Key will replace existing chief executive Peter Erskine on February 1, 2008 but Erskine will remain on the Telefonica board.
Key joined O2 in 2002 as chief financial officer and was promoted to his current role in 2005. Over the last year he has overseen the operator winning the exclusive UK rights to the iPhone, the launch of O2 Broadband and sponsoring the Millennium Dome (now the O2).
Prior to joining O2 Key was financial director at Vodafone UK and has also held various financial roles at other major companies including Coca-Cola and Schweppes, Grand Metropolitan and Kingfisher.
Telefonica executive chairman César Alierta said: “Under Matthew’s leadership, O2 UK has grown its revenue and profitability more than all of its competitors combined and has become a partner of choice in the UK market, with highly successful collaborations with world-leading brands such as Tesco and Apple.
“In his new role, I am confident that he will continue to build on the strong position of Telefónica in the highly competitive European markets.”