ACEA to be Partner in Italy

Telefonica SA
14 April 2000

TELEFONICA FORMS CONSORTIUM TO COMPETE FOR UMTS LICENCE IN ITALY

- ACEA will be Telefonica's partner in Italy

- Telefonica will have management control and the majority capital stake

Madrid, Abril 14, 2000 - Telefonica has reached an agreement with ACEA to form a
consortium for joint participation in the auction for five UMTS licenses in
Italy.  Telefonica will have management control of the company and will hold the
majority capital stake, which could be reduced as other Italian and
international partners, with whom negotiations are in progress, join the
consortium.  ACEA, which is listed on the Italian stock exchange, will take an
initial 20% stake, and will provide support for the development of the mobile
business in the city of Rome, where it is the leading supplier of water, gas and
electric power.

Telefonica and ACEA currently have joint ownership of a company which provides
telecommunications services in Rome and Lazio.  Italy is the most important and
dynamic market in the European mobile telephone business.  It has a penetration
rate above 48%, in comparison with the European average of 42%, and revenues
exceeding 10 billion dollars.  This market is expected to achieve 100%
penetration within the next ten years.

The appeal of the Italian mobile telephone market, together with its important
Internet potential, with a current penetration level of 14%, gives the UMTS
excellent business prospects.  The new UMTS technology will enable development
of the mobile-Internet market, and will provide access to all of the
personalized information and entertainment services on the Italian market.  It
will also make possible development of the mobile electronic commerce       
(m-commerce) market as well as the introduction of mobile-internet financial
services.  

The Italian auction may be announced shortly and the bid, foreseeably based on
the 'beauty contest', could be made between the months of June and September,
2000. 

Telefonica is currently participating, through Telefonica InterContinental, in
the UMTS auction taking place in the United Kingdom and also plans to compete
for UMTS licences in other countries, such as Germany and France.