2006January-December Rslts-P2

Telefonica SA
01 March 2007

Part 2

RESULTS BY BUSINESS LINES

Telefonica O2 Europe

The results of O2 Europe for the period ended 31 December 2006 comprise the
results of the O2 Group for the 11 month period ended 31 December 2006 and the
results of Telefonica O2 Czech Republic and Telefonica Deutschland for the 12
month period ended December 2006. O2 Group also includes the results of be* from
1 July 2006, Decision Focus from 1 august 2006 and The Link from mid September
2006. At the end of December 2006, the contribution of Telefonica O2 Europe to
Telefonica Group revenues was 13,159 million euros, and operating income before
depreciation and amortization (OIBDA) reached 3,708 million euros.

Telefonica O2 Europe CapEx for the period ended December 2006 amounted to 2,553
million euros. For the period Feb-Dec 06, O2 Group CapEx, excluding
acquisitions, totaled 2,238 million euros, in line with the guidance for the
period provided by the Company (2,000-2,300 million euros).

Among the latest actions taken in the quarter, we should highlight:

  • The launch of Telefonica O2 Slovakia's commercial service on 2 February
    2007. In the first 12 days over 110,000 active customers were acquired. The
    initial offer, called 'O2 Jednotky', includes prepaid on-net calls for SKK 2
    and SKK 8.50 for calls to all other networks, and the Czech Republic, at
    anytime of the day. From 2 February until 31 march all customers will
    receive a 100% credit bonus when they top up for the first time. Top up
    vouchers are available with a value of SKK 250 and 350 (valid for 3 months),
    as well as SKK 550 and 950 (valid for 6 months). Vouchers will be sold
    through a broad distribution network of more than two thousand points of
    sale located across Slovakia.

  • O2 launched its DSL service and refreshed its successful Genion Homezone
    tariffs, enabling the company to offer integrated mobile, DSL landline
    telephony and broadband Internet access services. The DSL packages, O2 DSL S
    /M/L, are priced from 40 euros to 55 euros a month and comprise a DSL
    connection of 4 to 16 megabits per second with flat rate Internet access,
    plus fixed line calls charged either at flat rate or per minute. O2 DSL
    customers who are also O2 mobile contract customers receive a discount of 5
    euros per month.


    The refreshed Genion tariffs - S/M/L - are closely integrated with the new
    DSL offering. The new tariffs simplify and reduce prices for making calls
    from both within and outside the Homezone. The Genion S tariff is a postpay
    tariff without a fixed contract term and no basic monthly fee. Genion M
    offers a flat rate tariff for calls from the Homezone, while the Genion L
    tariff introduces a Germany-wide flat rate for a monthly fee of 25 euros.

  • Be* continued its network rollout in the UK, with over 500 exchanges
    across the UK unbundled by february 2007, enabling it to provide broadband
    services to more than one third of the UK population. Be* operates one of
    the most innovative and technically-advanced UK broadband networks, using
    ADSL 2+ technology which offers download speeds of up to 24 Mbps.


    Be* also launched 'Upload Plus' during the quarter, a service which allows
    business broadband customers to send data at much faster speeds of up to
    2.5Mbps, more than double the nearest competitor. Be* is the first UK ISP to
    offer this service, with a rollout to consumers planned for the second
    quarter. Plans to offer an integrated mobile and broadband service from O2
    in mid 2007 are progressing well, driven by three aims: to make customers'
    lives easier; to offer the best service quality and customer service in the
    market; and to give straightforward value for money.

  • During the quarter O2 UK finished the re-branding of 96 Link stores,
    bringing the total number of O2 Retail stores to around 400. This expansion
    is part of an ongoing shift in the UK market towards increased direct
    distribution by network operators. As the focus moves to retention and
    loyalty in an increasingly mature market O2 is well placed to improve the
    customer experience through its award winning retail chain.


    In December O2 Ireland announced a joint venture with Tesco in Ireland,
    Tesco Mobile, to offer exclusively Tesco branded mobile services in Tesco
    Ireland stores nationwide. The MVNO service will use the O2 network and is
    expected to launch in summer 2007.In October O2 Ireland and Arqiva jointly
    announced the first consumer trial of broadcast mobile TV in Ireland,
    featuring all the main Irish TV channels plus content from Sky and other
    channels. 350 O2 customers in the Greater Dublin area will be able to access
    broadcast TV on their mobile phone during the trial, using the Nokia N92
    DVB-H handset. O2 has already conducted initial demonstrations of broadcast
    mobile TV at the 2006 Ryder Cup, with content from RTE 1, RTE 2, TV3, TG4
    and Sky. The trial will commence in early March.

  • Following on from the announcement in December 2006, JPMorgan Cazenove has
    been instructed to conduct a strategic review of Airwave, including a
    possible sale of the business. Since that date JPMorgan Cazenove has been
    working with all stakeholders involved, including the UK government, to
    review options and produce an Information Memorandum, which is expected to
    be released in early Spring.


    With the conclusion of the Welsh Ambulance contract, Airwave has now
    contracted with all the blue light emergency services in the UK and
    continues to pursue other opportunities, such as winning new contracts and
    providing additional services to existing customers, as demonstrated by
    recent announcements regarding contracts with London Underground and Channel
    Tunnel Rail and the launch of new data services.

O2 Group

O2 UK

Fourth quarter net service revenue grew by 13.7% year on year and for the eleven
months to 31 December reached a total of 3,885 million pounds, an increase of
14.7% compared to the same period last year, in line with the guidance provided
for 2006 (14%-15% range). This growth has been driven by continued strong
customer and ARPU growth.

OIBDA margin for the eleven months to 31 December 2006 was 28.4% compared to
29.3% for the same period last year, reflecting the high level of customer
growth, with O2 UK adding 1.65 million customers in the calendar year. The drop
in OIBDA margin reported for the 11 month period until December is fully aligned
with the last guidance provided by the Company (-1 p.p.) OIBDA for the eleven
months to December 2006 was 1,211 million pounds, showing an increase of 10.2%
vs. the same period last year.

The quarter again saw tough competition in the market, but the business
continued to perform well with broadly stable gross additions quarter on
quarter, although year on year gross additions were down around 5% due to the
increasingly mature nature of the UK market. A total of 295,500 net new
customers were added in the quarter, taking the base to 17.6 million, 10.3%
higher than at the same time last year (excluding the Tesco Mobile customer
base).

A total of 136,200 net new contract customers were added in the quarter and at
the end of the period contract customers made up 35.3% of the total base,
compared to 34.4% in the same period last year. 12 month rolling contract ARPU
of 513 pounds was down 2 pounds quarter on quarter, and 4 pounds lower than the
fourth quarter last year, as a result of new customer propositions and an
increasingly competitive market. 12-month rolling contract churn was 23%,
compared to 27% for the same period last year, the sixth consecutive quarter of
decline, reflecting the ongoing strategy of rewarding customer loyalty.

A total of 159,300 net new pre-pay customers were added in the quarter, and 12
month rolling pre-pay ARPU of 143 pounds was 7 pounds higher than the fourth
quarter last year and 1 pound higher than the previous quarter, driven by
promotions such as O2 Long Weekends.

12 month rolling data ARPU of 84 pounds was 7 pounds higher than the same period
last year and 1 pound higher than the previous quarter, driven primarily by
growth in text message volumes, up 30% year on year in the fourth quarter, as
well as increasing usage of a range of non-SMS services such as the user
generated content service 'Look at Me'.

O2 UK's blended 12 month rolling ARPU of 273 pounds was 6 pounds higher than the
fourth quarter last year, and 1 pound higher than the previous quarter,
reflecting the continued growth in data ARPU coupled with broadly stable voice
ARPU.

Quarterly monthly minutes of use were up 9.1% year on year to 180 minutes a
month, driven by propositions such as 50% extra minutes on 18 month contracts,
Treats and Long Weekends.

O2 UK's own channels accounted for around 60% of gross connections in the
quarter. O2 UK also completed the re-branding of 96 Link stores to expand its O2
Retail network to around 400 stores. Blended customer acquisition costs (SAC) on
an annual basis fell by around 9% year on year.

CapEx in the eleven months to December (excluding CapEx related to the
acquisition of be*and The Link) was 518 million pounds, with continued
expenditure on rolling out coverage of the 3G network as well as investment in
the existing 2G network to ensure a high level of service.

O2 UK promoted a number of products and services during the quarter, aimed at
acquisition and retention of customers and revenue growth. These included:

  • O2 Long Weekends, offering free on net calls from Saturday to Monday for
    new and existing O2 Pay and Go customers who top up 15 pounds a month and
    free calls to any network in the UK for new Pay Monthly and upgrading
    customers;
  • O2 Treats, offering customers bundles of free texts, voice minutes or
    value added services after 6 months as an O2 customer to reward loyalty;
  • O2 Rewards, offering prepay customers 10% of top-ups back every 3 months;
  • Bluebook, which enables customers to store contact information, text
    messages, pictures and video clips to a free web-accessible personal
    account. The converged service is a first for any UK mobile operator;
  • The Xda Orbit, the latest model in the successful Xda range, a stylish,
    ultra slim, lightweight device with inbuilt Global Positioning System (GPS).
    The Xda Orbit features Microsoft(R) Windows(R) Mobile 5.0, with direct push
    email giving real time access to Microsoft(R) Outlook(R) Inbox, Calendar,
    Contacts and Tasks. The Xda Orbit also has an FM radio, an MP3 player, a 2.0
    megapixel camera and a quad band mobile phone.




