provide total assurance against material mis-statement or loss, the
Directors, following a review of the systems described, are of the opinion that a proper system of internal
control is in place within the Group.
The Company has a Disclosure Committee which considers the materiality of information and the
respective disclosure obligations in releases made to regulatory bodies.

The Audit Committee, chaired by Stephen Hodge, reviews the effectiveness of internal controls, matters
raised by the internal and external auditors in their regular reports to the Committee and the full and half-
year financial statements prior to their release. The Committee reviews the programme and effectiveness
of risk management within the Group as well as ensuring that an appropriate relationship between O2 plc
and the external auditors is maintained. The Committee also approves the appointment or dismissal of the
Head of Internal Audit and reviews the procedures for handling complaints from whistleblowers. A full
report of the activities of the Committee during the year is contained in the report on corporate
governance in the Annual Report.

The Nomination and Governance Committee, chaired by David Arculus since he became Chairman
on 28 July 2004 and previously by David Varney, is responsible for reviewing the structure, size and
composition of the Board and for recommending candidates for Board membership for the approval of
the Board. The process leading to the selection of the new Chairman in 2004 was conducted by an ad-hoc
committee of independent Directors headed by the Deputy Chairman and advised by an independent
executive search agency.

The Remuneration Committee, chaired by Patrick Lupo since 11 November 2004 and previously by
Andrew Sukawaty, is responsible for determining the framework and broad policy for the remuneration
of the Chairman, all executive Directors, the Company Secretary and General Counsel, and members
of the Executive Committee, and for determining within agreed terms of reference, specific remuneration
packages for each of these, including any pension rights, any compensation payments and the
implementation of executive incentive schemes. A summary report on Directors’ remuneration is set
out on pages 17 and 18. The full report on directors’ remuneration is published in the Annual Report.

O2 Germany’s first O2 flagship store was opened in Munich in

December 2004.
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Summary Directors’ remuneration report

This summary of the report on directors’ remuneration has been prepared by the Remuneration Committee The performance share awards made to the CEO of O2 Germany and a small number of senior
(the Committee). Further details on all aspects of this summary are provided in the full report, found in the O2 Germany employees will be based on controllable EBIT margin and net service revenue growth of O2
Annual Report and Financial Statements 2005. Germany over a three-year period.

Remuneration policy O2 has a sufficiently flexible remuneration approach to support the changing needs Share ownership The Committee has introduced guidelines that require the executive Directors to build a
of the business. The Committee considers it vital to align the interests of the leadership team with those of shareholding of one times base salary.
shareholders, by linking a significant proportion of the package to the creation of shareholder value.
Pensions Peter Erskine and Rudolf Gröger accrue retirement benefits under Defined Benefit Schemes.
The Committee has adopted the following principles: David Finch accrues benefits under both a Defined Benefit and a Defined Contribution scheme. For the
year ended 31 March 2005, £89,250 was paid to a defined contribution Funded Unapproved Retirement
• the Committee sets base salaries which reflect contribution, criticality to the business and general wage Scheme and £48,875 was paid as a cash supplement in respect of David Finch. During the year, £16,482
levels elsewhere in the Group. Decisions are made with reference to a range around the median of the was paid to David Arculus’s personal pension arrangements. David Varney retired on 28 July 2004 and did
relevant market for the individual although the Company may pay more to recruit a high-calibre executive; not participate in any of the Company’s pension plans. David McGlade received a cash allowance of
• emphasis is placed on rewarding business performance, and therefore we seek to position the total £117,833 in lieu of pension benefits for the year under review.
compensation packages at upper quartile for superior performance; and
• performance-related incentives with stretching business performance targets to drive and reward superior Contracts and notice periods The notice period required by the Company to terminate executive Directors’
performance from our executives whilst at the same time aligning the interests of the leadership team with service agreements is 12 months. The Company may in its discretion terminate without notice and make a
those of our shareholders. payment in lieu of notice equal to the sum of 12 months’ pay including the value of employer’s pension
contributions, benefits, and a bonus payment of not less than the previous year’s bonus. Specific provisions
Base salary Reflects position within the Company, performance and contribution to the success of the apply following a change of control of the Company.
organisation. Base salaries are reviewed (but not necessarily increased) annually by the Committee.
Performance graph The performance graph below illustrates the Company’s TSR performance versus the
Annual incentives The annual incentive arrangements are based on a balance of key performance FTSE 100 Index and the FTSEurofirst 300 Telecommunications Index over the period from 19 November
indicators that the Committee considers to be the main drivers of shareholder value, including EBITDA and 2001 (when the Company was first listed following its demerger from BT) to 31 March 2005.
EBIT (indicators of strong financial performance); net service revenue, data ARPU and customer satisfaction
targets (crucial to future growth and profitability). Total shareholder return against the FTSE 100 Index and FTSEurofirst 300 Telecommunications Index
Source: Thomson Financial
During the year, the Committee reviewed bonus opportunity for executive Directors and senior executives.
Value (£)
Following dialogue with shareholders, the Committee concluded that bonus opportunity will increase by
160
half and the resulting bonus will be delivered two-thirds in cash, and one-third in deferred O2 plc shares
(the shares will be deferred for three years and subject to continued employment). For the year ended 140
31 March 2005 and the year ending 31 March 2006, the bonus opportunity as a percentage of base salary 120
(including the deferred shares element) payable to the Chief Executive Officer and Chief Financial Officer is
100 per cent of salary for on-target performance and 150 per cent of salary for maximum performance. 100
The CEOs of Operating Businesses each have an on-target and maximum bonus opportunity of 120 per 80
cent of salary and 180 per cent of salary.
60

