1st Quarter Results- Part 1

Telefonica SA
16 May 2002



PART 1

                               Financial Results

                               January-March 2002




Note: The financial statements for the January-March 2001 period do not reflect
the change in the fiscal year for Telefonica de Argentina, Telefonica Data
Argentina, Telefonica Comunicaciones Personales (TCP) and Cointel to adapt them
to the Group's fiscal year. As a result of this, October-December 2000 is the
consolidated period for these assets in the consolidated accounts for year 2001.




                                                  FINANCIAL HIGHLIGHTS

The main points to highlight in the 1Q02 in the Telefonica Group Results are:


  • The Financial results of the Telefonica Group are conditioned by the
    Argentine crisis, the evolution of the exchange rate and the consolidation
    perimeter. In the first quarter revenues decreased by -2,4%, EBITDA by -2,7%
    and the EBIT by -10,9%.


  • The operating evolution of the businesses in Argentina and the peso
    depreciation impacted revenues in 570,2 million euros; EBITDA in 220,5
    million euros; and EBIT in 127,1 million euros. Eliminating the Argentine
    contribution, revenues would have grown 5,8% and EBITDA 5,0%, EBIT would
    have been reduced by -1,8% while net income would have grown by 10.1%
    year-over-year.


  • The accumulated financial impact net of taxes due to the devaluation and
    consequent depreciation of the peso, in the profit and loss statement and
    balance sheet as of March 31, 2002 reached 2.886,1 million euros. The
    maximum exposure of the Telefonica Group in the various Argentine companies,
    to this date is 1,668.3 US dollars. This amount includes the equity interest
    in proportion to the investment, goodwill and intercompany loans.


  • The operating evolution of the businesses is shown by the 3,2% revenues
    grouth and the 4,1% EBITDA growth if the effects of the exchange rates and
    change in perimeter are eliminated. The positive evolution of the cost
    control and efficiency gains are demonstrated by the 1,5% reduction in
    operating expenses, which have inverted the past year trend and have allowed
    an EBITDA margin of the 41,0%.


  • Solid operating and financial evolution at Telefonica Moviles, which is
    the largest contributor to growth in the Group. Telefonica Moviles has
    registered a 16,6% growth in revenues, a 22% in EBITDA and an EBITDA margin
    improvement, that reached 40,5%.


  • Telefonica de Espana financial results are affected, in comparison terms,
    by the tariff reductions in 2001 and 2002 resulting from the adoption of
    'price cap' and the last year's base for comparisons. The EBITDA margin
    reached 44,7%.


  • Telefonica Group has reduced its net debt at the end of the quarter. Free
    cash flow generation (EBITDA - Capex) totaled 2,093.1 million euros, an
    increase of 36.5% year-over-year.



                          GRUPO TELEFONICA SELECTED FINANCIAL DATA





Unaudited data
(Millions of euros)                                         January-March
                                                    2002          2001        % Var.

Operating revenues                                    7,418.6       7,603.3      (2.4)
EBITDA                                                3,044.7       3,128.2      (2.7)
Operating profit                                      1,208.0       1,355.6     (10.9)
Income before taxes                                   (143.0)         523.9       c.s.
Net income                                              121.1         431.8     (72.0)
Net income per share                                     0.03          0.09     (72.8)
Average number of shares, millions (1)                4,765.4       4,621.5        3.1


(1) Average number of shares for the period. It includes capital increases in to
fund the acquisition of cellular companies from Motorola, as well as the
issuance of new shares coming from convertible bonds, weighted for the number of
days listed. Bonus capital increases charged to reserves, which do not involve
any change in the ownership structure, as considered as of January 1.


Number of shares at the end of the period is 4,7651,354,202


Telefonica Group Financial Results


The management comments included in this report refer to the financial evolution
of the Telefonica Group according to the organizational structure by business
lines. This structure was created after the completion of the tender offers for
the acquisition of the minority stakes in various Latin American operators,
given their relative high level of capital contribution in the Group.


These pro-forma income accounts are based on the assumption that each business
line has a stake in the companies owned by the Group in the corresponding
businesses, regardless of whether this stake has already been transferred or
not, although ultimately, Telefonica, S.A. intends to transfer it in the future.


Furthermore, in order to facilitate the comparison and analysis of the results
obtained by the Telefonica Group, the companies included in each business line
have been consolidated effective January 1, regardless of when certain
consolidations were actually made throughout the period. The results
corresponding to the same period of the previous fiscal year are also on a
pro-forma basis, under the same assumptions.


It should be noted that the assumptions considered in the preparation of these
pro-forma statements by business line do not alter in any way the overall
results of the Telefonica Group, and that such results have been incorporated as
of the date of the acquisition of each stake by the Group.


During first quarter of 2002, Telefonica Group achieved consolidated net income
of 121.1 million euros, 72.0% less than the results for the same period last
year.


When analyzing the financial results for this first quarter, various
circumstances which have had a noticeable impact should be taken into account,
such as:


  • The complicated economic situation that Argentina continues to experience.
    This has significantly affected the development of the Group's businesses in
    the country, despite the Group's implementation of all measures within its
    reach: to preserve, to the extent possible, the generation of cash flow
    coming from the country.


    As we have already indicated in the last quarterly financial results, this
    situation affected the 2001 financial results of Telefonica Group (resulting
    from the application of a 1.7 pesos/dollar (1.5149 pesos/euro) exchange
    rate, in line with the most conservative accounting criteria established by
    the Spanish Accounting Regulator (ICAC) in both the profit and loss account
    and in lower reserves of translation differences in consolidation of 369.0
    million euros and 1,424.1 million euros, respectively.


    During the first quarter of 2002 and as a result of the significant
    depreciation the Argentine peso experienced throughout this period (-64.2%
    against euro), the Group's financial results suffered an additional negative
    effect, resulting from the application of a 2.85 pesos/dollar (2.4862 pesos/
    euro) exchange rate, of 254.4 million euros, and lower reserves of
    translation differences in consolidation of 838.6 million euros


    Additionally, the use of latest exchange rate effective prior to the release
    of this results, would not imply any signifficant additional impact on the
    Group's individual and consolidated accounts.


    On March 31, 2002, Telefonica Group's maximum exposure to its different
    Argentine companies totaled 1,668.3 million euros, which includes the equity
    value assignable in these investments, their goodwill, and the internal
    financing provided.


    Among the still pending issues is the required renegotiation with the
    Argentinean government of Telefonica de Argentina's future rates. This
    renegotiation will take place as a result of the issuance of Law 25.561 on
    January 6, 2002, which establishes that tariffs are denominated in pesos at
    an exchange rate of 1 peso for 1 US dollar.


    Likewise, the measures adopted by the Argentinean Government and the
    consequences on the Group's financial statements could cause, under certain
    circumstances, certain equity and financial imbalances, such as: negative
    equity, the inability to cover short-term foreign debt payment obligations
    due to limitations on the convertibility of the peso, the need to accelerate
    payments of financing contracts, etc.


    To the extent that the aforementioned circumstances have not occurred on the
    date these annual results were prepared, because their future unfold is as
    yet uncertain, we have not been able to quantify their possible impact, if
    any, on the consolidated financial statements as of March 31, 2002.


  • Non-recurring negative results totaling 198.2 million euros were the
    result of the following factors: lower capital gains from the sale of the
    securities portfolio in the first quarter of last year in the amount of 68.1
    million euros, net of taxes; lower non-recurring positive results in the
    amount of 150 million euros, posted in first quarter 2001, stemming from the
    reversion of the provisions awarded in fiscal 1999 by Telefonica de Espana;
    higher provisions provided during the quarter for securities portfolio
    depreciation in the amount of 36.2 million euros; and finally higher
    non-recurring negative results from Admira Media in the amount of 43.4
    million euros, as a result of the provisions associated with the investment
    made in Azul Television investment in Argentina.


  • The positive balance of 179.1 million euros in the corporate tax
    provision, as a result of posting under this heading credits from deductions
    and contributions pending application for tax purposes. Because these were
    carried out under a criterion of prudence, there is no doubt as to their
    future use. The amount totals 257.9 million euros and has been accounted in
    accordance with the stipulations set forth in the March 15, 2002 Resolution
    issued by the Spanish Accounting Regulator responsible for these matters
    (ICAC), and in accordance with international accounting standards.


Excepting the aforementioned circumstances, the Group's operating performance
can be considered positive. Thus, the Group's customer base at the end of March
reached 74.6 million customers (79.8 million customers in total), up 11.4% (7.6
million customers added) from the same period last year and a 1.9% or 1.4
millions growth compared to the previous quarter.


This growth mainly comes from the year-over-year increase of 5.4 million
subscribers (21.4%) in Telefonica Moviles' managed customer base, which totaled
30.8 million at the end of the quarter. In the last quarter alone, Telefonica
Moviles' managed customer base grew by more than 965,000 subscribers, more than
54% of these from Spain.


Equally noteworthy is the growth in the fixed telephony managed customer base,
which rose 5.1% or 2.1 million lines, 1.6 million of which are in Latin America
(1.3 million belong to Telesp).


As for growth in customer base broken down by region, emphasis should be placed
on the balance of growth obtained versus the first quarter 2001, with Latin
America experiencing 45.7% growth.


From a financial standpoint, consolidated revenues for the Group reached 7,418.6
million euros, down 2.4% from the same period last year. This decrease in
revenues is conditioned, firstly, by the negative evolution of the Latin
American exchange rates and by the changes in the Group's consolidation
perimeter, which, together, mainly affect Telefonica Latinoamerica and Admira
Media, and secondly, on the revenues evolution of Telefonica de Espana.


It should be noted that fluctuations in the exchange rate assume 7.5 percentage
points of lower growth in the Group's consolidated revenues, mainly due to the
depreciation of the Argentine peso throughout the period and, to a lesser
extent, due to the devaluation of the Brazilian real. This negative performance
has mainly affected the revenues from Telefonica Latinoamerica, which totaled
2,155.1 million euros, 16.9% lower than in first quarter 2001, and which
contributed -5.8 percentage points to the growth of the Group's consolidated
revenues. It is necessary to stress that a large part of the decline shown at
Telefonica Latinoamerica was caused by the performance of Telefonica de
Argentina, whose revenues fell 16.0% in local currency -January-March 2002 vs
October-December 2000- (-56.0% in euros), caused by the difficult macroeconomic
environment of the country. These figures, however, are influenced by the change
in fiscal year accounting carried out by the Company during fiscal 2001. If we
adjust fiscal 2001 to the current fiscal year, the decrease would be 7.5% in
local currency (51.9% in euros). On the other hand, the performance of Telesp in
Brazil, the Group's most important asset, grew 15.9% in local currency (3.4% in
euros). This was basically due to the growth experienced in lines in service
throughout fiscal year 2001 and the 10.4% average tariff increase, which went
into effect in June of the same year. If we exclude the exchange rate variations
and adjust TASA's fiscal year 2001 to the current fiscal year, Telefonica
Latinoamerica's revenues would have grown 3.1%.


Likewise, Admira Media has been hurt by the evolution of the exchange rate (ATCO
posted a 42.4% revenues decrease in local currency) and the crisis in the
advertising market, which has translated into less revenues in all of the
Group's Companies. At the same time, it was also influenced by the change in
Onda Cero's consolidation criteria, which from this quarter onwards is
consolidated by the equity method, as a result of the decision to sell the radio
station to Grupo Antena 3.


As for Telefonica de Espana, consolidated revenues reached 2,518.7 million
euros, 2.7% below those reported for the same period last year, which
contributed negative 0.4 percentage points to the Group's consolidated revenues.
This negative contribution is, however, in line with the performance expected
for Telefonica de Espana throughout the fiscal year, due to the fact that in the
first quarter, the Company's revenues were affected by tariff decreases
throughout fiscal 2001 and during the first quarter of 2002, according to the
price cap system. Anyway, throughout the coming quarters this differential will
improve and will enable the Company to end the fiscal year at similar levels to
last year's.


In relative terms, Telefonica Moviles continues to be first contributor to
Group's revenue growth in relative terms (3.4 percentage points), totaling
2,261.6 million euros, 16.6% more than in March 2001, making it the number two
company in absolute contributions to growth in the Group's consolidated
revenues. This growth is mainly due to the positive performance of Telefonica
Moviles Espana, mainly due to the increase in the customer base, increased
traffic, and higher terminal sales, partially offset by lower ARPU, although the
incorporation of new companies into its consolidation perimeter has played a
role.


If we exclude the effects of the exchange rate and perimeter, the Group's
consolidated revenues would have grown by 3.2% over March 2001.