O2 UK
SELECTED OPERATING DATA
Unaudited figures
                                             2005                        2006
                                             December      March      June   September  December                  % Chg
    Cellular customer (thousands)            15,980.9   16,340.6  16,814.3    17,337.7  17,633.2                   10.3
        Prepaid                              10,479.2   10,654.4  10,940.5    11,255.8  11,415.1                    8.9
        Contract                              5,501.6    5,686.2   5,873.8     6,081.9   6,218.1                   13.0
                                                   4Q         1Q        2Q          3Q        4Q                  % Chg
    MOU (minutes)                                 165        162       169         175       180                    9.1
    ARPU (EUR)                                   33.3       32.3      33.1        34.0      34.1                    2.5
        Prepaid                                  17.2       16.8      17.3        17.9      18.2                    5.7
        Contract                                 63.7       61.6      62.7        63.9      63.5                  (0.4)
    Data ARPU                                    10.0        9.8      10.0        10.6      10.7                    6.7
    %non-P2PSMS over data revenues              12.2%      12.5%     13.3%       13.1%     12.5%               0.3 p.p.

Note: MOU and ARPU calculated as monthly quarterly average.



O2 Germany

Service revenue grew by 3.3% in the fourth quarter, and for the eleven months to
December reached a total of 2,808 million euros, an increase of 6.7% compared to
the same period last year vs. the guidance of High Single Digit growth provided
by the Company for the period. This growth has been driven by the continued
expansion of the customer base, which partly offset ARPU weakness in the German
market. Fourth quarter service revenue was reduced by almost 5 p.p. due to the
termination rate cuts in December 2005 and November 2006.

OIBDA margin for the eleven months to December was 20.7%, 1 percentage point
lower than the same period last year. OIBDA for the eleven months to December
2006 was 631 million euros, broadly flat compared to the same period last year.
OIBDA and consequently the OIBDA margin were negatively impacted by the
inclusion of a charge related to a rebalancing of the workforce towards
customer-facing areas. O2 Germany plans to increase the number of employees in
areas such as customer service and to reduce positions in non-customer facing
areas. Excluding this charge, the OIBDA margin for the eleven months to December
2006 is 21.8%, stable in comparison to the same period last year and in line
with the full year guidance.

In this competitive environment, O2 Germany continued to trade well. Roughly
396,000 net new customers were added in the quarter, taking the base to 11.0
million, 12.9% higher than at the same time last year. The Tchibo Mobile
customer base grew by 55,000 to 827,000 by the end of the quarter.

O2 Germany added a total of 192,700 net new contract customers in the quarter,
its highest level since the fourth quarter last year. 12 month rolling contract
ARPU of 475 euros was 6 euros lower than the previous quarter, and 33 euros
lower than the same quarter last year. This reflected the impact of the
termination rate cuts in both December 2005 and November 2006, as well as
increasing competition in the German market and the introduction of new customer
offers.

A total of 203,400 net new pre-pay customers were added in the quarter. 12 month
rolling pre-pay ARPU of 105 euros was 6 euros lower than the previous quarter
and 25 euros lower than the fourth quarter last year, reflecting the impact of
the termination rate cuts, increasing competition, higher market penetration the
growth in multiple SIM ownership and lower minutes of use.

12 month rolling data ARPU was 69 euros, 1 euro less than the previous quarter
and 8 euros lower than the same period last year due to the higher number of
lower spending pre-pay users in the base and a shift from SMS to voice usage.
Non-SMS data users grew 12% compared to the same period last year.

Blended 12 month rolling ARPU remains the highest in the German market at 290
euros, down from 299 euros in the previous quarter and 332 euros in the same
quarter last year. This trend reflects the ongoing impact of the termination
rate cuts, the rapid growth in the pre-pay customer base over the past 12
months, which now makes up over 50% of the total base, and the increasingly
competitive market environment. Termination rate cuts reduced 12 month rolling
ARPU in the quarter by approximately 13 euros. Blended customer acquisition
costs (SAC) on an annual basis fell by around 8% year on year.

Quarterly monthly minutes of use grew by 4% year on year, to 129 minutes, driven
by new propositions such as Genion flat rate. O2 Germany now has a total of 3.9
million Genion customers (71% of the post-pay base), with 51% of all new
post-pay customers opting for Genion.

CapEx in the eleven months to December was 1,139 million euros, with continued
expenditure on both the 3G and 2G networks.

Germany launched a number of new products and services during the quarter,
including:

  • LOOP S/M/L, a new prepay tariff to reward larger top ups. For a 30 euros
    top up the customer receives a 20 euro bonus;
  • O2 Business flat, a nationwide flat rate tariff for on-net and fixed net
    calls. The flat rate is available for 25 euros per month SIM only and 35
    euros with a handset. Off-net calls cost 15 cent/min. The Genion-Option for
    O2 Business and O2 Business Profi tariffs were also reduced, with local and
    long distance calls now charged at 2.5 cent/min;
  • The Xda Orbit, also launched in UK;
  • AOL Mobile. AOL Germany launched a mobile service during the quarter in
    co-operation with O2 Germany. The basic tariff costs 19 cent/min for calls
    to all networks, with SMS priced at 16 cents. Three additional options can
    be added to this basic tariff: Plus Family (4.99 euros/month) gives free
    calls between up to five numbers and an AOL phone; AOL Plus Friends (2.99
    euros) enables national community calls for 5 cent/min; Plus Web offers 20
    MB of WAP and Web browsing for 4.99 euros.
  • Launch of HSDPA on 1 December 2006. Data download speeds of up to 1.8 Mbit
    /s are available in Hamburg, Berlin, Cologne, Dusseldorf, Frankfurt and
    Munich. There is no HSDPA surcharge on existing UMTS tariffs.




O2 GERMANY
SELECTED OPERATING DATA
Unaudited figures
                                             2005                        2006
                                             December      March      June   September  December                  % Chg
    Cellular customer (thousands)             9,768.8   10,099.0  10,335.3    10,628.9  11,024.8                   12.9
        Prepaid                               4,798.9    4,986.9   5,143.3     5,340.7   5,544.1                   15.5
        Contract                              4,970.0    5,112.1   5,192.1     5,288.0   5,480.7                   10.3
                                                   4Q         1Q        2Q          3Q        4Q                  % Chg
    MOU (minutes)                                 124        127       128         124       129                    4.0
    ARPU (EUR)                                   26.5       24.1      24.2        25.3      23.7                 (10.6)
        Prepaid                                  10.4        9.2       8.9         9.0       8.3                 (20.5)
        Contract                                 41.4       38.6      39.1        41.7      39.2                  (5.3)
    Data ARPU                                     6.1        5.9       5.4         5.8       5.9                  (3.6)
    %non-P2PSMS over data revenues              21.7%      23.0%     21.5%       21.4%     22.6%               0.9 p.p.

Note: MOU and ARPU calculated as monthly quarterly average.



O2 Ireland

Service revenue fell by 1.5% in the fourth quarter due to termination rate
regulation, increasing competition and the introduction of new customer offers.
The termination rate cut of RPI minus 11% in January 2006 impacted fourth
quarter service revenue growth by approximately 2%. For the eleven months to
December service revenue reached a total of 824 million euros, an increase of
1.1% compared to the same period last year, driven by a higher customer base.

In a competitive market O2 Ireland traded well, with gross and net connections
at a broadly similar level to the fourth quarter last year. 29,000 net new
customers were added in total during the quarter, taking the total base to 1.6
million customers, 1.9% higher than at the same time last year.

O2 Ireland added a total of 17,000 net new contract customers in the quarter. 12
month rolling ARPU of 1,020 euros was 53 euros lower than the fourth quarter
last year and 20 euros lower than the previous quarter, reflecting the impact of
the termination rate regulation.

A total of 12,000 pre-pay customers were added in the quarter, and 12 month
rolling ARPU was 353 euros, down 7 euros on the same period a year ago and 3
euros compared to the previous quarter.

12 month rolling data ARPU was 117 euros, 4 euros higher than the fourth quarter
last year and 1 euro higher than the previous quarter. Non-SMS data users grew
by 53% year on year.

Blended ARPU of 542 euros was reduced by approximately 7 euros due to the
termination rate cuts, and was 8 euros lower than the same quarter last year and
down 3 euros quarter on quarter.

Quarterly monthly minutes of use increased by 9.8% year on year to 246 minutes,
mainly due to the ongoing success of usage stimulation promotions such as 1 cent
weekends on pre-pay.

In addition O2 Ireland launched a number of pricing initiatives and services
during the quarter. These included:

  • Extension of a new device repair programme called Swap Out Service (SOS).
    From an initial trial in six O2 stores, the programme has been extended to
    all O2 Retail stores. Under the new service, customers are given an
    immediate replacement handset if they have a faulty device which is within
    its warranty period.
  • The launch of Napster Mobile in Europe on O2 Ireland 3G i-mode handsets.
    Napster Mobile allows O2 Ireland customers to search, browse, preview and
    purchase content from Napster's immense music catalogue of over two million
    songs.