Long-term incentives The Committee believes it is important to adapt the incentive arrangements offered 40
in future years to support the Group’s fast-changing business requirements. It achieves this through an
20
appropriate and flexible portfolio of long-term incentives. The portfolio comprises performance shares,
share options, restricted shares, and deferred equity shares. Other than under exceptional circumstances, 0
executives will only be made an award under one plan in any year. 19 Nov 31 Mar 31 Mar 31 Mar 31 Mar
2001 2002 2003 2004 2005
mmO2/O2 FTSE 100 Index FTSEurofirst 300 Telecommunications Index
Following consultation with shareholders, the Committee has recommended that the Performance Share
Plan will be the primary form of long-term incentive for the year ending 31 March 2006. Performance share
awards will normally vest on the third anniversary of grant subject to continued employment with the
Company and the Total Shareholder Return (TSR) performance of the Company compared to the TSR
performance of the constituent companies of the FTSEurofirst 300 Telecommunications Index (formerly
known as the FTSE E300 Telecoms Service Index) over a fixed three-year period.

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Summary Directors’ remuneration report continued

Directors’ remuneration (excluding pension arrangements) for the year to 31 March 2005
Salary and fees1 Annual bonus Benefits excluding pensions2 Total Total
2005 2004 2005 2004 2005 2004 20053 20044
£ £ £ £ £ £ £ £

Current directors
D Arculus 280,8475 48,000 – – 16,787 – 297,634 48,000
P Erskine6 665,833 607,500 568,404 564,200 35,241 40,602 1,269,478 1,212,302
D Finch 425,000 395,833 430,000 364,000 28,222 24,705 883,222 784,5387
R Gröger8 439,992 399,211 534,847 499,896 25,146 20,543 999,985 919,650
D McGlade9 414,167 372,500 391,980 462,000 24,162 100,047 830,309 934,547
D Chance 48,000 48,000 – – – – 48,000 48,000
S Hodge 66,66710 55,000 – – – – 66,667 55,000
R Lamprecht11 – – – – – – – –
P Lupo12 30,856 – – – – – 30,856 –
K O’Donovan11 – – – – – – – –
A Sukawaty 87,00013 100,000 – – – – 87,000 100,000

Former directors
D Varney14 113,844 350,000 – – 42,91115 36,125 156,755 386,125
N Kroes16 20,833 50,000 – – – – 20,833 50,000
I Meakins17 50,000 50,000 – – – – 50,000 50,000
P Myners18 17,290 48,000 – – – – 17,290 48,000
1 11
Salaries are reviewed in June each year. Non-executive Directors’ fees are reviewed in April each year. Appointed as a non-executive Director on 30 March 2005.
2 12
Benefits include car provision or cash allowance, healthcare, financial planning, dental care, home security and life cover. Appointed as a non-executive Director on 10 August 2004.
3 13
Certain Directors received pension supplements for the year ended 31 March 2005. Details of these payments can be found on page 17. Andrew Sukawaty stepped down as Deputy Chairman of the Company on 31 December 2004 but remains on the Board.
4 14
Total aggregate remuneration for 2004 excludes long-term incentive gains which were included in the Summary Directors’ remuneration Retired at the conclusion of the Company’s AGM on 28 July 2004. No compensation for loss of office was paid.
15
report for the year ended 31 March 2004. In addition to the benefits listed in Note 2 David Varney received a payment for outstanding holiday entitlement.
5 16
Includes aggregate fees earned as a non-executive Director and Chairman designate for the period 1 April 2004 to 28 July 2004. Resigned from the Board as a non-executive Director on 31 August 2004.
6 17
Highest paid Director. Resigned from the Board as a non-executive Director on 30 March 2005.
7 18
Excludes £146,717 gains from long-term incentives which were included in the Summary Directors’ remuneration report for the year Resigned from the Board as a non-executive Director on 10 August 2004.
ended 31 March 2004.
8
Rudolf Gröger’s remuneration has been converted from Euro to Sterling at an exchange rate of £1 = €1.45836.
9
Resigned on 31 March 2005. No compensation for loss of office was paid.
10
Appointed as Deputy Chairman of the Company on 1 January 2005.