Revenues performance has been partially offset by the positive development in
operating expenses, which totaled 4,344.8 million euros, down 1.5% from the
first quarter of fiscal 2001 and that reverts the trend in relation to the
previous year, demonstrating the Group's effort in reducing costs and achieving
efficiency. Operating expenses, as well as revenues, were also influenced by the
evolution of the exchange rate and the perimeter, to such an extent that if we
exclude both effects, operating expenses would have increased 2.7%, 0.5
percentage points below the revenues growth rate.


It is important to mention that all lines of business experienced a lower growth
rate in costs than in fiscal 2001 except Telefonica Moviles, due to the impact
of the centralized handset procurement model introduced in December 2001, and
Telefonica Espana, due to the higher expenses associated with launching ADSL.


As for bad debt evolution, despite the increase Telefonica de Argentina
experienced to 9.4% over revenues at the end of the first quarter from 6.4% at
the close of fiscal 2001, the Group's performance improved by 0.2 percentage
points over the same period last year, 2.4% over revenues against 2.6% in March
2001. This improvement is mainly due to Telefonica Moviles, whose ratio of bad
debt over revenues fell 1.4 percentage points to 1.6% because of Telefonica
Moviles Espana's positive management of its customer portfolio.


Consolidated EBITDA at the end of the first quarter reached 3,044.7 million
euros, down 2.7% from the same period last year. This figure, as with figures
for revenues and expenses, was influenced by exchange rate variations in Latin
American currencies and in the consolidation perimeter. If we excluded both
effects, the EBITDA reported would have grown by 4.1%. (The exchange rate
deducts 8 percentage points from EBITDA growth, while the consolidation
perimeter contributes 1.2 percentage points). In terms of margins, however, the
performance is positive, if we take into account that margin over revenues was
41.0%, just 0.1 percentage point below the same period last year.


The company that contributed the most to the Group's EBITDA growth was
Telefonica Moviles (5.8 percentage points), totaling 916.6 million euros, up
22.0% from the same period last year and 5.4 percentage points above the revenue
growth rate for the period, which demonstrates the Company's effort in reducing
costs. This effort led to an improvement in the EBITDA margin of 1.8 percentage
points compared to March 2001, with the margin over revenues reaching 40.5%
(38.7% in 1Q01).


Terra Lycos contributed 1.1 percentage points to the consolidated EBITDA growth
of the Group, as a result of the cost cutting program implemented by the
Company, which has enabled the EBITDA at the end of the first quarter to reach
-46.8 million euros versus -82.7 million euros in the same quarter last year.
Similarly, Telefonica Data contributed 0.3 percentage points to growth, mainly
due to the improved results obtained in Brazil and Peru and the cost cutting
program carried out in Telefonica Datacorp, although the change in its
consolidation perimeter also had an influence.


On the other hand, Telefonica Latinoamerica's EBITDA totaled 1,050.0 million
euros, down 18.7% from first quarter 2001 (deducting 7.7 percentage points from
the Group's consolidated EBITDA growth). These evolution were mainly due to
Telefonica de Argentina, whose EBITDA in local currency fell 7.0% (January-March
2002 vs. January-March 2001), as well as the negative evolution of the exchange
rates. If we exclude the depreciation of Latinamerican currencies and adjust
TASA's 2001 EBITDA to the current year, Telefonica Latinoamerica's EBITDA would
have grown by 2.8%.


Telefonica de Espana, subtracted 4.1 percentage points from the Group's
consolidated EBITDA growth, totaling 1,126.9 million euros, down 10.3% compared
to the same period last year. This drop, as was anticipated in the fourth
quarter 2001 financial results, was significantly determined by tariff decreases
stemming from the implementation of the Price Cap system throughout 2001 and the
first quarter of 2002, the evolution of market share, and the increase in costs
related to the launch of retail ADSL service. As a result of the above, the
EBITDA margin at the end of the quarter was 44.7%, which is slightly above the
margin posted for the entire fiscal 2001. Despite the EBITDA reported for this
first quarter, the Company hopes to continue improving in comparative terms
throughout the year, and by the end of the year hopes to reach similar levels to
those reported in 2001.


As for the Group's financial expenses, these totaled 856.1 million euros, up
75.6% from the first quarter 2001. This growth, however, was due to the impact
the devaluation of the Argentine peso had during the quarter, which was 418
million euros. If we excluded these effects, financial costs for the quarter
would have been 438 million euros, 10% less than the same period last year, due
to the 0.67% average cost reduction of the debt.


As for the Group's net debt, at the end of March it rose to 28,684.0 million
euros, down 0.9% from the 28,941.6 million euros posted at the end of fiscal
2001. This decrease was mainly due to the operating cash flow generated by the
Group during the quarter (1.010 million euros), that allowed to more than offset
the higher level of net debt as a result of the increase in non-euro denominated
debt, due to the appreciation of the dollar against the euro (237 million
euros), and higher financial investments in the period (282 million euros). Free
cash flow (EBITDA - Capex) totaled 2,093.1 million euros, an increase of 36.5%
year-over-year




Goodwill amortization totaled 170.0 million euros, down 26.8% from the result
posted for first quarter 2001, which was the result of extending the
amortization period of Terra Lycos' goodwill assets from 5 to 10 years, which
started on the second half of 2001.


Capex for the period totaled 951.6 million euros, 40.3% lower compared to the
same period last year. This is a generalized decrease in all of the Group's
lines of business, except for Telefonica de Espana, which remained at the same
level due to the investments needed to lead the broadband development in Spain.
Among all lines of business, the reduction at Telefonica Latinoamerica (64.1%)
should be highlighted. This reduction was mainly due to the lower capex
dedicated to Telesp after it met the targets established by the Brazilian
regulator in 2001 (-63.7%) and because of the strict capex control and
rationalization policy put in practice in the rest of the countries in the
region. Nevertheless, the strong cyclical behavior of investments should be
taken into account. For this reason, this performance should not be extrapolated
for coming quarters.

                                                  GRUPO TELEFONICA


MARKET SIZE

Thousands                               January-March            % Var.               Weighted (*)              % Var.
                                     2002           2001         01/02        March 2002        March 2001       01/02

Lines in service                      45,410.2       43,259.1          5.0          39,632.2          37,553.9       5.5
In Spain                              21,100.5       20,600.3          2.4          21,100.5          20,600.3       2.4
In other countries (1)                24,309.7       22,658.8          7.3          18,531.7          16,953.6       9.3
Cellular customers                    33,271.5       27,163.5         22.5          24,607.1           19292.6      27.5
In Spain                              17,135.0       14,246.3          215          16,051.0          13,192.1      21.7
In other countries (2)                15,956.5       12,917.2         23.5           8,556.1           6,100.5      40.3
Pay TV customers (3)                   1,148.9        1,025.2         12.1             727.0             655.2      11.0
In Spain                                 808.3          674.0         19.9             393.1             327.8      19.9
In other countries                       340.6          351.2        (3.0)             333.9             327.4       2.0
TOTAL                                 79,830.6       71,447.8         11.7          64,966.3          57,501.7      13.0

(*) Weighted by the economic interest in each of the companies.


 1. Lines in service: includes all lines in service in March 2002 and March 2001
    for Telefonica de Espana, Telefonica CTC Chile, Telefonica de Argentina,
    Telefonica del Peru, Telesp, and CanTV.

 2. Cellular customers: includes all cellular customers as of March 2002 for
    Telefonica Servicios Moviles Espana, Medi Telecom, Telefonica Movil Chile,
    TCP Argentina, Telefonica Moviles Peru, CRT Celular, TeleSudeste Celular,
    TeleLeste Celular, NewCom Wireless Puerto Rico, Telefonica Moviles
    Guatemala, Telefonica Moviles El Salvador, Telefonica Moviles Mexico, Quam,
    and CanTV.

 3. Pay TV customers: includes all pay television customers for Via Digital in
    Espana and Cable Magico in Peru.



                                    TELEFONICA GROUP FINANCIAL RESULTS BY COMPANY

Unaudited data                          Income                         EBITDA                    Operating result
Millions of euros                   January-March                   January-March                  January-March
                               2002       2001     % Var.     2002       2001     % Var.      2002      2001     % Var.

G. Telefonica de Espana        2,518.7    2,588.7    (2.7)    1,126.9    1,255.7    (10.3)      448.1     579.0   (22.6)
Cellular Business              2,261.6    1,939.3     16.6      916.6      751.2      22.0      575.8     446.3   (29.0)
G. Telefonica Latinoamerica    2,155.1    2,594.7   (16.9)    1,050.0    1,291.5    (18.7)      419.0     634.4   (33.9)
G. Telefonica Data               456.8      406.4     12.4       16.9        7.3     133.3     (37.7)    (32.5)     15.8
G. Terra-Lycos                   159.5      177.2   (10.0)     (46.8)     (82.7)    (43.4)     (87.2)   (115.2)   (24.3)
Directory Business                68.0       51.6     31.8        6.9     (10.9)      c.s.      (0.5)    (16.3)   (96.7)
G. Admira Media                  217.8      283.7   (23.2)        6.8       10.5    (35.4)      (9.0)     (6.7)     33.7
G. Atento                        156.4      153.5      1.9       10.4       11.4     (8.5)     (12.9)     (4.8)    169.7
Other subsidiaries               294.4      297.3    (1.0)     (49.0)     (55.8)    (12.2)     (93.3)    (80.0)     16.7
Eliminations                   (956.9)    (971.4)    (1.5)     (18.2)     (55.0)    (64.9)        1.4    (33.1)     c.s.
GROUP                          7,418.6    7,603.3    (2.4)    3,044.7    3,128.2     (2.7)    1,208.0   1,355.6   (10.9)






FINANCIAL RESULTS BY LINE OF BUSINESS

FIXED TELEPHONY BUSINESS

GRUPO TELEFONICA DE ESPANA

During the first quarter of the year and as a result of a very demanding
regulatory environment at Telefonica de Espana, competitive pressures have
increased, in both access and in traffic, especially from cable operators.


At the end of the period, the competition was able to increase its share of the
access market by an estimated 4.8%. Thus, during the quarter, there was a net
decrease in PSTN and ISDN lines of 106,389 lines. The figure attained for
pre-assigned lines was 1,454,815 of which around 947,000 (65.1%) are totally
pre-assigned (including local calls).


As for traffic, the total volume 35,160 million minutes, representing a 3.4%
increase over the same period of 2001. The 16.5% growth in incoming traffic
reported for the quarter has been partially offset by outgoing traffic,
representing over 70% of total minutes used, which fell 1.0%. The decrease in
outgoing traffic was primarily due to the 10.1% year-over-year fall in local
traffic and, to a lesser extent, by the decreases in DLD traffic, down 5.7% from
the first quarter 2001, and ILD traffic, down 20.4% as a result of the
rationalization of the PUT (Public Use Telephony) traffic reselling business. On
the other hand, provincial traffic grew 25.2% and fixed-to-mobile went up by
3.1%, both compared to the same period last year. Lastly, despite a slowdown in
Internet traffic resulting from the migration toward broadband, total Internet
minutes increased year-over-year by 5.6%.


The marketing of packaged minutes has continued to be well accepted by the
market, especially Local Traffic packages, which totaled 2,443,084 subscribers
at the end of the quarter. Thus, the total number of franchised plans reached
3,695,858 during the first quarter of this year, up 58.9% over last year.


As for Value-Added Services, we should note that the number of active voice
mailboxes reached 10,401,800 at the end of March, and Caller ID Service reported
3,773,535 subscribers, up 94.9% from the same period of last year.


Total usage, measured in terms minutes per line per day, increased to 21.79 and
grew 3.8% over the first quarter of last year.


As we anticipated last quarter, the results obtained in the first quarter of
2002 decreased in both income and EBITDA. These decreases significantly resulted
from tariffs decreases related to the implementation of the Price Cap system in
both 2001 and 2002 and from the decrease in interconnection rates approved in
August 2001. This downward trend will continue to slow throughout the period,
thanks to the growing Internet and Broadband businesses, coupled with the
gradual decrease in revenue volume from fiscal 2001. These will enable the
revenues and EBITDA to reach similar levels to those obtained in 2001.


Operating Revenues for Telefonica de Espana Group as of March 2002 totaled
2,518.7 million euros, a year-over-year decrease of 2.7%. Revenues from
Telefonica de Espana Operating Company, which counted 96.2% of the Group's total
revenues, shrank by 2.8%, mainly due to strong tariff decreases imposed by the
Price Cap in the traditional business. Additionally, the revenue growth
permitted by the Broadband business is in part offset by the economic impact on
the traditional business. The fixed percentage of total revenues at the end of
the first quarter is 51.2%, up 7.9 percentage points from the same period in
2001.


Revenues from traditional business, which represents 80% of the total revenues,
reached 1,941.3 million euros, down 3.9% from March 2001. The evolution of this
business reflects the strong impact in 2001, and in January and March of this
year of the DLD and provincial tariff decreases. These decreases reached to
11.8% and 15.8%, respectively. The 1.2 euro increase in the monthly fee for
Basic Telephone Service in January 2002 has not entirely offset the revenue lost
from the tariff cuts for DLD and provincial traffic.