O2 Ireland also continued to promote the following offers:

  • 1 cent calls and texts at weekends for prepay customers, extended until 25
    February 2007.
  • 'My Europe' roaming tariff, offering holidaymakers a reduced flat-rate
    voice roaming rate across the European Union. Using the free opt-in service,
    O2 customers are charged a flat rate of 59 cent per minute to make or
    receive a call within the EU, regardless of the mobile network used, at any
    time




O2 IRELAND
SELECTED OPERATING DATA
Unaudited figures
                                              2005                       2006
                                              December     March     June   September  December                   % Chg
    Cellular customer (thousands)              1,601.8   1,593.0  1,598.6     1,603.0   1,632.0                     1.9
        Prepaid                                1,173.2   1,154.0  1,146.9     1,134.9   1,146.9                   (2.2)
        Contract                                 428.6     439.0    451.7       468.1     485.1                    13.2
                                                    4Q        1Q       2Q          3Q        4Q                   % Chg
    MOU (minutes)                                  224       220      237         241       246                     9.8
    ARPU (EUR)                                    46.1      44.6     45.8        45.2      45.0                   (2.4)
        Prepaid                                   30.5      28.9     29.4        29.8      29.6                   (3.0)
        Contract                                  88.1      87.1     88.2        83.5      81.4                   (7.6)
    Data ARPU                                      9.6       9.5      9.5         9.9      10.0                     4.2
    %non-P2PSMS over data revenues               11.8%     13.8%    15.6%       18.4%     19.6%                7.8 p.p.
Note: MOU and ARPU calculated as monthly quarterly average.



O2 Airwave

After the period end, Airwave announced the Welsh Ambulance Service had signed a
10 year contract worth 32 million pounds to use its service, as well as a
contract with London Underground Limited valued at 115 million pounds to provide
Airwave coverage for the emergency services throughout London's underground
network. Airwave has now contracted with all the 'blue light' emergency services
in the UK to supply a secure digital communications system .

In December a 10 year contract was signed with Lancashire Constabulary to
provide a managed mobile data solution based around the Airwave Mobile
Applications Gateway (MAG) Service and the Airwave network. This groundbreaking
development means that Lancashire Constabulary will become the first UK police
force to deploy a multi-bearer force-wide mobile data solution.

During the quarter Airwave also launched the 'Locator' service, a new location
based service aimed at all Public Safety organisations, including police, that
need to know the whereabouts of their people and assets. A 2.8 million pounds
contract was also signed with Channel Tunnel Rail Limited to provide Airwave
communications to their UK tunnels and stations. Airwave continues to improve
its offering to customers with the development of voicemail and call forwarding
adding new functionality to Airwave's telephony features.




RESULTS BY BUSINESS LINES

Telefonica O2 Europe

TELEFONICA O2 CZECH REPUBLIC

Telefonica O2 Czech Republic contribution to Telefonica Group revenues in 2006
amounted to 2,148 million euros. In local currency, and taking into account
other recurring revenues, this represents an increase of 0.4% year-on-year
(+0.1% year-on-year in the fourth quarter alone), in line with the guidance of
flat revenues set for 2006. Mobile business was the key driver of this growth,
although the rate of decline of revenues from the fixed business slowed during
the year.

Consolidated operating expenses showed an increase in local currency of 2.8%
year-on-year in 2006, up by 13.2% in the fourth quarter alone mainly due to
re-branding costs and costs related to the launching of the Slovak project
(operations actually began on February 2nd 2007), fully reflected in the
year-on-year 12.4% year-on-year increase, in local currency, of costs from
external services. Supplies expenses (+2.2% year-on-year in local currency) also
contributed to the increase in consolidated expenses due to higher activity in
carrier transit and growth in mobile off-net traffic from Telefonica O2 Czech
Republic customers. Personnel expenses showed a decrease in local currency of
9.4% as a result of one-off items recorded in 2005 and 6.4% headcount reduction
(total number of employees at 31 December 2006 is 9,416).

The Group's operating income before depreciation and amortization (OIBDA)
amounted to 985 million euros, a year-on-year increase of 2.4% in local
currency, including Slovak operations and accomplishing guidance for the full
year which was upgraded during third quarter' results. As a result, OIBDA margin
was 45.8% in 2006, 0.9 p.p. higher than in 2005, showing the ongoing path on
cost efficiencies on the one hand, and the higher impairment charge registered
in 2005, on the other.

Total CapEx for Telefonica O2 Czech Republic Group in 2006 amounted to 229
million euros, an increase of 7.0% year-on-year in local currency. While CapEx
in the fixed segment increased by 40.0% year-on-year in local currency and
largely spent on broadband rollout and IPTV, investments in the mobile segment
decreased by 16.9% year-on-year in local currency, mainly due to the significant
investment in mobile broadband networks deployment made in the same period of
last year. CapEx over revenues reached 10.6% in 2006.

Cumulative operating free cash flow (OIBDA-CapEx) to December 2006 stood at 755
million euros, 1.1% year-on-year higher in local currency than in the same
period last year.

Fixed Line Business1

Revenues in the fixed line business amounted to 1,057 million euros for the full
year, showing a decrease of 5.1% year-on-year in local currency, driven by the
shift from traditional voice services which has not been fully compensated by
the increase in revenues from broadband Internet, data and value added services.
On the positive side, it is worth mentioning the turn around seen in the
Internet revenues (Narrowband&Broadband) through the year and the significant
improvement in revenues from IT services.
--------------------------------------------------------------------------------

1    After the merger of Cesky Telecom and Eurotel into Telefonica O2 Czech
Republic as of 1st July, 2006 all inter-company transactions between fixed and
mobile became intra-company. As a result, the financial results of the fixed and
mobile segments for 2006, as well as the comparable results from 2005 are
disclosed excluding inter-segment revenues and costs. However, mobile ARPU
calculation includes the full amount of revenues (including revenues from fixed
line business).



Revenues from traditional access fell by 6.5% year-on-year in local currency,
primarily due to the 17.4% decline in the number of fixed telephony accesses to
reach 2.4 million accesses at the end of 2006, reflecting a strong fixed to
mobile substitution effect, as well as the exclusion of 'incoming only lines'
from calculation, already reported in September. The increase of residential
monthly fees from 1st May has impacted positively on this revenue item, showing
rates of decline of around 2% in the third and fourth quarter, respectively,
compared to a decline of 7.9% in the second quarter.

Revenues from traditional voice services (voice traffic and interconnection)
declined by 9.6% year-on-year in local currency. Revenues from voice traffic
declined by 16.2% year-on-year in local currency, as a result of lower voice
traffic generated by end customers, which decreased by 7.0% year-on-year. The
unification of local and long distance rates effective as of 1st April helped
long distance traffic to remain in 2006 in the same level as the previous year.
Interconnection revenues were flat year-on-year in local currency in 2006,
mainly due to the decrease in interconnection charges and lower incoming
traffic, being offset by the growth in revenues from international operators, as
a result of higher international transit traffic.

Revenues from Internet and Broadband services registered a year-on-year increase
of 9.7% in local currency and by 17.9% in the fourth quarter alone, reflecting
the turn around already seen from the first quarter, as Narrowband Internet
represents a decreasing proportion of Internet revenues with limited downside
potential.

The total number of retail Internet broadband accesses at the end of December,
2006 amounted to 405,000 (which represents 86.2% of the total ADSL base),
showing a net adds in the year of 179,299 accesses.

It is also important to mention that 'O2 TV' customers at the end of 2006
amounted to 15,600 since the launching of the service, based on the Imagenio
IPTV platform, in the beginning of September 2006.

Revenues from data services showed a 4.1% year-on-year decrease in local
currency as the decrease in revenues from leased lines (-10.9%) was partially
offset by the increase in revenues from virtual private networks based on
broadband IP connectivity solutions (+6.2%).

Mobile Business

Revenues for the full year 2006 in the mobile segment increased by 6.1%
year-on-year in local currency to reach 1,091 million euros.

In the Czech mobile market, while SIM card penetration reached almost 121% at
2006 year end, total number of cellular accesses managed by Telefonica O2 Czech
Republic increased by 4.0% year-on-year to reach 4.9 million at the end of
December 2006. Net additions for the full year amounted to 188,000, with strong
performance in the fourth quarter alone (93,000 net additions on contract and
11,000 on prepay). Further migration of prepaid customers to contract, has lead
to a 21.3% year-on-year increase in the number of contract customers who at the
end of December totaled 1.9 million, or 38.5% of the total customer base
compared with 33.1% at the end of 2005. The blended monthly average churn rate
stood at 1.5% for the full year, up from the 1.3% registered in 2005.

Revenues from voice services (monthly fees, customer and interconnection
traffic) increased in the full year by 4.4% in local currency, with the increase
in revenues from monthly fees (+9.0% year-on-year), driven by the larger
contract customer base, and helped by the 1.4% year-on year increase in traffic
revenues as a result of traffic stimulation activities. Total mobile traffic
grew by 21.0% year-on-year, reflecting an increased average MOU per subscriber
and the increase of incoming traffic (MOU per customer blended resulted in 102
minutes in 2006, up from 92 minutes in the last year).

In the fourth quarter of 2006, blended ARPU registered a 2.7% year-on-year
increase in local currency to reach 19 euros on the back of continuing customer
migration from the prepaid to the contract segment.

Revenues from Value Added services (SMS, MMS and Content) increased by 8.5% in
local currency, with the non-SMS blended data ARPU as a percentage of data ARPU
reaching 41.0%, compared with 39.0% for the same period last year.

The number of customers using the Data Express service (CDMA-based broadband
internet access service) reached 94,000, up by 34.3% year-on-year. This,
together with the 10.4% increase in the number of customers using the Data
Nonstop service (GPRS-based internet access service), which stood at 74,000 at
the end of December, led to a year-on-year increase in revenues from Internet
and Data of 24.5% in local currency.

Revenues from equipment (including connection fees) showed a 0.6% year-on-year
decrease in local currency, partially because lower connection fees charged to
new contract customers.