Non-executive Directors’ remuneration The remuneration of non-executive Directors is reviewed

annually by the Chairman and executive Directors. Each non-executive Director has a letter of
appointment with O2 plc covering, amongst other items, their terms of appointment and expected time
commitment together with a general statement of their role and duties. Non-executive Directors are
appointed initially for three years unless otherwise terminated earlier by and at the discretion of either
party upon one month’s written notice.

Following a review of the remuneration of non-executive Directors, it was agreed that, with effect
from 1 April 2005, the annual fees payable to non-executive Directors would be a basic annual fee
of £50,000, plus an additional fee of £7,500 for membership of the Audit and Remuneration
Committees, £3,750 for the Nomination and Governance Committee, and an additional fee of £7,500
for chairmanship of a committee. The annual fee of £100,000 payable to the Deputy Chairman of the
Company remains unchanged. O2 Connection Manager - the UK's first integrated mobile connection
software to incorporate 3G, Wireless LAN (WLAN) and GPRS.

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Summary group profit and loss account Summary group balance sheet
Year ended 31 March 2005 As at 31 March 2005
2 2005 2004
2005 2004
£m £m £m £m

Group turnover 6,683 5,694 Intangible assets 7,045 7,354

EBITDA 1
1,768 1,367 Tangible assets 4,449 3,996
Investments 2 5

Group operating profit before exceptional items 386 233 Fixed assets 11,496 11,355
Exceptional items (45) (75) Current assets 2,473 2,043
Creditors: amounts falling due within one year (2,031) (1,678)
Group operating profit 341 158
Group share of operating result of joint ventures and associates (3) – Net current assets 442 365
Costs of capital reorganisation (20) – Total assets less current liabilities 11,938 11,720
Loss on sale of business – discontinued operation – (5) Creditors: amounts falling due after more than one year (1,403) (1,375)
Net interest payable and similar charges (9) (58) Provisions for liabilities and charges (254) (251)
Profit on ordinary activities before taxation 309 95 Net assets 10,281 10,094
Tax on profit on ordinary activities (8) 71
Shareholders’ funds 10,281 10,094
Profit for the financial year 301 166
Dividends3 (196) –
Retained profit for the year 105 166
All results in the current year derive from continuing operations.
Summary group net debt
As at 31 March 2005
2005 2004 2005 2004
£000 £000 £m £m

Directors’ emoluments4 4,758 5,318 Cash and current asset investments 1,326 1,016
Euro medium-term notes (1,056) (1,012)
2005 2004 Loan notes (7) (8)
Basic earnings per share (pence) 3.5 1.9 Obligations under finance leases and hire purchase contracts and other borrowings (341) (362)
Diluted earnings per share (pence) 3.4 1.9 Net debt (78) (366)
Dividend per share (pence) 2.25 –
1 This summary financial statement was approved by the Board of Directors on 17 May 2005 and was signed
EBITDA is our earnings before interest, tax, depreciation, amortisation and exceptional items, excluding our share of the operating result of
our joint ventures and associates. on its behalf by:
2
O2 Netherlands was sold on 3 June 2003. Included within the 2004 results is turnover of £48 million, EBITDA of nil and an operating
loss of £1 million which are classified as a “discontinued operation” in accordance with Financial Reporting Standard 3 “Reporting
financial performance”.
3
The proposed final dividend of 2.25 per share will be paid on 26 August 2005 to shareholders on the register at 5 August 2005.
4
Includes payments to non-executive Directors.

