SHAREHOLDER groups hit out at O2 last night for forcing thousands of small investors to sell their holdings just months before Telefónica’s agreed bid sent the mobile operator’s shares surging.

As the banks that advised on the £18 billion deal — JPMorgan, Merrill Lynch, Goldman Sachs, Citigroup and Royal Bank of Scotland — prepared for a bonanza pay day, small shareholders in O2 said it was “disgusting” that they had been deprived of the surge in the share price.

Under a controversial share buyback programme implented in March, the former BT Cellnet offered to buy out more than 800,000 small shareholders. But investors who failed to respond to the offer in time had their stakes compulsorily repurchased.

They were paid just 130p — significantly below yesterday’s closing price of 206p in the wake of the announcement of the Telefónica offer.

The buyback was aimed at helping O2 to cut its unusually large base of small investors and cut the associated administrative costs.

David Blundell, of the UK Shareholders Association, said: “This provides further evidence that relying on inertia is not fair for the small shareholder. It would seem to be a breach of good faith on the part of O2.”

Angela Knight, of the Association of Private Client Investment Managers and Stockbrokers, said: “If companies do not pay sufficient attention, when they carry out their corporate actions, to the way individual shareholders hold their shares then they can disadvantage them quite substantially.

“It is a real shame that an entity, which is part of the wider share ownership culture, forgot about the small shareholder.”

Brian Rose, a former small shareholder who surrended his 800 shares in the buyback, said: “It is pretty disgusting. It seems they have enticed us to sell our shares then taken advantange of that.”

The large number of small investors in O2 stems from the Thatcher years, when BT was part of a flagship privatisation.

This encouraged small investors to buy shares in a national favourite. BT shareholders were then allowed to be compensated in mmO2 shares when BT decided to dispose of mmO2 four years ago.

O2 would not reveal how many of the shareholders had opted to be bought out under its buyback plan and how many the company had bought out by default.

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