TELEFONICA O2 CZECH REPUBLIC
SELECTED OPERATING DATA CELLULAR BUSINESS
Unaudited figures
                                               2005                      2006
                                              December     March     June  September  December                    % Chg
    Cellular customer (thousands)              4,676.0   4,695.0  4,770.2    4,759.7   4,864.5                      4.0
        Prepaid (1)                            3,130.4   3,051.8  3,043.1    2,978.3   2,989.7                    (4.5)
        Contract                               1,545.6   1,643.2  1,727.1    1,781.3   1,874.8                     21.3
                                                    4Q        1Q       2Q         3Q        4Q                    % Chg
    MOU (minutes)                                   97        96      102        102       109                     12.4
    ARPU (EUR)                                    17.5      17.1     17.9       18.3      18.8                      7.6
        Prepaid                                    8.3       7.9      8.4        8.6       8.8                      6.5
        Contract                                  36.8      34.8     34.8       34.9      35.0                    (4.9)
    Data ARPU                                      3.8       3.7      3.7        3.8       4.0                      6.0
    %non-P2PSMS over data revenues               40.2%     39.1%    38.7%      43.0%     40.0%               (0.2 p.p.)
Note: MOU and ARPU calculated as monthly quarterly average.
(1) 13 month active customer base.





RESULTS BY BUSINESS LINES

Telefonica O2 Europe

Telefonica Deutschland

Telefonica Deutschland revenues in the fourth quarter amounted to 76 million
euros, 4.8% higher than in the same period last year, and reached a total of 297
million euros for the 12 months to December 2006, a year-on-year increase of
5.4%.

This was primarily due to a significant increase in revenues from voice services
that offset the decline in revenues from the Internet narrowband wholesale
business. Voice revenues in the twelve months of 2006 amounted to 93 million
euros, an increase of 82% compared to full year 2005, representing 5.4 billion
minutes carried by the Telefonica Deutschland IP network and maintaining the
company's lead in the German VoIP wholesale market. Fourth quarter voice
revenues were 23 million euros, an increase of 28% on the same period last year,
representing 1.6 billion minutes.

Although competition in the German broadband access retail market remained
intense, the total number of equivalent ADSL lines in service increased to about
618,000 at the end of full year 2006. Revenues from Internet broadband access
based on Telefonica Deutschland's own LLU infrastructure amounted to 25 million
euros for full year 2006, compared to 0.2 million euros in 2005. Fourth quarter
LLU revenues were 14 million euros. Telefonica Deutschland continues to provide
services to nearly all the major ISPs in Germany, maintaining its strong market
position.

Telefonica Deutschland registered a negative operating income before
depreciation and amortization (OIBDA) of 50 million euros in the 12 months to
December 2006, compared to negative OIBDA of 3 million in the 12 months to
December 2005, mainly due to start up losses relating to its nationwide ULL
rollout. By the end of 2006 42% of households were covered, with a target of 60%
by the end of august 2007. The fourth quarter of 2006 resulted in a negative
OIBDA of 25 million euros, compared to a negative OIBDA of 4 million euros in
the fourth quarter of 2005.

RESULTS BY BUSINESS LINES

Telefonica O2 Europe




O2 GROUP
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
                                                                                             February - December
                                                                                                                   2006
Revenues                                                                                                         10,733
Internal expenditure capitalized in fixed assets (1)                                                                187
Operating expenses                                                                                              (8,069)
Other net operating income (expense)                                                                               (67)
Gain (loss) on sale of fixed assets                                                                                (10)
Impairment of goodwill and other assets                                                                               0
Operating income before D&A (OIBDA)                                                                               2,773
Depreciation and amortization                                                                                   (1,770)
Operating income (OI)                                                                                             1,003
(1) Including work in process.


TELEFONICA O2 CZECH REPUBLIC
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
                                                              January - December               October - December
                                                          2006      2005          % Var       2006    2005       % Var
    Revenues                                             2,148     1,035           n.c.        555     526         5.6
    Operating income before D&A (OIBDA)                    985       457           n.c.        206     204         0.9
    OIBDA margin                                         45.8%     44.1%       1.7 p.p.      37.1%   38.8%  (1.7 p.p.)
Note: In 2005 Telefonica O2 Czech Republic includes the results from July. In 2006 costs from start up operations in
Slovakia are included.


TELEFONICA DEUTSCHLAND
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
                                                              January - December               October - December
                                                             2006    2005        % Chg       2006    2005         % Chg
    Revenues                                                  297     281          5.4         76      73           4.8
    Operating income before D&A (OIBDA)                      (50)     (3)         n.m.       (25)     (4)          n.m.
    OIBDA margin                                          (16.8%)  (1.1%)  (15.7 p.p.)    (32.1%)  (5.7%)   (26.4 p.p.)


TELEFONICA O2 EUROPE
ACCESSES
Unaudited figures (Thousands)
                                              2005                          2006
                                             December        March       June   September   December              % Chg
    Final Clients Accesses                   35,730.1     36,361.9   37,055.8    37,566.3   38,311.1                7.2
        Fixed telephony accesses (1)          3,021.6      2,971.4    2,894.9     2,598.3    2,462.9             (18.5)
        Internet and data accesses              613.5        596.5      572.7       564.6      607.1              (1.0)
            Narrowband                          366.9        292.4      224.3       178.6      143.7             (60.8)
            Broadband                           233.7        291.5      335.9       373.9      451.9               93.4
            Other                                12.8         12.6       12.5        12.1       11.6              (9.7)
        Cellular accesses                    32,095.0     32,794.0   33,588.2    34,400.7   35,225.4                9.8
        Pay TV                                    0.0          0.0        0.0         2.8       15.6               n.m.
    Wholesale Accesses (2)                      597.3        573.0      527.2       620.0      881.7               47.6
Total Accesses                               36,327.4     36,934.8   37,583.0    38,186.3   39,192.8                7.9

(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary
access; 2/6 Access x30. Company's accesses for internal use included.

(2) Includes T. Deutschland connections resold on a retail basis.

Note: Cellular accesses, Fixed telephony accesses and Broadband accesses include 
MANX customers.


TELEFONICA O2 EUROPE
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
                                                                                               January - December
                                                                                                                   2006
Revenues                                                                                                         13,159
Internal expenditure capitalized in fixed assets (1)                                                                219
Operating expenses                                                                                              (9,570)
Other net operating income (expense)                                                                               (83)
Gain (loss) on sale of fixed assets                                                                                 (8)
Impairment of goodwill and other assets                                                                             (9)
Operating income before D&A (OIBDA)                                                                               3,708
Depreciation and amortization                                                                                   (3,399)
Operating income (OI)                                                                                               309
(1) Including work in process.
Note: Telefonica O2 Europe includes O2 Group (February-December), Telefonica O2 Czech Republic y T. Deutschland
(January-December).



RESULTS BY BUSINESS LINES

Others Business

Atento Group

Atento Group net turnover reached 1,027 million euros by the end of 2006, a
19.9% growth year on year. The evolution of Group revenues was motivated by the
increased activity of its main clients, as well as the addition of new clients
in all countries, primarily Brazil, Mexico, Venezuela, Chile and Spain.

The ratio of revenues generated by clients outside the Telefonica Group
increased year on year by 2.2 percentage points to stand at 47.0% as of the end
of December 2006. The main clients to have contributed to this growth are:

  • In Brazil: Increased activity primarily in the financial sector with Banco
    IBI, Badresco, Itau and the addition of new clients such as Santander and
    Aon.
  • In Mexico: Growth in sales with BBVA, particularly in the Telecobranza
    Hipotecaria, Seguros Zodiaco and Finanzia services
  • In Venezuela: Growth in revenues due to new clients in the financial
    sector, such as: Banco de Venezuela, Banpro and Sicobank and increased
    management with Grupo CANTV and Movilnet.
  • In Chile: Increased activity with the client VTR Interamericana.
  • In Spain: Growth in revenues in Servicios 012 Cataluna, Repsol, Agencia
    Estatal de Administracion Tributaria and BBVA.

In terms of the geographic distribution of revenues, Brazil accounts for 38.7%
of the total and Spain for 29.1%, as a whole representing 1.8 percentage points
less than in December 2005. Atento Mexico continued with its significant growth
rate to stand at 10.2% of revenues compared with 8.7% the previous year. Chile
represented 6.3% compared with 6% twelve months ago and Venezuela totalled 3.9%
in comparison with 2.5% in December 2005.

Operating costs grew 18.9% year on year to 882 million euros, mostly due to
increased personnel expenses (+19.6% year on year) as a result of the Group's
activity growth.

The OIBDA of the Atento Group totalled 142 million euros, equivalent to a 21.8%
year-on-year growth generated by increased activity and by savings in structural
costs. In terms of profitability, the OIBDA margin stood at 13.8% to improve the
margin recorded the previous year by 0.2 percentage points. Atento Brasil
contributed to OIBDA with 62 million euros, representing 44.0%. The remaining
operations contributing the most to the Consolidated OIBDA were Mexico with
13.5% (19 million euros), Chile with 9.8% (14 million euros), Spain with 9.2%
(13 million euros), Venezuela with 8.3% (12 million euros) and Peru with 6.5% (9
million euros).

The operating result to December amounted to 113 million euros to give a
year-on-year growth of 28.2%.

Capex at December 2006 stood at 35 million euros compared with 40 million euros
the previous year, primarily centred on Brazil, Mexico, Venezuela and Spain.