As a result of this, revenues from usage fell 13.8% from first quarter 2001.


Revenues from the wholesale business, which totaled 331.4 million euros, remains
flat compared to last year, despite a strong drop in interconnection rates in
August 2001. This tariff reduction was offset by the traffic associated with
this business, up 16.5% in March.


Internet and Broadband revenues reached 151.3 million euros and grew 6.7% over
the first quarter of the year.


The total number of ADSL customers reached 527,604 users, in line with the goal
of 900,000 customers by the end of the year.


With the launch of 'ADSL Solutions'' for corporations, a part of the eBA
platform (Broadband e-Solutions) last March 4, Telefonica de Espana has taken a
very important step forward in capturing new revenues in the Broadband business
through value-added services. The new range of 'ADSL Solutions'', developed in
conjunction with Terra-Lycos, offers small- and medium-sized businesses gradual
services that range from creating an intranet to develope and manage their own
web and creating on-line stores with the tools necessary to active management,
logistic control, transactions, and presence in an on-line mall.


The operating expenses for Telefonica de Espana Group totaled 1,408.3 million
euros, up 3.9% over March 2001. This growth was mainly due to the costs
evolution of Telefonica de Espana's related to the deployment of the new ADSL
retail service, starting September 2001.


Personnel expenses for Telefonica de Espana Group, which reached 523.8 million
euros, is virtually at the same level as last year (-0.5%). The decrease in
these expenses reflects a 0.7% average decrease in the number of employees, with
the number of employees at the end of the first quarter dropping to 40,810.
Productivity in terms of lines per employee, including ADSL lines, reached 517.0
and grew 3.2% over March 2001.


Cost of supplies for Grupo Telefonica de Espana, which totaled 614.4 million
euros, were up 4.3% from last year. Interconnection costs totaled 388.6 million
euros, and continued on a downward trend from last year, down 4.5% from last
quarter.


The external work, provisions, and services of Telefonica de Espana Group grew
15.9% at the end of the quarter, reaching 227.0 million euros, evolving as
expected. The trend for these costs, which are mostly commercial, depends on the
need for a significant effort to strengthen the Company's commercial position,
all in order to develop its Broadband business.


The company efforts to apply control systems on provisions for bad debt have
enabled traffic provisions to return to levels comparable to those before the
rationalization of the PUT (Public Use Telephony) traffic reselling business,
with growth of just 2.5% over March last year.


As a result of the above mentioned evolution in revenues and costs, the EBITDA
of Telefonica de Espana Group reached 1,126.9 million euros, a 10.3% decrease
compared to the first quarter 2001. EBITDA margin, however, are 44.7%, up 0.6
percentage points on 2001 levels, while margin of the operating company hit
46.7% for the quarter.


Given Telefonica de Espana's operating performance and its maintenance of the
level of depreciation (+0.3%), the Operating Results for the Group totaled 448.1
million euros, 22.6% less than the results reported in March 2001.


Capex at the end of the first quarter reached 410.5 million euros, down 0.2%
from the same period in 2001. While 53% of this investment was made in the
traditional business, the remaining 47% was applied to new businesses, in clear
alignment with the Company's transformation policies.

GRUPO TELEFONICA LATINOAMERICA

First quarter financial statements for Telefonica Latinoamerica include the
effects derived from the impact of the Argentine peso's devaluation on the debt
of the Argentine operators. Argentina's currency fell in value from 1.5149 pesos
/euro (1.7 pesos/dollar) to 2.4862 Argentine pesos/euro (2.85 pesos/dollar),
given that the financial statements for December 2001 include the effect of the
devaluation of the foreign currency debt adjustment in Argentina at 1.5149
Argentine pesos/euro (1.7 pesos/dollar), following the prudence principle
established by the ICAC. On the other hand, at the time Telefonica de
Argentina's financial results were consolidated, the applied average exchange
rate for the period was: 1.7738 Argentine pesos/euro (2.02 pesos/dollar).


In addition, starting January 2002, the fiscal year for Telefonica de Argentina
and Cointel ran from January to December, matching the rest of the Group's
operators. Nevertheless, the 2001 financial statements for Telefonica
Latinoamerica included in the TASA and Cointel accounts a one-quarter delay
(October-December 2000).


The first three months of fiscal 2002 were influenced by the regional economic
slowdown and the devaluation of the Argentine peso, which forced fixed operators
in Latin America to look for strategic action to adapt to this new environment.
This effort has been reflected in the first quarter financial results, with a
2.8% growth in EBITDA in constant exchange rates and adjusting TASA's fiscal
year 2001 to the current fiscal year.


From the financial-economic point of view, operating revenue reached 2,155.1
million euros, down 16.9% from year over year, primarily due to the depreciation
of the Argentine peso (-50.6% on average), the Brazilian real (-15.3% on
average), and the Chilean peso (-9.3% at the end of the period) relative to the
dollar. These were not offset by the 5.3% appreciation of the dollar relative to
the euro, given the fact that, in constant terms and adapting TASA's 2001 fiscal
year to the current, operating revenues would have experienced a growth of 3.1%
year over year. This moderate rate of change is the result, on the one hand, of
the 15.9% increase in Telesp's revenues in local currency and, on the other
hand, the decrease observed at the rest of the operators, also in local
currency: -16.0% at TASA (January-March 2002 versus October-December 2000; -7.5%
January-March 02 vs. January-March 01), reflecting the crisis, and -0.7% and
-1.9% at CTC and TDP, respectively, derived from the contractions in their
respective long-distance and local telephony markets.


Total operating expenses for Telefonica Latinoamerica, which rose to 1,153.2
million euros, showed a 3.3% growth in constant terms and adjusting 2001 TASA's
fiscal year to the current fiscal year, due to the increases registered in local
currency derived from increases in Telesp (15.2% in line with the growth of the
customer base) and Telefonica del Peru (2.9%, from higher interconnection
costs). These was partially offset by cost-cutting at TASA (-15.3% in local
currency, January-March 2002 versus October-December 2000, but which were -9.4%
if homogenous quarters - January-March - are compared) and at CTC (-4.8% in
local currency), which together reflect the cost-cutting policies implemented
during the second part of last year in both companies to offset the impact of
the economic crisis and the drop in revenues, respectively.


There was an 18.7% drop in the EBITDA from last year, mainly as a result of the
drop in TASA's EBITDA, which was caused by the economic situation in the
country, as well as by the negative evolution in the exchange rates. However, if
the effects of the exchange rate are not considered, and 2001 TASA's fiscal year
is adapted to the current fiscal year, the EBITDA would have grown 2.8%, as a
result of the increases posted by Telesp and CTC (+15.8% and +4.3%,
respectively, in local currency), which offset the drop of 7.0% at TASA
(January-March 2002 versus January-March 2001), and the 11.2% drop at Telefonica
del Peru, both measured in local currency.


Net Income for the quarter reached 72.6 million euros loss compared to a profit
of 174.5 million euros last year. This result was significantly impacted by
including 234.3 million euros (net of taxes) from adjusting the exchange rate of
the debts of TASA, THA and Cointel. This effect is in addition to the one
included at the close of 2001 on the financial statements of Telefonica
Latinoamerica (309.9 million euros impact in net income), which was considered
at an exchange rate of 1.5149 Argentine pesos/euro (1.7 pesos/dollar). Thus, the
March statements include a debt adjustment from 1.5149 Argentine pesos/euro (1.7
pesos/dollar) to 2.4862 Argentine pesos/euro (2.85 pesos/dollar).


The positive income tax provision reported for the quarter totaled 132.6 million
euros, caused mainly by the activation of the DAEX (Export Activity Deduction)
tax credit, which generates an income of 59.2 million euros, as well as the tax
credit due to the exchange rate losses from the devaluation of the Argentine
pesos (130.1 million euros), which offset the tax provisions from the rest of
the operators.


As of the end of March, Telefonica Latinoamerica had 21.6 million lines in
service, with a year-over-year growth of 7.9%, with Telesp contributing 58% of
all new additions. During the first quarter, Telesp reported a negative net
addition of lines as a result of the decreased number of new costumers caused by
more rigorous entry filter processes after the ANATEL targets were met, and
because of a higher number of disconnections, which is enabling the improvement
of the quality of the customer base by turning the process to drop customers who
had problems with late payments more efficient. These measures are already
yielding positive results in terms of consumption.


The Broadband market continues to be a key objective of Telefonica
Latinoamerica, and it has enabled the company to attain 273,432 users in
service, more than 4 times the amount for the same period last year.


At the end of March, there were 26,744 employees at Telefonica Latinoamerica
(30,369 employees including Sonda and Cablemagico), down by nearly 4,200
employees from March 2001, following an effort to reduce the headcount, mainly
at Telesp and CTC.


At the end of the first quarter, accumulated investments totaled 241.7 million
euros, down 64.1%, following an effort to rationalize investments in response to
the new environment (primarily due to the early compliance with Telesp's targets
and the Argentine crisis) and in order to protect Free Cash Flow.


Brazil


At the beginning of March, Anatel certified that Telesp had complied with its
targets ahead of schedule. This enabled all of Telefonica Group's companies in
Brazil to request new authorizations and thereby to offer broader coverage and
services to the rest of the country. The mandatory license has already been
awarded (it was received on April 26), so Telesp has begun to offer
international long distance service from Sao Paulo in May, 7 and in the coming
months it will be offering the other long distance services.


Telesp ended the first quarter of the year with over 12.5 million lines in
service, which represents a year-over-year growth of 12.3%. With the objective
of complying with the goals ahead of schedule, Telesp, after the great expansion
in its subscriber base during 2001, registered a negative net addition of lines
for the first quarter of the year. Measures were adopted to make it easier for
the company to drop customers who presented problems of rate payment, and
stricter controls were established for new installations. These procedures are
allowing the company to 'clean' and improve the quality of its customer base,
and are already translating into an improvement in local traffic per line per
day.


It is also worth mentioning the estimated share of the Sao Paulo DLD
intrastate, which reached 78.4% as of March 2002, more than 3 percentage points
above the market share reported for March 2001.


ADSL lines rose by the end of March to 215,671, which is 3.5 times above the
figure reported for the same period last year. In spite of being below the
targets set for the period, the growth rate, that started to improve in March,
is expected to improve in the 2Q02 with the launching of promotional campaigns.


After complying with the goals, Telesp implemented a severance program at the
last quarter of 2001. This intends to adapt Telesp's structure to an
increasingly competitive environment and in part of the ongoing process to swap
of fixed costs for variable costs. To this end, the lines in service per
employee reached 1,191 in March 2002, up 43.4% year over year.


At the end of the first quarter of 2002, Telesp registered an EBITDA growth of
15.8% in local currency (3.3% in euros) mainly due to the expansion of the
average lines in service (15.6% year-over-year terms), a 10.4% average tariff
increase in local currency, registered in July 2001, and the positive
performance registered in long distance traffic allowed the company to report
revenues of 1,138.8 million euros, with year-over-year growth of 15.9% in local
currency (3.4% in euros). The increase in revenues has offset higher expenses
from expanded activity and bad debt (from applying a more conservative
provisioning policy since May 2001, in line with the criteria applied by Grupo
Telefonica Latinoamerica's other operators). As for bad debt, although a
year-over-year increase was reported because of the aforementioned criteria
change, during the first quarter of 2002, this figure has remained stable at
3.6% over revenues (3.5% cumulative for fiscal year 2001).


Net income reached 101.6 million euros, down 12.4% in local currency (-21.8% in
euros). This was due, on the one hand, to the increase in amortizations and, on
the other hand, higher financial expenses derived from increases in the average
debt level reported from the second semester 2001, both related to the
investment effort to obtain the early completion of goals. Early compliance of
the goals has implied a significant decrease in the CAPEX (-63.7% in euros year
over year) to 189.4 million euros, which positions the CAPEX/Revenues ratio at
16.6%.


Argentina


TASA's financial results for the first quarter of 2002 have been marked by the
economic crisis in Argentina. The following factors stand out:


  • Devaluation of the peso to 2.85 pesos/dollar at the end of March, which
    has produced negative exchange differences of 3,449.1 million pesos. In
    accordance to the Argentine Accounting Regulation, the enterprises there
    established, could not record in their respective financials the effects of
    the peso devaluation once the this has occurred on 2002. Consequently,
    Telefonica de Argentina results hereby presented, and referring to the first
    quarter 2002, incorporate the effects of the Argentine peso devaluation from
    the exchange rate of 1 peso/dollar to 2.85 pesos/dollar.


  • High inflation, (7.9% year-over-year variation in the CPI), which
    Argentine law has not yet allowed to be incorporated into telephone tariffs.


