Acquisition

Telefonica SA
6 June 2000

  TELEFONICA ACQUIRES MEDIAWAYS, INTERNET SERVICES UNIT OF BERTELSMANN GROUP

Telefonica has reached an agreement with Bertelsmann AG to acquire its affiliate
mediaWays GmbH, a company specializing in internet services, data  transmission
and other value-added services for business, which will become the platform for
the development of Telefonica Data in Europe.

Telefonica will buy 100% of MediaWays with shares of Telefonica Data or, if
Telefonica Data is not listed before 31/12/2001, with shares of Telefonica,
S.A. Bertelsmann will be able to rely on Telefonica to monetize the shares,
through an investment bank, from 3l January 2001. The purchase price is $1.6
billion, with an adjustment mechanism linked to the completion of projected
revenue levels during the year 2000. The transaction will be carried out through
the exercise of a sale ('put') option held by Bertelsmann, in January, 2001. If
this option is not exercised, Telefonica has a purchase ('call') option, which
can be exercised, at a higher price, in April 2001. The agreement is subject to
approval by regulatory authorities.

Telefonica Chairman and Chief Executive Officer, Juan Villalonga, and
Bertelsmann Chairman and Chief Executive Officer, Thomas Middelhoff, both
expressly welcomed the agreement, which is part of the current strategy of 
cooperation between the two companies. Telefonica's internet affiliate Terra  is
in the process of acquiring Lycos, the U.S. search engine, whose European 
affiliate Lycos Europe is partially owned by Bertelsmann.

An important aspect of the Terra-Lycos merger is Bertelsmann's commitment to
make investments in advertising and electronic commerce in the new company, in
the amount of $1 billion over a five-year period. Of this amount, Bertelsmann is
obliged to pay $325 million to Terra Lycos for these services during the first
two years. From the third to the fifth year of the accord, Bertelsmann will buy
up to $675 million in additional services. Taking into account the joint
projects to be developed between Telefonica and Bertelsmann, Telefonica  has
agreed to purchase, if it were necessary, any portion of those services that
Bertelsmann does not buy, up to the aforementioned amount ($675 million).

In addition, Terra-Lycos and Bertelsmann will form a joint venture (25%-75%)
for the sale of books in Spain and Latin America under the BOL (Bertelsmann
On-Line) brand name. Bertelsmann has agreed that the sale of its products in
Spanish and Portuguese in these two regions will be done primarily through the
joint venture.

MediaWays is the largest Internet Protocol (IP) network services provider in
Germany, after Deutsche Telekom. Its network consists of 270 nodes and 150,000
gateways, with nationwide coverage in Germany. MediaWays manages the internet
access network for online services for the main ISP's in Germany and offers
corporate networks and complete Internet and Intranet solutions for companies,
integrating voice and data services over IP.

'This operation is fundamental for the international expansion strategy of
Telefonica Data, since mediaWays will become the pillar of our strategy in 
Europe,' said Guillermo Fernandez Vidal, managing director of Telefonica Data.

Since its creation in 1996, MediaWays has had annual revenue growth of more than
100%.

'In its first four years, mediaWays wrote a story of unparalleled success,' said
Klaus Eierhoff, Bertelsmann executive board member and head of the  Multimedia
Division. Basically, the enterprise was financially successful from  the
beginning. Now that it has been made possible, the acquisition of MediaWays by
Telefonica can release a substantial amount of potential for further growth,
strengthen the company's innovative lead and promote its internationalization 
process. Telefonica has the strategic alignment and resources necessary to
provide strong support for MediaWays' further development.'

Telefonica Data, a member of the Telefonica Group, is a leader in data
communication services for business. It provides data transmission and internet
services, telephone and voice over the IP network, Internet-based services,
advanced client services and satellite services.

Currently, Telefonica Data is undergoing a significant international expansion,
developing its activities in countries such as Argentina, Brazil, Chile,
Colombia, Venezuela, Uruguay and Peru, as well as in Central America, the United
States, Austria and Italy.

                                                   Madrid, June 5, 2000