Operating free cash flow (OIBDA - Capex) improved substantially in relation to
the figure accumulated to December 2005 to stand at 106 million euros, a 39.9%
increase as a result of improved management and lower investments.



In terms of operations, the Atento Group had 46,847 positions in place at 31st
December 2006, 18.0% more than one year ago. The average number of occupied
positions for 2006 stood at 35,343. Financial productivity stood at 77.6%, a 2.2
percentage point drop in comparison with December 2005.




ATENTO GROUP
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
                                                                             January - December     October - December
                                                                              2006   2005  % Chg     2006   2005  % Chg
Revenues                                                                     1,027    856   19.9      269    248    8.3
Internal exp capitalized in fixed assets (1)                                     0      0   n.m.        0      0   n.m.
Operating expenses                                                           (882)  (742)   18.9    (228)  (214)    6.6
Other net operating income (expense)                                           (3)      1   c.s.      (2)    (1)   n.m.
Gain (loss) on sale of fixed assets                                            (0)      0   c.s.        0      0   34.3
Impairment of goodwill and other assets                                          0      0   n.m.        0      0   n.m.
Operating income before D&A (OIBDA)                                            142    116   21.8       39     34   16.5
Depreciation and amortization                                                 (28)   (28)    1.4      (7)    (7)  (0.2)
Operating income (OI)                                                          113     88   28.2       32     27   21.1
(1) Including work in process.




RESULTS BY BUSINESS LINES

Others Business

Content and Media Business

The Contents and Media business ended the last quarter of 2006 with a net
turnover (revenues) of 1,608 million euros, 26.7% up from the figure reached in
the same period of the previous year. This increase is due to the positive
evolution of results from the main lines of business.

Operating income before depreciation and amortization (OIBDA) in the
January-December period amounted to 362 million euros, compared with the 269
million euros obtained in the same period of 2005. This significant growth in
2006 was primarily due to the revenues obtained from the sale of part of the
Sogecable stake by the Telefonica Group in the take-over bid launched by the
Prisa Group.

Endemol NV

Endemol enjoyed a strong overall performance in the full year 2006, recording a
24.1% growth in turnover, reaching a level of EUR 1,117 million. The company
experienced turnover growth in all genres, compared to last year. Growth in
Non-scripted came in at 22.2% and Scripted grew by 8.5%. Digital Media
registered a very strong performance as well, growing by 65.3%. Both
Non-scripted and Digital Media were strongly fuelled by the hit format Deal or
No Deal.

Organic growth accounted for the vast majority of total growth, with a
remarkably high 20.9% out of the 24.1%, in line with the guidance provided to
grow over 15% in organic terms. This organic development is mainly due to the
strong performance of Endemol's operating companies in the UK, the US and Italy.
While Big Brother remained the top format with very sound ratings across the
globe, the performance of Deal or no Deal was especially remarkable, triggering
an increasing appetite for game shows, one of the core elements of Endemol's
product portfolio. This higher demand was leveraged by closing a number of deals
in various territories on other game shows such as 1 vs 100, Show me the Money
and Set For Life.

EBITDA in 2006 reached a level of EUR 177 million, a +15.9% increase compared to
last year, when it amounted to EUR 153 million. In terms of EBITDA margin,
Endemol has moved from 17.0% of turnover in 2005 to 15.9% in 2006, almost in the
middle of the guide EBITDA range (15-17%).

ATCO

The advertising market in Argentina (Capital and Gran Buenos Aires regions) grew
by 10.8% over the year with respect to the previous year. This figure differs
from the 20.7% increase recorded in the same period of 2005, which reflected the
market recovery recorded over 2004 and 2005.

In this market context, Telefe maintained its leadership in terms of audience
over the last quarter, ending 2006 as the leader in audience share that reached
38.8% compared with the 30.3% obtained by Canal 13, its main competitor. The
market share accumulated by Telefe to December 2006 end stood at 41.6%, slightly
up from that reached in the same period of 2005 and, once again, followed by
Canal 13 with 38.1%.




CONTENT AND MEDIA BUSINESS
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
                                                                           January - December      October - December
                                                                            2006     2005  % Chg    2006   2005   % Chg
Revenues                                                                   1,608    1,269   26.7     483    390    23.8
Internal expenditure capitalized in fixed assets (1)                           0        0   n.m.     (0)      0    n.m.
Operating expenses                                                       (1,411)  (1,052)   34.1   (404)  (325)    24.5
Other net operating income (expense)                                          24        6   n.m.      15    (3)    c.s.
Gain (loss) on sale of fixed assets                                          143       47   n.m.     (0)     40    c.s.
Impairment of goodwill and other assets                                      (2)      (1)  159.0     (2)    (1)   169.1
Operating income before D&A (OIBDA)                                          362      269   34.4      92    102  (10.1)
Depreciation and amortization                                               (26)     (29)  (9.2)     (5)    (8)  (40.4)
Operating income (OI)                                                        336      240   39.6      87     94   (7.4)
(1) Including work in process.




ADDENDA

Companies included in each Financial Statement

Based on what was indicated at the start of this report, the results breakdown
of Telefonica Group are detailed according to the business in which the Group
has a presence. The main differences between this view and the one that would
apply attending to the legal structure, are the following

  • Telefonica O2 Europe results up to December 31st 2006 include O2 Group
    results from February 1st 2006 to December 31st 2006, and Telefonica O2
    Czech Republic and Telefonica Deutschland results from January 1st 2006 to
    December 31st 2006. As of December 31st 2005 include Telefonica O2 Czech
    Republic for the six months July 1st 2006 to December 31st 2006 and the
    Telefonica Deutschland results for the twelve months January 1st 2006 to
    31st December 2006. Telefonica Group 69.4% stake in Telefonica O2 Czech
    Republic is legally dependent upon Telefonica S.A..
  • Telefonica, S.A. directly participates in the share capital of Endemol
    Entertainment Holding, N.V., which has been included in Content and Media
    Business. The accounting effects from the Sogecable S.A. stake have been
    also assigned to Content and Media Business, including the partial
    divestiture that took place in the first quarter 2006, even though a part of
    the investment is legally dependent upon Telefonica, S.A..
  • Telefonica Holding Argentina, S.A. holds a minority stake of Atlantida de
    Comunicaciones, S.A. (ATCO) which, for those purposes, is considered to be
    part of Telefonica de Contenidos, consolidating 100% share capital of ATCO
    in the Content and Media Business.
  • Telefonica International Wholesale Services Group (TIWS) financial results
    has been assigned to Telefonica Latinoamerica Group, even though is legally
    dependent upon Telefonica, S.A. (92.5%) and Telefonica Data Corp (7.5%).
  • Terra Networks Espana S.A. has merged with Telefonica de Espana S.A. with
    economic effects from January 1st 2006. The 2005 results also has been
    assigned to the Telefonica de Espana Group for this presentation. Maptel
    Networks, S.A.U. and Azeler Automocion, S.A. have been included in
    Telefonica de Espana Group although as of December 31st 2006, are directly
    participated by Terra Networks Asociadas, S.L, which are legally dependent
    upon Telefonica, S.A..
  • Latin American companies formerly dependent upon Terra Group have been
    legally transferred to Telefonica International, S.A. during the second half
    of 2005, although the results have been assigned to Telefonica Latinoamerica
    Group from the beginning of 2005.

ADDENDA

Key Holdings of the Telefonica Group and its Subsidiaries detailed by business
lines




TELEFONICA GROUP                                                   TELEFONICA DE ESPANA GROUP
                                                    % Part                                                    % Part
Telefonica de Espana                               100.00 Telyco                                              100.00
Telefonica Moviles (1)                             100.00 Telefonica Telecomunic. Publicas                   100.00
Telefonica Latinoamerica                           100.00 Telefonica Soluciones Sectoriales                  100.00
Telefonica de Contenidos                           100.00 T. Soluciones de Informatica y Comunicaciones de   100.00
Atento Group                                        91.35 Espana
Telefonica O2 Europe                               100.00 Nota: Terra Networks Espana and Telefonica Empresas

(1) Telefonica Moviles has been absorbed by Telefonica S.A.                                                             
Espana has been absorbed by merger with Telefonica de
                                                                                                                        