  • Deterioration of the economic situation, a 12% to 15% drop is expected for
    GDP during this quarter, which is reflected in less usage expressed, both in
    Local service (-5.6%) and in Long Distance service (-11.4%), and higher bad
    debt (the provision for bad debts rose to 9.4% over revenues for the first
    quarter of 2002 versus 6.9% for the same period of 2001).


Despite the poor economic situation, TASA's EBITDA totaled 179 million euros,
and although this represents a drop of 7.0% in local currency (-51.6% in euros)
from January-March 2001, it presents a margin over revenues of 52.2%, very
similar to last year's.


Revenues fell 7.5% in local currency (-51.9% in euros) mainly due to the crisis,
which affected to a greater extent the Long Distance, ISP, and Equipment
businesses, although the market share has remained at levels similar to last
year, long distance being the only one that increased. Operating expenses fell
9.4% in local currency (15.2% if we exclude provisions for bad debts) and 52.9%
in euros, reflecting the company's effort to reduce costs to offset the drop in
revenues.


TASA posted losses of 1,928.8 million euros mainly due to the recognition of the
exchange rate difference in foreign currency nominated debt, measured by the
end-of-quarter exchange rate (1 dollar = 2.85 pesos), versus the exchange rate
at the close of 2001 (1 dollar = 1 peso). If we eliminate this effect, net
income would have totaled 15.8 million euros compared to 86 million euros during
the January-March 2001 period, basically as a consequence of the drop in EBITDA.


Regarding CAPEX and given the country's economic situation, TASA invested 19.2
million euros during the first quarter of 2002, which represents a 41.1%
year-over-year reduction in local currency (-79.1% in euros).


As for the operating parameters, there has been a noticeable increase in lines
in service (3.5%) mainly through products targeted at minimizing the risk of
non-payment (the number of prepaid lines rose 46.9%), the year-over-year drop in
new subscriptions (-55.6%) given the investment contention, and lower traffic
per line per day (-9.3%) mainly due to Internet, since fixed-to-fixed traffic
(9.13 minutes) remains at the same levels as for 2001.


Chile


During the first quarter of 2002, Telefonica CTC Chile (Fixed Telephony Operator
FTO and Sonda) reported revenues totaling 335.6 million euros, down 0.7% from
the same quarter of 2001 in local currency (-5.1% in euros). Several factors
have had a significant impact on this: the 1.9% drop in revenues from local
telephony, measured in local currency, due to shifting of the client base
towards flat rate and pre-paid schemes and due to the cannibalization of mobile
telephony. Particularly noteworthy is the development of the Long Distance
business, where revenues was up 11.0% in local currency (6.0% in euros) over
last year, despite the negative evolution that the long distance market has been
experiencing since the final months of 2001, which translates into the loss of
customers in some of the company's semi-flat rate plans.


The accumulated EBITDA in March reached 140.4 million euros, up 4.3% in local
currency over March 2001 (maintained in euros). This growth has been sustained
due to the good performance of expenses, down 4.8% in local currency from last
year (-9.1% in euros) mainly due to the plans of cost rationalization that have
been put in place since last year. It is also worth mentioning the favorable
performance of the provision for bad debt, which decreased slightly from 2001
levels, totaling 1.7% of revenues (versus 2.0% for the same period of 2001).


Non-operating profits were above those obtained in March 2001, thanks to an
improvement in both the extraordinary and the negative financial results, which
are 6.5% lower, in local currency (-10.7% in euros), than last year, brought
about by a lower debt level and by the decrease in interest rates throughout
2001.


As of March, there has been a noticeable 32.6% decrease in CAPEX, measured in
euros (-29.4% in local currency) to 21.0 million euros, placing the CAPEX over
revenues ratio at 6,2%.


From the operating standpoint, lines in service rose 0.8% over the same period
last year. It should be noted that throughout the period net additions are being
generated thanks to the standard lines. Despite the drop in the long distance
market, CTC is holding and even increasing its estimated market share in
Domestic Long Distance over the one it had in March 2001 (from 38% to 40%).


Peru


Telefonica del Peru (Fixed Telephony Operator - FTO including Cablemagico)
posted a decrease in EBITDA of 11.2% in local currency (-4.4% in euros) in its
results for the first quarter of 2002. This is linked to regulatory pressures
during 2001 to implement successive reductions in interconnection fees, and the
implementation of the price cap system in September 2001, which has led to a
tariff decrease of 3%.


The Company continues to be the leader in Local and Public Telephony. Of
particular significance is the 20.4% increase in Public Telephony plant, which
drove revenues growth to 6.0% in local currency. Nevertheless, in long distance,
the shrinking market and greater complexity in the competitive environment has
led to a decrease in accounting rates and market share, especially in incoming
long distance, which represents a drop in revenues of 25.3% in local currency.
These factors have led the total revenues of the company to drop 1.9% in local
currency (an increase of 5.6% in euros).


As for expenses, which have increased by 2.9% in local currency year over year,
a 7.9% decrease in personnel expenses, measured in local currency, is
noteworthy, which has been sustained in part because of the 2.5% reduction of
workforce in fixed telephony.


Efforts to improve bad debt are directly linked to the company's focused
development of the prepaid segment. After 27.0% growth over the last 12 months,
this segment now represents 32.5% of the company's lines in service. This has
favored a reduction of the bad debt provisioning from 3.1% over revenues in the
first quarter of 2001 to 2.9% over revenues in the same period of 2002.


In its ongoing transformation to encompass new Broadband and value-added
businesses, the Company is directing its investments toward developing ADSL and
Cable modem services, but is not neglecting the optimization of traditional
investment projects. As of March 31, Telefonica del Peru had 9,506 broadband
customers, up more than 30% growth compared to the figure at the end of 2001.


We should mention the Capex level of investment, which fell 56.0 to 11.3 million
euros from last year.




MOBILE TELEPHONY BUSINESS

CELLULAR BUSINESS OF TELEFONICA GROUP

During the first quarter of 2002, net income for Telefonica Moviles reached
286.7 million euros, with annual growth of 85.6%, which was determined by the
following factors:


  • Positive performance of operating revenues that increased by 16.6% on the
    first quarter of 2001 to 2,262 million euros.


    Excluding the impact from incorporating Telefonica Moviles' subsidiaries in
    northern Mexico, the full consolidation of TeleLeste Celular and Terra
    Mobile, and the significant impact of exchange rates fluctuations,
    consolidated revenues would have posted a year-over-year increase of 12.6%.


    This growth is primarily due to a larger active customer base of the fully
    consolidated operators (28.4%) (18.7% excluding Mexican companies and
    TeleLeste Celular) and to a higher traffic carried by these operators (16.4%
    in number of minutes and 37.5% in SMSs). These increases more than
    compensate the decline in ARPU in local currency (7.2% on average) and the
    negative impact of currency depreciations against the euro.


    Telefonica Moviles' managed customer base reached 30.8 million in March
    2002, representing an annual increase of 21%. During the first quarter of
    the year, net gains in subscribers totaled more than 965,000 subscribers.


    By geographical area, Telefonica Moviles Espana contributed 70% of the
    consolidated revenues, totaling 1,574 million euros (21% vs.1Q01).


    Operating revenues from Latin American operators fully consolidated grew by
    8.7% compared to the first quarter of 2001. This growth has been primarily
    affected by the inclusion of the cellular assets from Telefonica Moviles
    Mexico and the full consolidation of TeleLeste Celular -which together
    contributed with 29 p.p. to the growth of consolidated revenues-, and the
    negative impact of the Argentinean peso devaluation and the depreciation of
    other Latin American currencies, especially the Brazilian real -which lessen
    the growth rate of revenues from Latin America in 17 p.p. -.


  • Rationalization of operating expenses, which increased 16.9%
    year-over-year and amounted to 61% of operating revenues, unchanged from
    March 2001.


  • Improvement in the EBITDA margins of all of the Group's operators versus
    the fourth quarter of 2001 were the result of less-than-typical commercial
    activity of the business after the Christmas campaigns had concluded and
    improvement in the operating efficiency of the companies. Together, these
    factors translated into a consolidated EBITDA margin of 40.5% (35.9% in 4Q01
    and 38.7% in1Q01).


    Consolidated EBITDA in absolute terms reached 916.6 million euros, 22%
    higher than in the first quarter of 2001. It should be highlighted that the
    effect of incorporating the Mexican operators and fully consolidating
    TeleLeste Celular and Terra Mobile in 2002 is fully compensated by the
    impact of currency exchange rate fluctuations. Consequently, the organic
    growth of consolidated EBITDA, assuming constant exchange rates, would have
    been 22.7%


    Telefonica Moviles Espana's EBITDA increased 34.4% year-over-year, with an
    EBITDA margin of 50% (45% in 1Q01).


    Total EBITDA for the Latin American operators fully consolidated, in euros,
    increased 18% year-over-year. Assuming constant exchange rates for the Latin
    American currencies, and excluding the incorporation of Telefonica Moviles
    Mexico and TeleLeste Celular in 2002, EBITDA from Latin America would have
    been 17% higher than in the first quarter of 2001.


    Start-up operations elsewhere in Europe contributed with a combined EBITDA
    of -75 million euros, of which -57.9 million euros come from Group 3G.


  • Year-over-year growth in consolidated net income was 85.6%.


  • Decrease in consolidated capex of 18% on the same period last year to 8%
    of operating revenues (12% in the first quarter of 2001) that it was
    achieved despite the incorporation of capex of Northern Mexico operators and
    those of TeleLeste Celular and Group 3G.


    During the first quarter of 2002, the total amount of capitalized expenses
    totaled 70.7 million euros, versus 128.7 million euros in the first quarter
    of 2001. These expenses include the provision the 3G spectrum assigned to
    Telefonica Moviles Espana for the future operation of UMTS technology (5.3
    million euros vs. 40.8 million euros in 1Q01), operating and start-up
    expenses of Group 3G (2.9 million euros), and financial expenses associated
    with the acquisition of the 3G license in Germany (62.5 million euros).
    Taking into account the percentage of economic interest Telefonica Moviles
    holds in these subsidiaries, the capitalized operating and financial
    expenses corresponding to Telefonica Moviles totaled 6.9 million euros and
    29.6 million euros, respectively.

Considering all the cellular businesses of the Telefonica Group (Telefonica
Moviles Group plus Startel), the consolidated revenues show a 16,2% growth
compared to the first quarter 2001, reaching a total of 2,348.8 million euros.
The EBITDA growth, in relation to the first quarter 2001, is 24,7% reaching
940.8 million euros.


Spain


At the end of March, the cellular market in Spain reached 30.7 million
subscribers, with a penetration rate of 73.5%. These figures represented
year-to-year growth of 20%.


In this context, the commercial performance of Telefonica Moviles Espana (TME)
has been significant. Thus, the Company closed the first quarter of 2002 with
more than 17.3 million customers, up 3% from the customer base at the end of
2001 and up 22% from the same period last year. Of the total customer base, 32%
were contract customers and the remainder pre-paid customers. These figures
include quarterly net adds in excess of 521,500 customers, from which 32%
corresponds to contract segment (28% in 1Q01), and shows an increase of 7% from
the figure of the first quarter of 2001.


Churn rate control continues to play a major role in the growth of the Company's
customer base. In this respect, the annual churn rate was around 12% at the end
of the first quarter of 2002.


The penetration levels attained in the market and the extraordinary growth
obtained during the 2001-2002 Christmas campaign had a significant impact on the
minutes of usage (MOU) and the ARPU during the first quarter of 2002,
underpinning a temporary change in trend for both indicators.


The Company estimates that the quarterly blended ARPU reached its lowest level
during the first quarter of 2002. It expects that starting next quarter there
will be a sustained recovery beginning next quarter, combined with typical
seasonaity or future price cuts, backed by the expected growth in MOU provided
by the new pricing structure. Logically, the annual blended ARPU should continue
to decrease until the end of the year compared to 2001 figures and will start to
recover next year.


Analyzing in depth the performance of ARPU for the first quarter of 2002 versus
the previous quarter (4Q01), we should keep in mind: i) the seasonality inherent
in MOU; ii) the strong growth of the prepaid segment during the fourth quarter
of 2001; and, iii) price cut carried out since the beginning of 2002. As a
result of the lower MOU (down 5% vs.4Q01) and lower prices, ARPU for the first
quarter of 2002 was 28 euros, down 7% from the previous quarter.


As for the variation of the ARPU in 1Q02 vs.1Q01, the following should be
considered: i) the increased impact the prepaid segment has on the total
customer base; ii) the price reductions that took place during the first quarter
of 2002, and in termination fees during 2001. As a result, ARPU for the first
quarter of 2002 was 11% lower with respect to the same period in 2001, in line
with expectations made when the Company planned its commercial actions for this
year.


