Peter Erskine is to step down as chief executive of Telefonica O2 Europe.

Mr Erskine, 55, who is credited for turning O2 around before its £17.7 billion sale to the Spanish telecoms giant last year, will cease to run the European business on January 31. He had been at the helm of O2 for six years.

Mr Erskine will be replaced by Matthew Key, 44, the chief executive of O2's British business.

Mr Erskine, who ran Telefonica’s European telecoms businesses outside Spain, had recently shrugged off questions about his long-term plans, saying he was enjoying his job and respected Cesar Alierta, Telefonica’s chairman and chief executive. He will remain on the Telefonica board.

He is reported to have earned around £12 million from the Telefonica deal.

O2 has faced recent difficulties in the fiercely competitive European market. It added only 34,000 customers in the last quarter, compared to Vodafone's 200,000, and was forced to cut forecasts for its vital German operation.

Mr Alierta, said today: "Peter has built a business and brand of exceptional value. Since the acquisition of O2 by Telefonica two years ago, he has worked closely with me and has been instrumental in ensuring the success of the merger of the two businesses, whilst contributing to a significant increase in shareholder value and the growth of Telefónica as one of the world's leading telecommunications companies.

"I personally hold Peter in the highest regard and value both his extensive industry experience and his frank advice. It is for this reason that I am delighted Peter will continue to play a vital role in the management of Telefónica as a member of the Comisión Delegada and board."

Robert Grindle, a Dresdner Kleinwort analsyt, said: “Clearly the O2 business is seeing a lot more pressure than it used to.

“Times are tougher and it’s hardly a big surprise that the chief executive of better times might think it’s time to take some profits.”

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