Espana


TELEFONICA LATINOAMERICA GROUP                                         TELEFONICA MOVILES GROUP
                                                         % Part                                                % Part
Telesp (1)                                                87.95        Telefonica Moviles Espana               100.00   
Telefonica del Peru (2)                                   98.18        Brasilcel (1)                            50.00   
Telefonica de Argentina                                   98.03        T. Moviles Argentina                    100.00
TLD Puerto Rico                                           98.00        T. Moviles Peru                          98.53   
Telefonica Chile (3)                                      44.89        T. Moviles Mexico                       100.00
Telefonica Telecom (4)                                    52.03        TM Chile                                100.00
Terra Networks Peru                                       99.99        T. Moviles El Salvador                   99.08
Terra Networks Mexico                                     99.99        T. Moviles Guatemala                    100.00
Terra Networks USA                                       100.00        Telcel (Venezuela)                      100.00
Terra Networks Guatemala                                 100.00        T. Moviles Colombia                     100.00
Terra Networks Venezuela                                 100.00        Otecel (Ecuador)                        100.00
Terra Networks Brasil                                    100.00        T. Moviles Panama                        99.99
Terra Networks Argentina                                  99.99        T. Moviles Uruguay                      100.00
Terra Networks Chile                                     100.00        Telefonia Celular Nicaragua             100.00
Terra Networks Colombia                                   99.99        Telefonica Moviles Chile                100.00
Telefonica Data Argentina                                 97.92        Group 3G (Germany)                       57.20
Telefonica USA (5)                                       100.00        IPSE 2000 (Italy) (2)                    45.59
T. Intern. Wholesale Serv. (TIWS) (6)                    100.00        3G Mobile AG (Switzerland)              100.00
(1) Effective participation 88.01%.                                    Medi Telecom                             32.18
(2) Telefonica Empresas Peru has been absorbed by T.del Peru as        Mobipay Espana                           13.36
of May 1st 2006.                                                       Mobipay Internacional                    50.00
(3) CTC has changed its name.                                          T. Moviles Soluciones y Aplicac. (Chile)100.00
(4) Colombia Telecom has changed its name.                             Tempos 21                                43.69
(5) Change its name. Before it was Telefonica Data USA                 (1) Joint Venture which fully consolidates the
(6) Telefonica, S.A. owns 92.51% y Telefonica DataCorp owns            subsidiary Vivo, S.A., through participation at
7.49%.                                                                 Vivo Participacoes, S.A. (62.94%)
Note: Telefonica Empresas Brasil has been absorbed by Telesp           (2) Additionally, Telefonica Group holds a 4.08% 
of
                                                                       IPSE 2000 through Telefonica DataCorp.
                                                                       Note: Radiocomunicaciones Moviles SA (Argentina)
                                                                       has been absorbed by Moviles Argentina


ATENTO GROUP                                                           TELEFONICA O2 EUROPE
                                                     % Part                                                     % Part
Atento Teleservicios Espana, S.A.                    100.00            O2 UK                                    100.00
Atento Brasil, S.A.                                  100.00            O2 Gemany                                100.00
Atento Argentina, S.A.                               100.00            O2 Ireland                               100.00
Atento de Guatemala, S.A.                            100.00            Manx                                     100.00
Atento Mexicana, S.A. de C.V.                        100.00            Airwave                                  100.00
Woknal (Uruguay)                                     100.00            Be                                       100.00
Centro de Contacto Salta                             100.00            Telefonica O2 Czech Republic (1)          69.41
Mar de Plata Gest y Contactos, S.A.                  100.00            (1) Company owned through Telefonica S.A.
Atento Peru, S.A.C.                                   99.46            Note: Telefonica Deutschland absorbed by O2      
                                                                       Germany
Atento Chile, S.A.                                    77.95
Atento Maroc, S.A.                                   100.00
Atento El Salvador, S.A. de C.V.                     100.00



TELEFONICA DE CONTENIDOS GROUP                                         OTHER PARTICIPATIONS
                                                     % Part                                                     % Part
Telefe                                               100.00            Lycos Europe                              32.10
Endemol (1)                                           99.70            Sogecable (1)                             16.76
Telefonica Servicios de Musica                       100.00            Portugal Telecom (2)                       9.84
Telefonica Servicios Audiovisuales                   100.00            China Netcom Group (3)                     5.00
Hispasat                                              13.23            BBVA                                       1.07
(1) Ownership held by Telefonica S.A. Endemol Holding                  Amper                                      6.10
NV is the parent company of Endemol Group and owns                     (1) Telefonica de Contenidos, S.A.  holds 15.63%
75% of Endemol NV, company quoted in the Amsterdam                     and Telefonica, S.A. holds 1.13%.
Stock Exchange.                                                        (2) Telefonica Group's effective participation.  
                                                                       Telefonica Group participation would 
                                                                       be 9.96% if we exclude the minority interests.
                                                                       (3) Ownership held by Telefonica Latinoamerica











ADDENDA

Significant Events

  • On February 22nd, 2007, Telefonica, shareholder of Portugal Telecom with a
    9.9635% equity stake therein, stated its intention to vote, in the
    Extraordinary General Meeting of Portugal Telecom to be held on March 2nd,
    2007, in favour of approving the amendments to the articles of association
    and the authorisations proposed to eliminate the voting restrictions, and so
    that all shareholders may express themselves without hindrance to their
    capacity to exercise their rights, in the best interest of the company.
  • On February 12th, 2007, Telefonica stated that has been offered the
    possibility of acquiring a minority stake in the capital of the Italian
    corporation Olimpia S.p.A., which is the major shareholder of Telecom
    Italia. In that sense preliminary contacts have been maintained with
    Pirelli, which is the major shareholder of the aforementioned company.
    Finally, it should be mention that no agreement has been reached with
    Pirelli in relation to this possible investment, its terms or possible
    conditions.
  • On January 22nd, 2007, Telefonica's treasury stock position was 79,030,886
    shares representing 1.606% of its current share capital.
  • On December 15th, 2006, Telefonica announced its intention to explore all
    strategic options in relation to O2's holding in the share capital of
    Airwave O2 Ltd., including total or partial disinvestments in that company
    (sale). To that end Telefonica has appointed JP Morgan Cazenove.



ADDENDA

Changes to the Perimeter and Accounting Criteria of Consolidation

In the period January-December of 2006, the main changes have occurred in the
consolidation perimeter were the following

TELEFONICA GROUP

  • On the 31st of October 2005, Telefonica, S.A. announced a Binding Offer
    for the purchase of all the shares in the UK company O2 plc. Once the
    Binding Offer ended and the procedure began for the mandatory sale of O2
    shares according to the UK Law, by September Telefonica held 100% of the
    shares forming the capital of this company that, as of 7th March this year,
    were no longer listed on the London Stock Exchange. The acquisition cost for
    the buyout of O2 Group was 26,135 million euros (17,887 million pounds
    sterling).Telefonica Group financial statements include the results from O2
    Group since February 1st, 2006. The company has been included in the
    consolidation perimeter of the Telefonica Group using the full integration
    method.
  • The subsidiary company Comet, Compania Espanola de Tecnologia, S.A., made
    a capital increase of 0.23 million euros in February this year through an
    increase in the par value of existing shares. In March Comet made another
    capital increase. Both were fully subscribed and paid up by its sole
    shareholder Telefonica. The company continues to be included in the
    consolidation perimeter of the Telefonica Group using the full integration
    method.
  • The Spanish company, Ifigenia Plus, S.A. which was included in Telefonica
    Group's consolidated financial statements according to the global
    integration method was dissolved during this financial year, and was thereby
    removed from the consolidation perimeter.
  • On the 29th July 2006, the merger contract, relating to Telefonica, S.A.'s
    absorption of Telefonica Moviles, S.A., was filed in the Madrid Mercantile
    Register. In order to cover the merger, 4 shares of Telefonica, S.A. with a
    nominal value of 1 euro, were exchanged for 5 shares of Telefonica Moviles,
    S.A. with nominal value of 0.5 euros. Telefonica handed over 244,344,012 of
    their own shares in treasury stock to Telefonica Moviles, S.A. shareholders
    which represented, approximately, 7.08% of the capital stock. The merger
    also bore extraordinary dividends of a total of 0.435 euros per share, which
    when added to the dividend of 0.205 euros, related to the 2005 results, made
    a total of 0.64 euros gross per share, which was paid on 21st July. The
    acquired company, Telefonica Moviles, S.A., which was consolidated by the
    global integration method, was removed from perimeter of consolidation.
  • During the month of July, Telefonica, S.A. dealt with the takeover bid
    formulated by Yell Group Plc, relating to 100% of the shares of Telefonica
    Publicidad e Informacion, S.A. (TPI), and accepted Yell's offer for the
    216,269,764 shares, representing 59.905% of the company's share capital,
    which Telefonica owned.
  • After the sale and under the 'Results for discontinued operations' heading
    in Telefonica Group's consolidated results account, the result from the
    disposal are included as well as the results from the TPI Group up to the
    30th June of the present financial year. In addition, and for comparison
    purposes, the consolidated financial statements have been modified for the
    Telefonica Group in the 2005 financial year to present the TPI Group results
    under the same heading.

TELEFONICA DE ESPANA GROUP

  • In February, the Spanish company Telefonica Cable, S.A. acquired 15% of
    the share capital of Telefonica Cable Galicia, S.A. Through this purchase,
    Telefonica Cable became the sole shareholder of the company. The company
    continues to be included in the consolidation perimeter of the Telefonica
    Group using the full integration method.
  • In June, Telefonica Cable, S.A. took over its subsidiary company Sociedad
    General de Cablevision Canarias, S.A.U. Following this operation, the
    company taken over was removed from the Telefonica Group perimeter of
    consolidation in which it was included using the full integration method.
  • In the month of July, Telefonica de Espana, S.A. absorbed Terra Networks
    Espana, S.A. and Telefonica Data Espana, S.A. Both companies, which were
    included in Telefonica Group's consolidation perimeter using the full
    integration method, have been removed from it.
  • In the month of July, Telefonica de Espana, S.A. paid 37 million euros for
    51% of the capital stock in the Spanish company Iberbanda, S.A. The company
    has been included in the Telefonica Group consolidation perimeter using the
    full integration method.
  • In the month of July, the Guatemalan company Telefonica Sistemas
    Ingenieria de Productos Guatemala, S.A went into liquidation. The company,
    which was included in the Telefonica Group's consolidation perimeter by the
    full integration method, has now been removed from it.