As for the data and content business, the SMS ratio by customer and month during
the first quarter of the year was above 33 short messages, up 10% from the same
period last year and representing more than 1,700 million messages throughout
the first three months of 2002. It should be emphasized that the quarterly
traffic of messages involving value-added services and content registered
year-over-year growth above 80%.


Collectively, data services revenue accounted for 15.3% of customer revenues in
the first quarter of the year and was 55% higher than in the first quarter of
2001.


The performance of ARPU is undoubtedly one of the cellular growth indicators
following the slowdown in customer growth, although other parameters that have a
direct influence on the company's profitability should not be forgotten. The
comparison of 2002 first quarter results vs. the same period of 2001 show that
there are situations where it is feasible to increase margins despite declines
in ARPU.


In this sense, we should note the Company's success in reducing costs and
leveraging economies of scale. Thus, the quarterly SAC fell 5% compared to the
figure posted in the last quarter of 2001 and 11% in year-over-year terms. If we
add to this the control over subscriber retention costs (SRC), the total
weighting of the SACs and SRCs over adjusted operating revenues (excluding the
impact of loyalty programs) was more than halved in the first quarter of 2002
from the same period last year, to levels below 10%.


It is also highlighting the impact of the implementation of the centralized
handset procurement model, which was introduced at the end of 2001. This model
enhances the Company's bargaining strength with handset suppliers, both in terms
of per unit price and the availability of new technology handsets.


It should be taken into account that the larger increase in operating revenues
derived from the complete implementation of this model throughout the year, may
appear to have a negative effect on the EBITDA margin in subsequent quarters.
This is due to the higher increase in revenues from handset sales with lower
margin expected. However, the model entails substantial improvements in
retention and acquisition costs, leading to higher absolute levels of EBITDA. In
this sense, compared to the increase in operating revenues, operating expenses
registered year-over-year growth of 13% (but were stable with respect to the
first quarter of 2001 if we exclude the increase in handset purchases), which
also contrasts with the 22% growth of the customer base.


As a result, the Company's EBITDA has been able to exceed the income growth
rate, totaling 784 million euros during the first quarter of the year, up 9%
from last quarter and nearly 35% above the figure reported for the first quarter
of 2001. The EBITDA margin during the first quarter of 2002 reached 50%.


TME has chosen Ericsson and Nortel as UMTS network providers. Ericsson will act
as the sole supplier for the initial roll-out of the UMTS network, providing
radio and switching access equipment, while Nortel will supply radio
infrastructure equipment.


REST OF EUROPE


Group 3G, a subsidiary of Telefonica Moviles in Germany that has been marketing
its GSM/GPRS services since the end of November 2001 under the Quam brand, had
91,000 subscribers as of March 31, 2002. During the first quarter of the year,
Group 3G has continued to expand its distribution network, which currently has
over 3,400 points of sale. Special note should be made of the strong brand
recognition Quam has achieved on the German market in a short period of time,
backed by the advertising and sponsorship activities carried out to date. Group
3G's commercial offering has stood out for being innovative with a simple,
competitive and transparent tariff structure.


On the other hand and in response to the Group's strategy to minimize its
financial exposure in Germany, on April 10 UMTS infrastructure supply agreements
and network construction service agreements were signed with Ericsson and
Nortel, along with the corresponding non-recourse financing agreements, which
will provide the company with a total of up to €500-600 million in the 2002-2003
period.


As for the economic and financial results of Group 3G, during the first quarter
of 2002, operating revenues reached 9.2 million euros, while EBITDA losses
totaled 57.9 million euros. Capex in the period totaled 38.3 million euros.


In Italy, Austria and Switzerland, the operators' activity has been adapted to
their business models, focusing on the pro-active monitoring of the regulatory
environment and analysis of potential roaming and network sharing agreements
with other operators, in order to assess the feasibility of launching commercial
UMTS operations.


These companies do not generate revenues as they have yet to carry out the
commercial launch of their operations. The subsidiaries in Austria and
Switzerland contributed with a combined negative EBITDA of 17.1 million euros,
while IPSE 2000, which is consolidated by the equity method, contributed with
-14.4 million euros in results from associate companies.


It should be mentioned that since January 1, 2002, all operating costs and
financial expenses associated with the acquisition of UMTS licenses in Italy,
Austria, and Switzerland are fully recorded as an operating expense in the
operator's income statement, with no capitalized expenses. Likewise, in the case
of Group 3G, only those expenses that were clearly identified as being related
to activities required for the future deployment of UMTS technology (2.9 million
euros) were capitalized.


Morocco


At the end of March 2002 Medi Telecom had 1,234,504 customers, a year-over-year
increase of 114%. Net adds in the first quarter amounted to approximately
122,000 new customers, doubling the figure for the same period last year. In two
years of commercial operations, Medi Telecom has achieved an estimated market
share of 40%.


In line with statements made at the end of 2001, Medi Telecom has fared well at
the operating level, achieving a positive EBITDA in the first quarter of 2002


LATIN AMERICA


Brazil


The operators managed by Telefonica Moviles in Brazil ended the first quarter of
2002 with 5.8 million customers, a year-over-year increase of 20.2% and a 3.7%
increase from December 2001. The prepaid segment represents 68% of the total
subscriber base, and the rest falls in the contract segment, which continues to
show slight annual growth (+3.5% vs.1Q01), reversing the trend shown in the same
period last year.


We would point out that all the operators remain leaders in their areas of
operation, with an estimated average market share above 64%. In the first
quarter of 2002, the three operators increased their shares of net adds from the
first quarter of 2001, reinforcing their competitive positioning ahead of the
forthcoming arrival of new operators in their markets.


From the financial standpoint, operating revenues from the Brazilian operators
rose to 364.3 million euros, up 10.6% (24.6% in local currency). Excluding the
revenues from TeleLeste Celular in 2002 results -the company has been fully
consolidated since January 1, 2002- organic growth in operating revenues of the
Brazilian operators in local currency would have been 7.1%. The growth in
revenues is explained by the increase in the operators' customer bases (+20% in
all), which offset the lower ARPUs (-8% in local currency) and the decline in
revenues from handset sales.


Total EBITDA after management fees of the three operators, in local currency,
showed a 7.1% year-over-year increase, totaling 143.1 million euros. Excluding
TeleLeste Celular, EBITDA from the Brazilian operators would have declined by 6%
due to increased commercial expenses and the depreciation of the real.


The EBITDA margin was 39.3% (40.1% excluding TeleLeste Celular). While in
comparison with March 2001 the EBITDA margin shows a 6.4 p.p. decline, with
respect to the fourth quarter of 2001 the performance was positive, with a gain
of more than 9 p.p. owing to reduced commercial activity and the reduction in
SAC. Annual comparison is affected by the sharp depreciation of the Brazilian
real vis-a-vis the US dollar, which affects SAC through the increase in handset
costs.


As regards the development of the Joint Venture with Portugal Telecom, now that
the new president of Anatel has been appointed, the companies are awaiting
approval of SMP regulations to determine the operators' migration to SMP, which
will allow for the future integration of operations in Brazil.


Mexico


Telefonica Moviles Mexico ended the first quarter of 2002 with 1.250 million
customers, 21% more than in March 2001, fuelled by an acceleration in the growth
of the contract segment to 39% year-over-year. The weighting of the contract
segment on the total customer base was 21% versus 18% 12 months ago.The launch
campaign for the brand name continued in the first quarter of 2002, positioning
the company with an innovative, trustworthy and modern image. In this respect,
to reinforce this strategy Telefonica Moviles Mexico pioneered the launch of the
Plan Ahorro product in 2001, and in January 2002 it introduced its short message
service (SMS), with a high degree of customer acceptance.


Net adds in the first quarter of the year amounted to approximately 37,500
customers, a natural decrease from the fourth quarter of 2001 due to the end of
the Christmas campaign. Nonetheless, in year-over-year terms the performance was
positive, as the company registered a net decrease in customer numbers in the
first quarter of 2001. The change in trend was driven by the launch of measures
aimed at retaining customers and increasing their loyalty, which led to a
sizeable reduction in the churn rate.


We would point out the expansion of the distribution network thanks to the
agreements reached with the large retail chains, with the company ending the
first quarter of 2002 with more than 530 points of sale. This channel did not
exist in the first quarter of 2001.


As regards the Mexican subsidiaries' financial results for the first quarter of
2002 in local currency -the operators were fully consolidated for the first time
from July 2001- operating revenues declined by 18.6% in local currency (-18.5%
in euros) vs. the fourth quarter of 2001, totaling 126.6 million euros. This was
due to the seasonality of the business after the high level of sales achieved
during the Christmas season, as well as to the fact that the first quarter of
the year is typically weak for the market in terms of economic performance.


In this sense, EBITDA shows a positive performance with respect to the previous
quarter, leading to an EBITDA margin of 11.2% from the negative margin achieved
in fourth quarter 2001 as a consequence of promotion costs associated to the
Christmas campaign and the launch of the new brand.


Argentina


The Argentinean cellular market is being severely affected by the country's
current economic recession and instability. As a result, the pace of decline in
the total mobile telephony customer base accelerated in the first quarter of
2002, with the penetration levels falling to approximately 18%. Against this
backdrop, TCP proceeded to regularize its customer base, especially in the
contract segment. At the end of March 2002, TCP had approximately 1.7 million
customers, with an 8% decline compared to March 2001. The prepaid segment
accounted for 67% of the total customer base vs. 62% in March 2001.


In line with the deteriorating economic situation in the country and the lower
subscriber base, there was a significant decrease in traffic compared to the
same period in 2001 (-23%), although the lower traffic volume compared to the
fourth quarter of 2001 (-15%) has also been affected by seasonal factors.
Despite this, in monthly terms, traffic has remained virtually stable in
January, February, and March 2002. The company has launched campaigns directed
at stimulating the recharge of prepaid card.


The change in the strategic focus of the business, implemented as of 2001, in
which cash management is a key priority, entailed major efforts to reduce costs,
contain bad debt and placed a greater emphasis on retaining high-value
customers. In this respect, we would point out the elimination of handset
subsidies and traffic promotions, with an immediate impact on the reduction of
SAC.


Operating revenues in local currency in the first quarter of 2002 declined 23%
year-over-year, mostly due to the decrease in the customer base and the drop in
traffic. However, strict cost-control policies underpinned an increase in EBITDA
over the first quarter of 2001, leading to an EBITDA margin of 24.2%. Also
noteworthy was the stability of bad debt levels in the first three months of
2002, slightly lower than those reported in the fourth quarter of 2001.


In line with the objective of minimizing cash outflows given the current market
situation, capex at TCP has been cut to a bare minimum, falling 98% on the first
quarter of 2001 to below 0.5 million euros.


We would point out that after the closing of the first quarter in April TCP has
raised its tariffs in local currency, applying an average increase of 8%-10% in
final prices to customers.


Peru


At the end of the first quarter of 2002, Telefonica Moviles Peru had 1,131,211
customers, with a year-over-year increase of 22.8%.


Noteworthy was the year-over-year growth of the overall Peruvian mobile
telephony market (close to 37%), resulting in an increased penetration rate of
7% from 5% the year before. Despite stiffer competition, Telefonica Moviles Peru
maintained its leadership of the market, with an estimated market share of 61%.
In this respect, the company's increase in its share of net adds, totaling 43%
in this quarter (vs. 30% in 1Q01), should be highlighted.


The favorable evolution of the contract segment within the customer mix, which
registered a positive net add for the second quarter in a row, should also be
noted.


Turning to financial results, Telefonica Moviles Peru recorded a 7.2%
year-over-year increase in operating revenues in dollars, fuelled primarily by a
rise in the customer base and higher prepaid traffic, boosted by the
introduction of prepaid cards in Peruvian soles in January 2002. Both effects
offset the decline in ARPUs as a resulting from the change in the customer mix.


The positive evolution in revenues and better costs structure allowed to record
an EBITDA of 25 million euros, with a year-over-year increase of 24% in dollars,
reaching an EBITDA margin of 32.6%, 4.5 percentage points over the first quarter
2001. However, continued commercial efforts, against a backdrop of an
increasingly competitive environment, caused a slight erosion in the EBITDA
margin relative to the preceding quarter (32.6% cumulative to March 02 versus
34.1% in 4Q01).


Chile


At the end of March 2002, Telefonica Movil, a subsidiary of Telefonica CTC Chile
managed by Telefonica Moviles, had a customer base of 1.65 million active
customers, with year-over-year growth of 27%. Net adds in the first quarter of
2002 were 14% higher than in the same period of 2001, mostly due to the decline
in churn owing to the positive results of the customer loyalty programs.