Basis of preparation
Peter Erskine David Finch
Chief Executive Officer Chief Financial Officer
O2 plc was incorporated on 10 December 2004 as part of the capital reorganisation undertaken by the Group, and on 14 March 2005 was
introduced as the new holding company of the mmO2 plc group pursuant to a Scheme of Arrangement (the Scheme) under section 425 of
the Companies Act 1985. The purpose of the capital reorganisation was to create distributable reserves in O2 plc to allow the
implementation of the Group’s distribution policy.
The Directors consider that in substance the Scheme constituted two distinct transactions being firstly, the insertion of the new holding
company, O2 plc, and secondly, a placing of shares on behalf of certain shareholders who elected to receive the consideration for their shares
in mmO2 plc in cash. The insertion of a new holding company constitutes a group reconstruction as defined by Financial Reporting
Standard 6 “Acquisitions and mergers” and has been accounted for using merger accounting principles. The premium paid to shareholders
who elected to receive their consideration in cash has been recognised as a deduction from the Group profit and loss account reserve.

o2.com 19
Independent auditors’ statement to the members of O2 plc Additional information for shareholders

We have examined the summary financial statement of O2 plc. Listings

The ordinary shares of O2 plc were listed on the London Stock Exchange on 14 March 2005, pursuant to
Respective responsibilities of Directors and auditors the Scheme of Arrangement of mmO2 plc.
The Directors are responsible for preparing the Annual Review in accordance with applicable law. Our
responsibility is to report to you our opinion on the consistency of the summary financial statement within Financial calendar/results announcements
the Annual Review with the annual financial statements, the Directors’ report and the report on Directors’ Annual General Meeting 27 July 2005
remuneration, and its compliance with the relevant requirements of Section 251 of the Companies Act
1985 and the regulations made thereunder. We also read the other information contained in the Annual Proposed dates
Review and consider the implications for our report if we become aware of any apparent misstatements Q1 Trading Statement and publication of July 2005
or material inconsistencies with the summary financial statement. IFRS financial information
Proposed Inaugural Final Dividend 26 August 2005
This statement, including the opinion, has been prepared for and only for the Company’s members as a of 2.25 pence per share payable to shareholders
body in accordance with Section 251 of the Companies Act 1985 and for no other purpose. We do not, who are on the register on 5 August 2005
in giving this opinion, accept or assume responsibility for any other purpose or to any other person to Interim Results November 2005
whom this statement is shown or into whose hands it may come save where expressly agreed by our prior Interim Dividend January 2006
consent in writing. Q3 Trading Statement February 2006
Preliminary Announcement May 2006
Basis of opinion Publication of the Annual Report and Financial Statements June 2006
We conducted our work in accordance with Bulletin 1999/6, “The auditors’ statement on the summary
financial statement” issued by the Auditing Practices Board for use in the United Kingdom. ShareGift
The Orr Mackintosh Foundation (ShareGift) operates a charity share donation scheme for shareholders
Opinion with small parcels of shares whose value makes it uneconomic to sell them. Details of the scheme are
In our opinion the summary financial statement is consistent with the annual financial statements, the available on the ShareGift internet site www.sharegift.org.
Directors’ report and the report on Directors’ remuneration of O2 plc for the year ended 31 March 2005
and complies with the applicable requirements of Section 251 of the Companies Act 1985 and the Cassettes for visually impaired shareholders
regulations made thereunder. The Company’s Annual Review is available on audio cassette. Copies can be obtained, free of charge,
from the Registrar, Lloyds TSB Registrars, by calling Freefone 0808 100 4102.

Annual Report and Financial Statements

PricewaterhouseCoopers LLP Copies of our Annual Report and Financial Statements can be obtained by contacting our Registrar,
Chartered Accountants and Registered Auditors Lloyds TSB Registrars, on Freefone 0808 100 4102.
London
17 May 2005 Annual General Meeting
The Annual General Meeting will be held at The Hexagon, Queens Walk, Reading, Berkshire RG1 7UA
on Wednesday, 27 July 2005, at 11.00 a.m.

The financial information contained in the summary financial statement on page 19 does not constitute
the Group’s statutory accounts for the years ended 31 March 2005 or 31 March 2004. The financial
information is derived from the statutory accounts which were approved by the Board of Directors on
17 May 2005. The auditors have reported on those accounts; their report was unqualified and did
not contain a statement under sections 237(2) or 237(3) of the Companies Act 1985. The 2005
statutory accounts will be delivered to the Registrar of Companies following the Company’s Annual
General Meeting.