TELEFONICA LATINOAMERICA GROUP

  • The Brazilian company Santo Genovese Participacoes Ltda., a holding
    company that owned all of the capital stock of the Brazilian Atrium
    Telecomunicacoes Ltda., was liquidated during the first quarter of 2006
    after taking over its subsidiary Atrium. Both companies, which were included
    in the consolidated accounts of the Telefonica Group using the full
    integration method, have been removed from the consolidation perimeter.
  • In April, Telefonica Internacional, S.A. purchased 50% plus one share in
    the Colombian company Colombia de Telecomunicaciones, S.A. ESP. In December,
    the Colombian company absorbed Telefonica Data Colombia, S.A., that has been
    removed from the consolidation perimeter, where it was included using the
    full integration method. As a result of the merger by absorption, Telefonica
    Group has increased its stake to 52.03%. The company has been incorporated
    in the Telefonica's Group perimeter of consolidation using the full
    integration method.
  • Telefonica del Peru, S.A.A. took over its subsidiary Telefonica Empresas
    Peru, S.A.A. in June. The company, which was included in the financial
    statements of the Telefonica Group using the full integration method, has
    been removed from the perimeter of consolidation.
  • On the 29th of July this current financial year, the Brazilian company,
    Telecomunicacoes de Sao Paulo, S.A. (Telesp), absorbed its subsidiary
    Telefonica Data Brasil Holding. The company, which was included in the
    perimeter of consolidation using the full integration method, has now been
    removed from it.
  • The companies Telefonica Finance, Ltd. and Telefonica Venezuela Holding,
    B.V. have merged with Telefonica International Holding, B.V.. Both
    companies, that were included in the consolidation perimeter of Telefonica
    Group using the full integration method, have been removed from it.
  • The spanish company Telefonica Soluciones de Informatica y Comunicaciones,
    S.L. was absorved by the spanish company Telefonica Datacorp, S.A.. The
    company, which was incorporated using the full integration method, has been
    removed from it.
  • As a consequence of amortizing its treasury stock, which Telesp did during
    the financial year, and the purchase of the Telefonica Data Brazil minority
    shareholders and their later merger with Telesp, the percentage of
    Telefonica Group's participation in Telesp's capital has increased to
    88.01%. The company continues to be included in Telefonica Group's
    consolidation perimeter by the full integration method.
  • The Mexican companies Katalyx Mexico S.A. de C.V. and Telefonica Empresas
    Mexico S.A. de C.V., wholly-owned subsidiaries of the Telefonica
    Internacional Group, were sold in 2006. Both companies, which were included
    in the financial accounts of the Telefonica Group using the full integration
    method, have been removed from the perimeter of consolidation.

TELEFONICA MOVILES GROUP

  • On the 22nd of February 2006, the Shareholders' Meetings of Telesp Celular
    Participacoes S.A. ('TCP'), Tele Centro Oeste Celular Participacoes S.A.,
    ('TCO'), Tele Sudeste Celular Participacoes S.A. ('TSD'), Tele Leste Celular
    Participacoes, S.A. ('TBE') and Celular CRT Participacoes S.A. ('CRTPart')
    approved corporate restructuring in order to exchange TCO shares for TCP
    shares to become a wholly-owned TCP subsidiary and the take-over of TSD, TBE
    and CRT Part by TCP.
  • In June 2006 VIVO Paticipacoes made a capital increase by asset
    contribution for a total of 194 million reais. Once the capital increase was
    completed, Brasilcel, N.V. stake in VIVO Participacoes stood at 62.77%.
  • In June 2006 Telefonica Moviles Group increased its participation in
    Telefonica Moviles Peru (TMP), from 98.03% to 98.40%, through the buyout of
    minorities. The company continues to be included in the consolidation
    perimeter of the Telefonica Group using the full integration method.
  • During the financial year, the El Salvadorian company, Telefonica Moviles
    El Salvador Holding, S.A. de C.V., acquired 2,220 shares in Telefonica
    Moviles El Salvador, S.A. de C.V., also from El Salvador, increasing their
    participation in this company to 99.08%. The company continues to be
    included in the Telefonica Group consolidation perimeter through the full
    integration method.
  • The Argentinean company, Telefonica Moviles Argentina, S.A., has absorbed
    Compania de Radiocomunicaciones Moviles, S.A., Radio Servicios, S.A. and
    Compania de Telefonos del Plata, S.A, which are also Argentinean companies.
    After this operation, these companies were removed from the consolidation
    perimeter, where they had been included using the full integration method.
  • In November 2006 the Telefonica Group's affiliated companies in Uruguay
    went through restructuring. Ablitur SA, Redanil SA and T. Moviles Uruguay,
    100% subsidiaries of the Group, went into liquidation. Thus, companies
    currently affiliated with the Telefonica Group, corresponding to the
    cellular market, are as follows: Wireless Network Ventures Ltd has become a
    100% subsidiary of Telefonica Moviles Holding Uruguay S.A. and Telefonica
    Moviles Uruguay SA (before Abiatar) has become a 68% affiliate of LACH BV.
    Both companies continue to be included in the Telefonica Group's
    consolidation perimeter according to the global integration method.
  • The American company Panama Cellular Holdings, LLC has gone into
    liquidation. The company, which was included in Telefonica Group's financial
    statements according to the global integration method, has been removed from
    the consolidation perimeter.
  • The Mexican company Telecomunicaciones Punto a Punto Mexico, S.A. de C.V.
    was sold in 2006 accruing capital gains of 10.4 million euros which were
    recorded under the sub-section 'Gains from the sale of affiliated companies'
    in the Telefonica Group's consolidated results. The company, which was
    included in the Group's consolidation perimeter, according to the global
    integration method, has now been removed.
  • 2006 saw a restructuring of Venezuelan companies affiliated to Comtel
    Comunicaciones Telefonicas, S.A., also from Venezuela, and the following
    companies have been liquidated:


    Promotions 4222. C.A., S.T. Merida, C.A., S.T. Ciudad Ojeda, C.A., S.T. San
    Cristobal, S.T. Maracaibo, C.A., S.T. Punto Fijo, C.A., S.T. Valera, C.A.,
    S.T. Valencia, C.A., SyRed, T.E.I., C.A., Servicios Telcel Acarigua, C.A.,
    Servicios Telcel Barquisimeto, C.A., Servicios Telcel Charallave, S.T.
    Cumana, C.A., S.T. Guarenas, C.A., S.T. Los Teques, C.A., S.T. Maracay,
    C.A., S.T. Margarita, C.A., S.T. Maturin, C.A., S.T. Puerto Ordaz, C.A.,
    S.T. Puerto la Cruz, CA, S.T. La Guaira, C.A.

    All these companies have been removed from Telefonica Group's consolidation
    perimeter where they were included according to the global integration
    method.



TELEFONICA O2 EUROPE

  • The 1st of July, 2006, the Czech company Eurotel Praha, spol. s r.o.
    (Eurotel) was taken over by its parent company Telefonica O2 Czech Republic,
    a.s. to give the new integrated operator Telefonica O2 Czech Republic, a.s..
    Following this operation, Eurotel, which was included in the financial
    statements of the Telefonica Group using the full integration method, was
    removed from the perimeter of consolidation.
  • In June, O2 UK Ltd. purchased 100% of the British internet service
    provider Be Un Limited (Be). The operation involved a total payment of 50
    million pounds sterling (approximately 73.5 million euros). Be is now
    included in the perimeter of consolidation using the full integration
    method.
  • In 2006, Telefonica Deutschland GMBH, was sold to the German company,
    owned by O2 Group, Interkom, to later merge both companies in order tos et
    up the new company Telefonica Deutschland GMBH, that is incorporated to
    Telefonica Group financial statements using the full integration method.
  • During the third quarter of the 2006 financial year, the Telefonica, O2
    Czech Republic, a.s., subsidiary company, Telefonica O2 Slovakia, s.r.o.,
    obtained the third mobile telephone licence in Slovakia. The Slovakian
    company is included in Telefonica Group's perimeter of consolidation by the
    full integration method.
  • In the month of October, the British group, O2, acquired the remaining 60%
    of the share capital in the British company The Link Stores, Ltd. With this
    acquisition, the Telefonica Group now controls all of this company. The Link
    Stores, Ltd., which was included by the equity method until the month of
    September, will now be consolidated by the full integration method from the
    month of October.

ATENTO GROUP

  • In 2006 Atento NV set up the Argentinean companies Atento Mar del Plata,
    S.A. (later called Mar de Plata Gestiones y Contactos, S.A.) and Atento
    Salta, S.A. (later called Centro de Contacto Salta, S.A.) with a share
    capital totalling 0.1 million Argentinean pesos. Both companies have been
    included in the Telefonica Group's financial statement by the full
    integration method.
  • In May, Atento Chile Holding purchased the percentage shareholding of
    Publiguias Chile in Atento Chile, S.A. Following this operation, the
    shareholding of the Atento Group in Atento Chile increased from 69.99% to
    71.16%. The company continues to be included in the perimeter of
    consolidation of the Telefonica Group using the full integration method.
  • In May, the Argentinean company Atento Microcentro, S.A. was set up (later
    denominated Microcentro de Contacto, S.A.) with a share capital totalling
    0.05 million Argentinean pesos. The company has been included in Telefonica
    Group's financial statements using the full integration method.
  • In June, Atento, N.V. purchased the 100% shareholding in the Uruguayan
    company Woknal, S.A., with an initial share capital of 0.4 million uruguayan
    pesos, around 0.01 million euros. The company has been included in the
    financial statements of the Telefonica Group by the full integration method.
  • In August, the Argentinean company Atento Cordoba, S.A. (later called
    Cordoba Gestiones y Contactos, S.A.) with a share capital totalling 0.05
    million Argentinean pesos. The company has been included in Telefonica
    Group's financial statements using the full integration method.