As for the financial results, the trend towards improvement started in 2001
continued in the first quarter of the year. Operating revenues totaled 87.2
million euros, 59% year-over-year growth, and EBITDA reached 24.2 million euros.
Finally, adjusted EBITDA margin for January-March 2002 was 29%, 2 p.p. higher
than in the first quarter of 2001 despite the higher growth of net adds achieved
this year.


Guatemala and El Salvador


The combined customer base of Telefonica Moviles' subsidiaries in Guatemala and
El Salvador was 363,000 at the end of March 2002, 7% less than at December 2001.
Such evolution is due to the operators' focus on higher value customers, which
is positively impacting the companies' financial results.


Operating revenues generated by the two operators, in euros, rose 5.4%
year-over-year. More significantly, combined EBITDA rose to €14.2 million
compared with losses in the first quarter of 2001. Both operators in El Salvador
and Guatemala were EBITDA positive, showing a combined EBITDA margin of 30%.

DATA BUSINESS

TELEFONICA DATA GROUP

Grupo Telefonica Data is facing difficult challenges during fiscal 2002. Among
its strategic priorities are to: a) to consolidate its leadership position in
Spain and Latin America, providing integrated solutions to corporate customers;
b) to make its business in new markets profitable; c) to move up the value chain
toward higher margin services that promote greater loyalty; d) to leverage its
differentiated geographic presence to strengthen sales of International Services
and centralize the attention to Multinational Customers; and e) to maximize the
operating efficiency of the businesses.


The analysis of the financial results of the first quarter of 2002 for Grupo
Telefonica Data are conditioned, by the changes its consolidation perimeter has
experienced. On one hand, and in order to complete its offer of services to
advance in its strategy in Germany, during the first quarter, the company
finalized the acquisition of HighwayOne Germany GMBH, one of the main broadband
service providers with XDSL broadband technology for corporate customers. On the
other hand, given the existing difficulties in making operations profitable in
the Austrian market, some divestiture alternatives are being analyzed.
Consequently as of January 1, 2002 the financial statements for ETI have been
consolidated by the equity method.


During the first quarter of 2002, Grupo Telefonica Data's Operating Revenues
rose to 456.8 million euros, representing a year-over-year growth of 12%. In a
difficult environment, this evolution is explained by the growth registered in
the new markets as well as in the Latin American markets where Telefonica Data
operates as an incumbent except for Argentina. At the same time, revenues from
the International Network has risen significantly as a result of stronger sales
of the International Services.


The consolidated EBITDA for Telefonica Data Group during the first quarter of
2002 totaled 16.9 million euros, up 133.3% from the same period of fiscal 2001.
The EBITDA margin is at 3.7%. This performance is mainly due to the positive
business evolution of the incumbent units (except for Argentina) and better
results obtained from the International Network, in line with the efforts
developed towards increasing operating efficiency at the businesses.


Telefonica Data signed an agreement whereby it will offer a one-stop solution to
communication services to the Sabre Connected travel agencies in Argentina,
Brazil, Chile, Colombia and Peru.


Incumbent Markets


In Spain, operating revenues during the first quarter of 2002 reached 203.7
million euros, similar to the same period last year. Growth would have been 8%
if the non-recurring revenues assigned to the ISP business were not accrued into
the first quarter of 2001, subsequently transferred to Telefonica de Espana. As
for the revenue breakdown, the growth in international services (25%) and
Hosting services (73%) should be emphasized. Thus, 81% of the revenues come from
Data and Internet, 11% from e-solutions, 4% from Hosting services, and 4% from
international services.


The EBIDTA reached 36.4 million euros during the first quarter of 2002 versus
45.3 million euros for the same period last year. The EBITDA margin was 17.9%.
The year-over-year evolution is explained by the effect of non-recurring results
in 2001, as well as by lower costs from transferring the development activity of
new services from Telefonica DataCorp to Telefonica Data Espana. In a highly
competitive market, specific actions are being implemented to strengthen the
commercial power of the company and to obtain better operating efficiency.


In the Americas, revenues from the four countries (Argentina, Brazil, Chile, and
Peru) as of March 2002 reached 96.9 million euros, up 2% compared to fiscal 2001
(without considering the effect of the devaluation in Argentina, growth would
have been 23%). As for EBITDA, it rose 7.9 million euros, and the EBITDA margin
went from 1.6% to 8.1%.


In Latin America, the positive development of operations in Brazil and Chile and
the negative impact the devaluation and the drop in economic activity had in
Argentina were particularly noteworthy.


Telefonica Data Brazil's consolidation as leading communication service provider
to corporations in Sao Paulo State has enabled it to achieve, during the
first quarter of 2002, revenues in the amount of 41.8 million euros and a
positive EBITDA of 2.5 million euros, versus 26.2 million in revenues and an
EBITDA of -1.8 million euros for the same period of 2001. According to the
established plan, during the first quarter a license was obtained to allow the
company to expand its operations outside of Sao Paulo State.


It is important to emphasize the quality of the revenues from the Spanish,
Argentine, Brazilian, Chilean and Peruvian markets, once they are derived from
end-customers and not from wholesale operators. This implies a higher stability
and a more solid base to move up the value chain in the mix of services.


Expanding Markets


Revenues in Europe reached 150 million euros, up 11% from the first quarter of
2001. As for EBITDA, in the first quarter 2002 it was a negative 4.8 million
euros, and in 1Q01 it was a negative 3.6 million euros.


In Germany and the United Kingdom (Grupo mediaWays) revenues totaled 103.4
million euros, a 3% drop compared to the same period last year. This was mainly
because the best narrow band users are switching to broadband services. It is
expected to partially compensate this situation throughout the year by offering
DSL broadband service, strengthened by the acquisition of HighWay One. Thus,
revenues will be less, and costs will be lower because the cost per minute of
Internet connection is going to decrease (approximately 20%) due to a decision
of the German Regulator, starting in March 2002. In 1Q02 the EBITDA reached 2.4
million euros, that is 2.3% EBITDA margin, less than the 8.5 million euros
obtained during the first quarter last year. This was the result of implementing
the DSL offering, which required the significant initial investments providing
the service in the development of a sales force and the commercial launch.


Revenues in Italy during the first quarter (46.5 million euros) rose 98%
compared to the same period in 2001 after the commercial launch of the company
had been completed, offering a wide range of products and service with national
coverage. During the same period, the EBITDA was a negative 7.2 million euros
versus a negative 8.7 million euros for last year.


As for the countries of the Americas, Telefonica Data is operating as a new
participant in Colombia, Mexico, Uruguay, and Puerto Rico, and it is present in
Miami, USA with its largest Data Center. Accumulated revenues from these
countries, at the close of first quarter of 2002, totaled 11.2 million euros, up
65% versus 6.8 million euros for the first quarter 2001.


The Group's contribution to the EBITDA from this market was a negative 9.3
million euros. These results are due the start-up phase that these operations
are currently in. The management challenge for this fiscal year is to reach the
scale needed to attain positive EBITDAs. In the first quarter 2001, EBITDA
reached -3.3 million euros, due to the low activity level in Mexico and
non-existing activities in USA.


International Network

During the first quarter of fiscal year 2002, revenues from the International
Network reached 20.4 million euros, up 115% compared to the same quarter of
2001. In the same period 2002, the EBITDA was a negative 6.4 million euros, up
53% compared to the negative 13.7 million euros posted for the first quarter of
2001.


The culmination of the deployment of the International Network, that enables
Telefonica Data to provide services to multinational companies and to other
operators within and between the European and Latin American regions where it
operates.


The rationalization of its structure, and higher sales of Network services have
led to improved results in this business.

MEDIA BUSINESS

ADMIRA MEDIA GROUP

When analyzing the consolidated financial results of the first quarter of 2002
for Admira Media Group, two significant circumstances should be taken into
account: First, the change in the Group's consolidation perimeter as the result
of the firm sale agreement whereby the holdings Admira Media has in the group
Uniprex and Radio Voz (Onda Cero Radio) will be sold to Antena 3 Television. As
a result of this, Onda Cero is now being consolidated by the equity method in
the same holding percentage as Admira Media's holding in Antena 3 Television.
Second: the general economic slowdown.


It must be stressed that the general economic slowdown is particularly affecting
the advertising market, which is very sensitive to the major macroeconomic
indicators and to the programming of the main television stations. In this
sense, we should point out that the advertising market in Spain fell 12.3%
compared to the first quarter last year.


The situation in Argentina deserves separate attention. During the first quarter
of 2002, a significant deterioration in the economic and social situation in
Argentina was observed. This has translated into a deterioration in the
advertising market, which fell 63% compared to the first quarter of 2001. This
situation has continued to have a strong impact on the investments of Admira
Media Group in that country. At the consolidated level, the depreciation of the
Argentine peso during the first quarter of the year (-64.2% versus the euro) has
had an additional negative impact on the Group's financial results, besides
those already registered in the fourth quarter 2001, of 15.4 million euros, that
were registered on the financial expenses by applying an exchange rate of 2.4862
pesos/euro (2.85 pesos/dollar).


During the first quarter of the year, Admira Media Group obtained consolidated
revenues of 217.8 million euros, down 23.2% from the same period last year, as a
result of the circumstances described above. Specifically, the change of
consolidation criteria for Onda Cero Radio has had an impact of 18.2 million
euros on the consolidated revenues of this first quarter. In turn, the economic
crisis has especially affected the income of Endemol in Holland, Germany, and
the United Kingdom and ATCO in Argentina.


In spite of this environment and thanks to the cost cutting efforts to adapt the
company to the current situation, reflected in a 22.0% decrease in operating
expenses, the Group has been able to maintain a positive consolidated EBITDA of
6.8 million euros, 35.4% lower than obtained in the first quarter of 2001.


The net loss totaled a negative 134.3 million euros, especially weighed down by
non-recurring results of negative 43.4 million euros, the majority of which are
due to the provisions associated with the investment made in Azul Television in
Argentina.


Content Business


ENDEMOL


The economic slowdown of fiscal 2001, further aggravated by the September 11
terrorist attacks, have affected the development of Endemol's business during
the first quarter of the fiscal year. This slowdown was translated into the
deterioration of the advertising market which was commented above and has led
television companies to decide to increase their in-house produced formats.


Despite the above, it should be emphasized that during the first quarter of
2002, Endemol has continued to successfully produce television formats, as shown
in the large audience share for 'Operacion Triunfo' (Star Academy) in Spain and
France and the interest that TV stations from other countries have shown in
obtaining the format for the short-term.


As the result of the current economic environment, Endemol registered
consolidated revenues of 160.6 million euros for the first quarter of 2002, down
19% compared to the same period last year. This decrease was mainly due to the
negative evolution in one of its traditional markets, the Dutch market, which
caused the Company's main clients to press for lower prices and to increase the
number of their own in-house productions.


The company is transferring the reduction in revenues to its operating costs, as
demonstrated by the fact that throughout the quarter it reported 270 layoffs in
Holland (one-third of the workforce), thus being able to present a positive
EBITDA of 24.6 million euros, although down in 34.4% from the same period last
year.


At the same time, Endemol continues to bank on new markets for its products,
like the North American market, where it has had greater than expected growth,
relying on a very flexible cost structure. It is also continues with the planned
expansion into the Latin American market as Grupo Telefonica's natural market,
where the development of partnerships with TV Globo in Brazil and Televisa in
Mexico continues. It has recently launched the Big Brother program in these
countries, obtaining significant audience shares, in excess of 50% on average.


As for the plan for growth in Europe, it is worth mentioning the acquisition by
the company, in the first quarter 2002, of 75% of the UK company 'Zeppotron.com'
- dedicated to the production of interactive comedies - through Endemol UK. The
company also acquired through Endemol France 100% of the company 'Miss France'
in France. Both acquisitions have involved an investment of 6.5 million euros.


Broadcast Television and Radio Business


ANTENA 3


During the first quarter of 2002, Antena 3 Television faced a very adverse
environment, marked by a drop in the general advertising market of broadcast
television in Spain, which fell 12.3% compared to the same period in 2001.
Besides this general market environment, the aggressive pricing policy adopted
by TVE since the prior fiscal year led to reduction in advertising prices and an
increase of time dedicated to commercials at this station.


This situation has had an impact on the Company's financial performance during
the first quarter of the year. Thus, revenues totaled 111.4 million euros during
the period, down 16.2% versus the same period in 2001. Meanwhile, the EBITDA was
9.9 million euros, down 68.7% from the first quarter of 2001.


In terms of audience share, however, Antena 3 is the second most-watched station
after TVE-1, with an accumulated viewer share over the first quarter of 20.7%.
This is slightly better than its position in the same period last year and
significantly higher than its closest competitor, Tele 5, whose audience share
fell from 20.9% during the first quarter of 2001 to 18.4% at the end of the
first quarter of this year.