The maintenance and integrity of the O2 plc website is the responsibility of the directors; the work carried out
by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the summary financial statement since it was
initially presented on the website.

Legislation in the United Kindom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions. O2 Xda IIs – the office in the palm of your hand
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Duplicate mailings General enquiries

You may have received separate sets of documents as it may not have been possible to combine your
records. Any shareholder who now wishes to stop the additional mailings by combining their records
should contact Lloyds TSB Registrars.
Dividend
To register your bank details and allow dividend payments to be sent directly to a bank account, please
contact Lloyds TSB Registrars or complete and return the mandate form that will be attached to your
dividend cheque in August 2005.
Shareview
Many shareholders prefer to receive their reports online rather than through the post. You can do this by
registering with Shareview, which is easy and free. Go to Shareview at www.shareview.co.uk – click on
“register now”, and complete the on-screen application form.
Shareview, which is operated by Lloyds TSB Registrars, gives O2 shareholders access to special services
over the internet. You will be able to check the details of your O2 shareholding at any time. As a Shareview
user, you will be able to view indicative prices of shares of other companies of which you are a shareholder
and who use Lloyds TSB as their Registrar.
An e-mail will be sent to you when there is an item for you to view on the shareholder pages on
www.o2.com.
In future, when a dividend payment is made, it will be possible to download your tax voucher in respect of
dividend payments by logging on to Shareview’s website at www.shareview.co.uk with your access number
and password, and click on “e-Tax vouchers”. You can print or save the details if you need to enter them
in self-assessment forms. There will also be a useful summary showing the details of payments within a
given tax period.
O2 plc offers its UK shareholders Shareview Dealing, an internet and telephone share sale and purchase
service operated by Lloyds TSB Registrars. Log on to www.shareview.co.uk/dealing or call them on 0870
850 0852 between 8.30 a.m. and 4.30 p.m., Monday to Friday, for more information about the service
and for details of their rates.
General enquiries should be addressed to the Company at:
O2 plc
Wellington Street
Slough
Berkshire SL1 1YP
e-mail: shareholders@o2.com
Third party trade marks
Third parties’ trade marks used in this document remain the property of the third party concerned.
Cautionary statement regarding forward-looking statements
This document contains certain forward-looking statements. We may also make written or oral forward-
looking statements in:
• our periodic reports to the US Securities and Exchange Commission, also known as the SEC, on Forms
20-F and 6-K;
• our Annual Report and Financial Statements and half-yearly reports;
• our press releases and other written materials; and
• oral statements made by our officers, Directors or employees to third parties.
We have based these forward-looking statements on our current plans, expectations and projections about
future events. These forward-looking statements are subject to risks, uncertainties and assumptions about
us. Forward-looking statements speak only as of the date they are made. Statements that are not historical
facts, including statements about our beliefs and expectations are forward-looking statements. Words like
“believe”, “anticipate”, “expect”, “intend”, “seek”, “will”, “plan”, “could”, “may”, “project”, “goal”,
“target”, and similar expressions often identify forward-looking statements but are not the only ways we
identify these statements.
These statements may be found in this document generally. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of various factors, including all the risks
discussed in the above-mentioned reports, releases and statements.

Lloyds TSB Registrars is a division of Lloyds TSB Bank plc, authorised and regulated by the Financial Services If any one or more of the foregoing assumptions are ultimately incorrect, our actual results may differ from
Authority and a signatory to the Banking Codes. our expectations based on these assumptions. Also, the sector and markets in which we operate may not
grow over the next several years as expected, or at all. The failure of these markets to grow as expected
Contacts may have a material adverse effect on our business, operating results and financial condition, and the
Shareholder enquiries market price of our ordinary shares.
Lloyds TSB Registrars maintain the Company’s share register and provide a shareholder helpline
service (details below). Shareholders should contact the Registrar if they have any enquiries about The information on our website, any website in this document or any website directly or indirectly linked to
their shareholding. our or any other website mentioned in this document is not incorporated by reference into this document
and you should not rely on it.
The Registrar
Lloyds TSB Registrars (3501) O2 plc shareholder helpline:
The Causeway Freefone 0808 100 4102
Worthing Fax: 01903 833371
West Sussex BN99 6DA From outside the UK:
Tel: +44 121 415 7102
Fax: +44 1903 833371

o2.com 21
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o2.com
O2 plc
Wellington Street
Slough
Berkshire SL1 1YP
Registered No. 5310128