TELEFONICA CONTENIDOS GROUP

  • In March, Prisa launched a partial take-over bid for the 20% of Sogecable,
    S.A. The Telefonica Group sold shares representative of 6.57% of the
    company's share capital, reducing its stake from 23.83% to 17.26%. Later in
    March, Sogecable made a capital increase although without Telefonica Group
    taking part, thus diluting its stake in the company's share capital to the
    present 16.84%. In April, Sogecable once again increased its capital to
    cover the options plans for company directors, executives and managers and
    turned Class B and series B2005 callable shares into ordinary Class A
    shares, leading to another decrease in the Telefonica Group shareholding,
    currently standing at 16.80%. In December, Sogecable turned 405.000 B2006
    collable shares to ordinary class A shares, diluting once more the stake of
    Telefonica Group that was 16.75% as of 31st of December. As a consequence of
    this reduction as of 31st December 2006, the investment in Sogecable is
    registered under the heading 'Other participations'. Telefonica Group
    continues consolidating Sogecable into the financial statements by the
    equity method.
  • The Telefonica de Contenidos Group sold all of its shares held in the
    Argentine company Patagonik Film Group, S.A. in May 2006. The company, which
    was included in the financial statements of the Telefonica Group using the
    equity method, has been removed from the perimeter of consolidation.
  • Andalucia Digital Multimedia, S.A. made a capital increase with the
    participation of Telefonica de Contenidos, S.A., which subscribed enough
    shares to enable it to increase its shareholding to 24.20%. The company
    continues to be included in the consolidation perimeter of the Telefonica
    Group using the full integration method.





ADDENDA

Consolidated Statements by Regional Business Units


TELEFONICA SPAIN
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
                                                                                2006
                                             Jan - Mar   Apr - Jun     Jul - Sep        Oct - Dec         Jan - Dec
Revenues                                          4,772        4,893          5,055             5,030            19,750
Operating income before D&A (OIBDA)               2,205        2,074          2,585             1,783             8,647
Operating income (OI)                             1,545        1,442          1,962             1,164             6,113


TELEFONICA LATIN AMERICA
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
                                                                                2006
                                             Jan - Mar   Apr - Jun     Jul - Sep        Oct - Dec         Jan - Dec
Revenues                                          4,317        4,390          4,535             4,847            18,089
Operating income before D&A (OIBDA)               1,528        1,474          1,809             1,761             6,571
Operating income (OI)                               591          583            884               841             2,900


TELEFONICA EUROPE
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
                                                                                2006
                                             Jan - Mar   Apr - Jun     Jul - Sep        Oct - Dec         Jan - Dec
Revenues                                          2,409        3,418          3,607             3,725            13,159
Operating income before D&A (OIBDA)                 756        1,001          1,041               910             3,708
Operating income (OI)                               229          346          (254)              (12)               309
Note: In the third quarter is registered the accumulated effect of the PPA for the February-September period.









ADDENDA

Corporate Responsability

Telefonica: spirit of progress



TELEFONICA's VISION:

'We want to enhance people's lives, the performance of businesses and the
progress of the communities where we operate, by delivering innovative services
based on information and communication technologies'.

BUSINESS PRINCIPLES

In December 2006, the Board of Directors of Telefonica, S.A. unified its Ethical
Business Principles throughout the world. These principles are based on the
highest standards and the best practices in business ethics. They are the result
of the combination of the Codes of Ethics of Telefonica, S.A. and Telefonica
Moviles and the Business Principles of O2. Furthermore, they reaffirm
Telefonica's vision and values.

The Business Principles inspire and define the way in which the Telefonica
Group's more than 200,000 employees carry out their activities and interact with
customers, shareholders, professionals, suppliers and the different communities
in which they work. To ensure their implementation, the company has set up its
Business Principles Office, which comprises the corporate areas of the General
Office of the Secretary to the Chairman, the General Office of the Legal
Secretary and the Internal Auditing and Human Resources departments, as well as
Telefonica's three geographical areas.

Based on the said principles, Telefonica builds its reputation as a company,
gains the trust of its stakeholders and maximises its long-term value for its
shareholders and society in general.

DRIVING FORCE FOR ECONOMIC DEVELOPMENT

In 2006, Telefonica once again demonstrated its commitment to the development of
its economies, contributing to the generation of an average of 1.5% of the GDP
of the main countries in which it operates. The number of suppliers who have
successfully bid for contracts with the Telefonica Group in the world exceeds
the figure of 19,000 and special mention must be made of the fact that an
average of 85% of the total purchasing volume is awarded to local suppliers.

Furthermore, Telefonica is an important redistributor of the wealth it generates
among all its stakeholders, where approximately 44% is redistributed among its
suppliers, 11% is allocated to the various public administrations and 7% is
directed to its employees' salaries. In 2006, it is significant to highlight
that 31% of these resources were channelled to new investments.

DRIVING FORCE FOR TECHNOLOGICAL DEVELOPMENT

According to the criteria laid down by the OECD, the year 2006 saw Telefonica
allocate more than 3,100 million euros to technological innovation all over the
world. Of this amount, R&D activities count for more than 588 million euros.

Technological innovation has focused mainly on the deployment of new-generation
networks for both fixed lines and mobile phones. By countries, Spain stands out
with 49% of the total, together with Brazil, which has 23%.

DRIVING FORCE FOR SOCIAL DEVELOPMENT

The 1st Latin American Forum on the United Nations Millennium Development Goals
and Information and Communications Technologies, organised by the General Office
of the Ibero-American Secretary and AHCIET, showed the potential of the services
offered by Telefonica to enable social development.

Throughout 2006, Telefonica has shown signs of its commitment to society in all
the countries in which it works. The areas in which it showed greater commitment
included the following:

  • Responsible use of services: throughout 2006, Telefonica has developed
    various programmes to encourage the responsible use of technology by its
    Spanish and European customers in collaboration with public and social
    players. As a result of this experience, an adapted terminal for minors was
    launched in Spain.
  • Digital social inclusion: with a view to incorporating collectives that
    are suffering the digital divide as customers, Telefonica develops
    geographical, economic and educational inclusion programmes. In particular,
    in Latin America, the company offers a controlled cost services at 30% of
    its fixed access base price and maintains more than 536,000 public
    terminals.
  • Social and cultural action: in 2006, Fundacion Telefonica dedicated more
    than 30.7 million euros to social and cultural action activities, most of
    which were developed in the area of education. The number of individuals who
    benefited from the various programmes is in excess of 30.6 million. In
    particular, special mention must be made of the Pronino project, which is
    dedicated to the eradication of child labour and has enabled more than
    25,000 children in the region to attend school.
  • Accessibility: the aim of the Telefonica Accesible programme, developed in
    collaboration with CERMI (the Spanish Committee of Representatives of the
    Disabled), is to enable the social integration of the disabled using new
    technologies. This project makes good use of the more than 30 years'
    experience of ATAM (Telefonica Association for the Care of the Disabled),
    which involves the collaboration of more than 60,000 of the group's
    employees and an allocation in 2006 of over 4.7 million euros. In addition,
    the company complemented this amount with a further 8.7 million euros.
  • Environment: the levelling-up of Telefonica's environmental management
    systems has enabled the certification of mobile telephone operations in
    Ecuador and Peru as compliant with the ISO 14001 standard and has increased
    those in existence in Spain, Mexico, United Kingdom, Ireland and Germany. In
    particular, O2 Germany is developing a pioneer programme to become the first
    mobile telephone operator to become carbon neutral as a response to the
    growing concern for the climatic change.

The corporate responsibility report will be published at the end of April 2007
at: www.telefonica.es/responsabilidadcorporativa







DISCLAIMER

This document contains statements that constitute forward looking statements in
its general meaning and within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements appear in a number of places in this
document and include statements regarding the intent, belief or current
expectations of the customer base, estimates regarding future growth in the
different business lines and the global business, market share, financial
results and other aspects of the activity and situation relating to the Company.
The forward-looking statements in this document can be identified, in some
instances, by the use of words such as 'expects', 'anticipates', 'intends',
'believes', and similar language or the negative thereof or by forward-looking
nature of discussions of strategy, plans or intentions.

Such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and other important factors that could cause
actual developments or results to differ materially from those expressed in our
forward looking statements.

Analysts and investors are cautioned not to place undue reliance on those
forward looking statements which speak only as of the date of this presentation.
Telefonica undertakes no obligation to release publicly the results of any
revisions to these forward looking statements which may be made to reflect
events and circumstances after the date of this presentation, including, without
limitation, changes in Telefonica's business or acquisition strategy or to
reflect the occurrence of unanticipated events. Analysts and investors are
encouraged to consult the Company's Annual Report as well as periodic filings
filed with the relevant Securities Markets Regulators, and in particular with
the Spanish Market Regulator.

The financial information contained in this document has been prepared under
International Financial Reporting Standards (IFRS). This financial information
is unaudited and, therefore, is subject to potential future modifications.








                                        For additional information, please
                                        contact.

                                        Investor Relations

                                        Gran Via, 28 - 28013 Madrid (Spain)

                                        Phone number:

                                        [phone]

                                        Fax number:

                                        [phone]

                                        Email address:

                                        Ezequiel Nieto -
                                        [e-mail]

                                        Diego Maus - [e-mail]

                                        Dolores Garcia - [e-mail]

                                        Isabel Beltran - [e-mail]

                                        [e-mail]

                                        www.telefonica.es/accionistaseinversores





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