It should be indicated that the transaction by Antena 3 Television to acquire
Onda Cero Radio continues. It has been approved by Antena 3's Board of Directors
and by the General Shareholders' Meeting. This transaction will be finalized
during the second quarter of 2002, and the estimated value of the transaction is
223.4 million euros.


As for Onda Cero, data from the 2002 Estudio General de Medios shows that the
radio station has a 19.8% audience share and continues to be the second most
listened radio station in Spain with 544,000 more listeners than its closest
competitor.


This positive performance of audience share has been reflected in the Company's
financial results. Thus, the Company's consolidated revenues totaled 18.2
million euros, up 13.6% from year over year, mainly due to the 7.5% increase for
advertising. This occurred despite the slowdown of the general advertising
market in Spain. The positive trends in revenues, together with the evolution in
operating expenses, which rose 10.9% compared to the first quarter of 2001, have
enabled the company to improve its EBITDA by 3.4% from year to year,
representing a loss of 2.9 million euros.


ATCO


The difficult economic situation in the country had a significant effect on
Telefe's business activity during the first quarter of 2002. This has logically
had repercussions in the broadcast television advertising market, which as of
March 2002 had fallen 63% below the same period of 2001. This implies a
significant deterioration in the recessionary trend experienced during last
year.


All of this translates into significant decreases in revenues and EBITDA at the
end of the first quarter compared to the same period 2001. Specifically,
revenues was at 20.9 million pesos in 2002, down 42.4% compared to the first
quarter 2001.EBITDA totaled a negative 14.6 million pesos, down 161.8% from the
same period last year.


In terms of audience, Telefe continues to be the leader in the country, despite
the difficulties it has had to renew programming. However, its audience share
fell was 36.5%, 2.7 percentage points lower than the end of March 2001. This
decreased audience share has been accompanied by a decrease in the share of the
advertising market, which went from 38.6% the first quarter of 2001 to its
current level of 36.1%. This loss of market share, however, is not having as
much of a negative effect in terms of revenues as could be expected, precisely
because the strong slowdown in the advertising market translates into only
marginal losses in revenues.


Pay Television


VIA DIGITAL


The pay television business in Spain is very difficult. It is an excessively
small market for an excessive number of competitors. Proof of this is the recent
announcement made by the principal shareholders in Quiero TV that the Company
was renouncing the Digital Terrestrial Television license it had been granted
and was entering in liquidation procedures.


During the first quarter of the year, Via Digital has continued to develop its
strategy, which is based on articulating measures to increase its current
subscriber portfolio and thereby increase its market share. Another goal is to
improve the quality of its portfolio and the average profitability per
subscriber. The subscriber base at the end of the quarter totaled 808,268
subscribers, up 19.9% year-over-year.


From the financial standpoint, Via Digital registered revenues during the first
quarter of 84.8 million euros, up 32.7% from the same period 2001. This was a
direct result of the increase in the number of subscribers. At the same time,
the company is continuing to implement the cost rationalization policy it
started during 2001, which has enabled the general expenses to decrease by 15%
compared to the same period last year and to continue the cost containment
program. This evolution of revenues and expenses has allowed the company's
EBITDA to improve by 28.8% year-over-year, representing a loss of 48.3 million
euros.




INTERNET BUSINESS


TERRA LYCOS GROUP


The financial results for the first quarter 2002 are not comparable to the
previous quarter, mainly due to the seasonality of the advertising business. At
the same time when compared to the same quarter last year it should be noted
that the macroeconomic situation was then much more favorable, and that a
significant part of the revenues of the company was produced by Internet
companies that are no longer in business.


In this uncertain environment, Terra Lycos' consolidated revenues rose to 159.5
million euros. At the same time, the EBITDA totaled -46.8 million euros. Both
figures were in the range of the expectations given to the market for the
quarterly results.


The company continued to make an effort to diversify its sources of income
through the OBP model. The OBP model (Open, Basic, Premium) is the concrete
result of Terra Lycos' evolving business model and is expected to generate
revenues based on the subscription and pay-per-view/-use model, both in the
access business and in the portal business.


Throughout the first quarter, numerous paid products and services were launched
within the OBP model, such as Lycos Insite Select ($30 per year), Lycos Insite
Pro ($189 per year) and intranet communication tools for the SOHO market ($29.95
per month) in the United States. In addition, a game platform (Brazil) and the
Big Brother program (Brazil, Mexico, and Spain) have been packaged together with
access. At the same time, in Spain, Terra Lycos has been a pioneer in launching
pay-per-view programs like the concert by Operacion Triunfo (Star Academy). One
example of paid products is the series launched by financial portal Invertia in
Mexico, which enables subscribers to personalize and update information,
configuring financial alarms, and gaining access to the most complete network of
financial information in the country. Another service were launched by Invertia
in Spain, which uses SMS service to offer 3 stock quotes per message and
information about the fluctuations in each user's own portfolio.


As for vertical portals, Terra Lycos launched Educaterra, an online educational
portal dedicated to the residential market, educational institutions and
companies, which offers free and paid contents.


Lastly, it should be emphasized that Terra Lycos continues to leveraged itself
with the different synergies and opportunities that come up within Telefonica
Group. Thus, in the Telefonica.Net a product dedicated to the market of small
and medium size businesses, Terra is the provider of the portal that has free
and paid contents of a business nature that accesses a virtual Intranet where
Terra becomes the ASP (Application Service Provider) for business management.


The launching of these products and services has allowed the company to attain
at the end of the period a total of 4.9 million access, communication services
and portal subscribers. Terra Lycos at the end of March had over 1.8 million
paying subscribers, 1.3 million access subscribers and 0.5 million communication
services and portal subscribers. This reflects an increase of 100,000 paying
subscribers in one quarter.


Viewers, measured by the number of pages visited, totaled nearly 450 million per
day, up 4% compared to the same period last year. On the other hand, the unique
visitors figure for the whole Group was 115 million in the month of March, a 16%
increase compared to March last year.


From the financial standpoint, first quarter revenues were 10% below the same
period last year. By business segments, the media business reported a 26%
decrease compared to the same period last year. Revenues for the media business
were affected by the performance of the US advertising market where, in spite of
certain indications of economic recovery, this has not been reflected in an
increase in advertising, which is the company's main source of revenues in the
region. On the other hand, access revenues increased by 28% during the same
period, which has enabled the company to offset in part the drop in the media
business.


The geographic and functional diversification of the revenues has enabled Terra
Lycos to maintain the stability in its generation. Thus, 56% of the revenues (90
million euros) came from the media business, while the remaining 44% (71 million
euros) came from the access business, which marks a growth trend in the
proportion of total revenues coming from access, at a time when the media
business is experiencing a negative cycle.


Geographically speaking, 58% of total revenues is generated in Spain and Latin
America and the other 42% of the total revenues came from the United States.


EBITDA reached -46.8 million euros, that implies an improvement of 35.9 million
euros compared to first quarter 2001.


The net loss for the period was -130.2 million euros, a 25.4% improvement over
the same period last year, as a result of the evolution of the EBITDA and the
extension of the goodwill amortization period from 5 to 10 years.


DIRECTORY BUSINESS


TELEFONICA'S DIRECTORY BUSINESS


During the first quarter of 2002, TPI Group experienced substantial growth in
revenues, EBITDA, and net income. Revenues rose 156.1% to 62.9 million euros,
and the EBITDA went from a negative -9.1 million euros for the first quarter of
2001 to a positive 7.5 million euros this quarter. The net income earned stood
at 2.5 million euros compared to a loss of 7.8 million euros obtained for the
same period last year. These good results were fundamentally due to:


  • The incorporation of TPI Peru into the Group's consolidated statements.


  • TPI Espana's good performance. Its revenues rose 45.2% to 21.3 million
    euros.


  • The improvement in the margin of the Publiguias Directories as a result of
    the new contract signed with TCTC.


It is important to again recall that the seasonal nature of the revenues, due to
accounting criteria in place once each guide was actually published, make it so
that the quarterly results are not comparable or standardized, nor can they be
extrapolated at the end of the year.


Since the first quarter results do not really represent the impact on the year
as a whole, the TPI group has facilitated forecasts on its main financial
indicators for the end of the year. These forecasts indicate that TPI Group's
revenues are expected to increase from 7% to 9%. This expected growth in
revenues, together with a cost containment policy implemented in all business
units, makes the company's expected EBITDA for the end of the year to rise from
13% to 16%.


TPI Espana contributes 35% of the Group's revenues. Its contribution to the
group's consolidated EBITDA is a negative 1.7 million euros. Revenues rose 45.2%
to 21.3 million euros mainly because of the organic growth of 7.3% experienced
by each of the 6 Yellow Page Directories that were published, the publication of
5 White Page Directories that were not published in the same period of the
previous year and whose organic growth was 15.9%, as well as a significant
increase for the multimedia product (66.3%).


Latin America contributed the remaining 65% of the revenues and enabled the
Group to obtain a positive EBITDA. TPI Peru obtained revenues totaling 30.3
million euros, which is 48% of the Group's total revenues, thanks to the
publication of the Lima directory, which revenues, in local currency, of this
edition were 6.9% above the previous edition, and it contributed 11.5 million
euros to the Group's consolidated EBITDA.


Publiguias experienced organic growth of 9% in local currency, which translates
into a 4.1% growth in euros because of the depreciation of the Chilean peso
against the euro. TPI Brasil grew 157.7% in revenues this quarter, being the
multimedia product the main source of revenues.


Operating costs rose 66.5% over the same period of last year mainly because of
the incorporation of TPI Peru and increased activity from TPI Espana, with the
publication of 5 additional White Pages directories. Excluding the incorporation
of TPI Peru, operating expenses would have risen 15.5%.


The Group attained a positive EBITDA amounting to 7.5 million euros compared to
a negative EBITDA of -9.1 million euros in the first quarter of 2001.


CALL CENTER BUSINESS


ATENTO


During the first quarter of the year, commercial activity at Atento Group
continued to focus on increasing the diversification of revenues, having reached
an increase of customers from outside the Group, over the same period last year.
This increase mainly took place in the financial sector (BBVA, SCH, Banco de
Brasil and Unibanco), although the telecommunications sector continues to be the
main contributor (AT&T, NTT, Alestra and Avantel are examples of customers).


As for the BBVA agreement, the Spanish Antitrust Committee has announced its
approval, and this will enable the Group to consolidate its telephone banking
services.


Given the different types of services provided, the information services and
traditional customer services departments continue to contribute the most to the
total revenues, with percentages near 80% of the total, while telesale services
total 10%, telecharge services 4%, and the rest corresponding to value-added and
consulting services.


From the operations standpoint, Atento had as of March 31, 2002, 28,238
positions, up 7.2% from March 2001 but down 4.5% from the end of last year.
Lower personnel levels resulted from the closing of Atento Italia, in line with
the current focus to turn the installed plant profitable. These positions are
serviced by 45,476 employees, 2,943 employees more than the same period last
year (2,261 less than December 2001). Occupancy levels at the centers are at
77%, 2 p.p. lower than the end of the first quarter 2001, due to an increase in
the number of operating units in Brazil, Mexico D.F. and Morocco throughout 2001
and 3 percentage points below December 2001.


From a financial standpoint, accumulated revenues in the first quarter totaled
156.4 million euros, up 1.9% from year to year, mainly because of the mentioned
increase in revenues from customers outside of the Group.


The average revenue per occupied position during the quarter reached 2,548
euros, down 4.3% from the same period last year, as a result of the increased
number of positions.


Operating costs totaled 145.9 million euros, up 2.7% from the first quarter of
2001. This increase was mainly due to wage increases in Spain in the
neighborhood of 9% after the signature of the Collective Agreement for 2002.
These costs were partially offset by positive changes in the costs of supplies
and outsourcing, which dropped by 18.8% and 13.9%, respectively, compared to the
first quarter of 2001.


As a result of the evolution in revenues and costs, EBITDA for the first quarter
totaled 10.4 million euros, 8.5% lower than the same period last year, and the
EBITDA margin was 6.7%, 0.7 p.p. lower than the first quarter of 2001.


As for Capex made by Grupo Atento during the first quarter of 2002, it amounted
to 9.2 million euros, 52% less than the same period 2001, as a result of the
consolidation of existing operations.


BROADBAND CAPACITY MANAGEMENT BUSINESS


EMERGIA


The operating revenues of Emergia during the first quarter of 2002 totaled 11.6
million euros. The company has been able to maintain this level of revenues due
to the sale and rental of capacity in a complex and competitive environment,
marked by the financial difficulties experienced by competitors and customers.


Operating expenses rose to 20.7 million euros. The comparison of the financial
results with the same period last year would not be meaningful because Emergia
was still in the pre-operational period.


Changes in revenues and expenses allowed the company to attain an EBITDA of
negative 9.5 million euros, with an improvement of 28.1% from last year.


It is important to mention that Emergia has followed a conservative accounting
policy in its capacity swaps with other operators. In this sense, the capacity
sold is registered in the P&L as revenue during the useful life of the cable,
and the capacity purchased is registered as a cost, in the same manner as the
revenue.


In any event and following a conservative accounting policy, Emergia has decided
not to recognize any kind of positive results when the net balance is positive
between revenues and costs corresponding to transactions made with carriers who
have filed for Chapter 11 protection in the United States of America.


Lastly, throughout the quarter, the company has continued to implement the
policy of signing commercial agreements to offer its clients better service. In
this sense it has reached an agreement whereby Emergia obtains the right to use
a ring in Miami that joins the NAP of the Americas (where the main carriers in
the city of Miami are located), Telefonica Data's Miami TIC, and Emergia's
landing station in Boca Raton. This protected ring enables Emergia the
possibility to offer its own connection in the main interconnection points in
the city of Miami. From a commercial stand point this implies that the company
is able to rely on a more competitive service portfolio. From the operational
point of view it implies a better flexibility in capacity activation and in a
better management of circuits with origin and/or termination in Miami gives
better conditions to activate capacity faster and to achieve better performance.
Telefonica Group benefits from an extended circuit providers offering to several
destinations in the USA, due to the fact that Emergia is interconnecting with
its own infrastructure to NAP of the Americas.




FOR ADDITIONAL INFORMATION, CONTACT:


Investor Relations Department.

Gran Via 28, floor 3, 28013 Madrid.

Tel: [phone].

Fax: [phone].

E-mail: [e-mail]

E-mail: [e-mail]

E-mail: [e-mail]

E-mail: [e-mail]


www.telefonica.com/ir/eng






COMPANIES INCLUDED IN EACH FINANCIAL STATEMENT


  • Telefonica, S.A. directly participates in the share capital of Endemol
    Entertainment Holding, N.V. and Mediaways GmbH Internet Services, S.A.,
    which have been considered into Admira Media Group, S.A. and Telefonica
    Data, S.A., respectively.


  • Telefonica Holding Argentina, S.A. (the former CEI Citiorp) holds 26.82%
    of Atlantida de Comunicaciones, S.A. (ATCO) and 26.82% of AC Inversora, S.A.
    which, for the purposes of the pro-forma financial statements, are 100%
    consolidated in Admira Media Group


  • In the case of Company de Telecomunicaciones de Chile, S.A. (CTC) and
    Telecomunicaciones de Sao Paulo S.A. (Telesp), owned by Telefonica
    Latinoamerica, although its process of segregation has not yet finished, the
    activities of the mobile telephony business in Chile has already been
    assigned to Telefonica Moviles and the activities of the data business in
    Brazil has been assigned to Telefonica Data.


  • With regard to the businesses that remain consolidated within TASA under
    Telefonica Latin America, the previously mentioned reorganization, we note
    that these companies will continue to include their respective directories
    activities which have also been added on a proforma basis to the TPI Group,
    in line with our vision for Telefonica's directories business.


  • Following the agreement with Iberdrola, Telefonica S.A. has acquired in
    December 2001 and February 2002, several participations in the fixed and
    cellular companies in Brazil. This participations has been consolidated in
    Telefonica Latinoamerica and Telefonica Moviles financial statements,
    according to the presentation of Telefonica results by global business
    lines, and assuming this stakes will be transfer to the above mentioned
    subsidiaries.


SIGNIFICANT EVENTS:


  • On May 8, 2002, Sogecable and Telefonica, through their media subsidiary
    Admira, reached an agreement to integrate DTS (Via Digital) with Sogecable.
    The operation will be carried out through a capital increase for Sogecable,
    which Via Digital shareholders will subscribe up to a 23% capital increase
    in Sogecable to be paid in with the contribution of shares of Via Digital.
    The efficacy of this agreement - which also includes Sogecable's acquisition
    of Admira's interest in Audiovisual Sport - is subject to authorization from
    the appropriate authorities.


    As a result of this agreement, Telefonica will have an interest in
    Sogecable's capital equal to the holdings of both Prisa and Groupe Canal+:
    16.38%, in the event that 100% of Via Digital shareholders take part in the
    capital increase. The increase, however, will not be integrated into the
    shareholder agreement signed by Prisa and Groupe Canal+.

The union of these two companies will give rise to the leading operator of pay
television in Spain, with more than 2.5 million subscribers and aggregated
revenues in 2001 of 1.300 billion euros.


  • On May 6, 2002, Telefonica Moviles signed the definitive agreement with
    Pegaso PCS shareholders to acquire 65% of the company's capital from Sprint,
    Leap Wireless, and other non-Mexican financial investors, in the amount of
    87 million dollars, which will be paid in cash. The remaining stake (35%)
    will remain in the hands of Grupo Burillo, headed by Alejandro Burillo,
    which will continue on as a strategic partner by contributing its vast
    knowledge of the Mexican market. The total worth of Pegaso PCS has been set
    at 1.360 billion dollars. The transaction is subject to authorization from
    Mexican regulatory authorities. Subsequently, Telefonica Moviles and Grupo
    Burillo will perform a capital increase in Pegaso totaling between 326 and
    488 million dollars. Telefonica Moviles will subscribe 65% of this amount in
    order to amortize short-term debt and to increase the company's financial
    strength. Then, Telefonica Moviles and Grupo Pegaso will combine Telefonica
    Moviles' operations in northern Mexico into a new company, in which TEM will
    have a controlling interest of between 90 and 92%.


  • On April 25, 2002, Anatel awarded Telefonica a license to operate long
    distance, national, and international traffic in Brazil, making it the first
    operator to offer this service to its subscribers once it complied with the
    telephone service universalization goals established by Anatel following
    sectoral privatization in July 1998. This license also authorizes Telefonica
    to offer local telephone service outside the area of its concession, Sao
    Paulo, and to operate in this manner throughout the country. In addition, it
    can extend its operations into the national market for corporate data
    transmissions and expand its mobile telephony business, thanks to the joint
    venture it has with Portugal Telecom. On March 4, 2002, Telefonica obtained
    the Anatel certificate after becoming the first fixed telephony operator in
    Brazil to comply with the goals in its concession area last September, two
    years and three months ahead of schedule. The main goals completed were:
    elimination of waiting lists, installation of new telephone lines in a
    maximum of two weeks, and intensive coverage of Sao Paulo state with
    public telephones.


  • On April 23, 2002, Telefonica Moviles launched Generation 2.5 mobile
    telephony in Brazil, through CDMA 1xRTT technology. This enables the firm to
    offer services and platforms similar to the ones it offers in Spain,
    Germany, and Morocco through GPRS. These include greater data transmission
    speed, always-on connection, and a system of rates broken down by data
    packet. This technology facilitates data transmission speed of 144Kbps, more
    than the 14.4Kbps of second generation services and fixed telephone services
    offered in Brazil (56 Kbps). Telefonica Celular handled this product launch
    in Rio de Janeiro, with Telesp Celular performing the parallel function in
    Sao Paulo. These launches were designed during the interim period prior
    to the final approval from Anatel of the Joint Venture uniting the assets of
    both groups.


  • On April 15, 2002, the General Shareholders' Meeting approved the renewal
    of the Board of Directors, to which the following have been appointed for a
    five-year period: Jose Antonio Fernandez Rivero, representing BBVA; and
    Gonzalo Hinojosa Fernandez de Angulo, Pablo Isla Alvarez de Tejera, and
    Enrique Used Aznar, as independent members. In addition, the following board
    members were re-elected for a new five-year term: Cesar Alierta Izuel and
    Maximio Carpio Garcia. On the other hand, Telefonica's Board of Directors
    approved the appointment of Jose Ignacio Goirigolzarri Tellaeche, CEO of
    BBVA, as Vice President of the Board, replacing Pedro Luis Uriarte.


  • On March 14, 2002, Telefonica Moviles announced the launch of a new
    multi-access portal, accessible from a mobile phone, computer, or PDA, which
    will integrate messaging and mobile Internet services for operators and
    suppliers of applications and content, as well as customer management
    services, among others. Group 3G will be the first operator of the Group to
    launch this service, and it will be presented during CEBIT.




CHANGES IN THE PERIMETER AND CRITERIA OF CONSOLIDATION FOR ACCOUNTING


During the period ended March 31, 2002, the following changes in the
consolidation perimeter took place:


Telefonica


In January, Telefonica, S.A. acquired 50,000 shares in Endemol Entertainment
Holding, N.V. (Endemol) for 2 million euros. With this operation, Grupo
Telefonica has a 99.47% capital interest in Endemol. The company continues to be
incorporated in the consolidated financial statements of Grupo Telefonica by the
global integration method.


In January, Telefonica, S.A. created the fully-owned subsidiary Telefonica
Capital, S.A., contributing 6 million euros, all of the initial capital of the
company in question. The company was incorporated into the consolidated
financial statements of Grupo Telefonica at its purchase price, since its
activities have not yet been initiated.


In February, Telefonica, S.A. participated in establishing the Brazilian company
Telefonica Factoring do Brasil, S.A., subscribing and paying out 960,000 euros,
40% of the company's initial capital. The company has been incorporated into the
consolidated financial statements of Grupo Telefonica by the equity value it
contributed.


The corporation Zeleris Espana, S.A. (formerly Telefonica Servicios de
Distribucion, S.A.) a fully-owned subsidiary of Telefonica, S.A., increased its
capital in January by 1.92 million euros. These were subscribed and paid out in
their entirety by the principal company. The company continues to be
incorporated into the consolidated financial statements of Grupo Telefonica by
the global integration method.


In March, the last part of the agreement was completed between Telefonica, S.A.
and Iberdrola, S.A., whereby the former will acquire all shareholdings
previously held by Grupo Iberdrola in the Brazilian operators where both groups
are shareholders, directly or indirectly. Telefonica, S.A. has acquired 3.38% of
the capital in Tele Leste Celular Participacoes, S.A., in exchange for 799,411
shares in Telefonica, S.A. The company, which had been incorporated into the
financial statements of Grupo Telefonica by the equity method during 2001, is
now being integrated by the global integration method.


Telefonica Datacorp Group


In January, Telefonica Datacorp, S.A. acquired 100% of the HighwayOne Germany
corporation, paying out 1.38 million euros in the transaction. The company is
being incorporated into the consolidated financial statements of Grupo
Telefonica by the global integration method.


Austrian company European Telecom International, GmbH, a fully-owned subsidiary
of Telefonica Data Holding, S.L., which is in turn a fully-owned subsidiary of
Telefonica Datacorp, S.A., which had been incorporated during fiscal 2001 by the
global integration method, is now being consolidated, based on management
criteria, by the equity method in this fiscal year.


Telefonica de Espana Group


During the first quarter of this year, the fully-owned subsidiary of Telefonica
de Espana. S.A., Telefonica Cable, S.A., acquired the following:


  • 27% capital in Telefonica Cable Andalucia, S.A.


  • 11% capital in Telefonica Cable Navarra, S.A.


  • 10% capital in Telefonica Cable Catalunya, S.A.


  • 10% capital in Telefonica Cable Madrid, S.A.


  • 43.25% capital in Telefonica Cable Castilla y Leon, S.A.


With these acquisitions, Telefonica Cable, S.A., the parent company in all of
these companies, holds 100% of the capital in these companies, except for
Telefonica Cable Castilla y Leon, S.A., where it holds a 97.25% stake. The
payout made was 4.83 million euros. The companies continue to be incorporated
into the consolidation perimeter of Grupo Telefonica by the global integration
method.


Telefonica Moviles Group


Telefonica Moviles, S.A. sold 2% of its associate company Mobipay Internacional,
S.A. for 409,000 euros, reducing its percentage in the company's capital to 36%.
The company continues to be incorporated into the consolidation perimeter of
Grupo Telefonica by the equity method.


Telefonica Moviles, S.A. acquired an additional 16.3% in the capital of
subsidiary Telefonica El Salvador Holding, S.A. de C.V., paying out 28.67
million euros in the transaction. The company continues to be incorporated into
the consolidation perimeter of Grupo Telefonica by the global integration
method.


Telefonica Moviles, S.A. acquired an additional 16.3% in the capital of
subsidiary Telefonica Centroamerica Guatemala Holdings, S.A., paying out 28.67
million euros in the transaction. The company continues to be incorporated into
the consolidation perimeter of Grupo Telefonica by the global integration
method.


Admira Media Group


Pursuant to existing commitments for the sale of a stake in Grupo Uniprex by
Grupo Admira Media, S.A. to Grupo Antena 3 de Television, the financial results
of these companies are now incorporated by the equity method.


TPI Group


During the first quarter of the year, TPI has acquired the participation of
Telefonica del Peru in Guitel, the directories business in this country. This
company continues to be consolidated by the global integration method.

     
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