Agreement of integration

Telefonica SA
29 January 2003



                            ANTONIO J. ALONSO UREBA

                          Director, General Secretary

                    and Secretary of the Board of Directors

                              TELEFONICA, S.A.


Telefonica S.A., as provided in article 82 of the Spanish Stock Market Act (Ley
del Mercado de Valores), and pursuant to the reports submitted on 9 May 2002 and
14 May 2002, hereby reports the following


                               Significant event


Sogecable S.A. and Telefonica de Contenidos S.A.U., a subsidiary of Telefonica,
S.A., report that they have signed an agreement today in which they state they
have completely fulfilled the requirements for the integration of Sogecable and
Via Digital, as set out in the contract signed on 8 May 2002. The agreement
signed today implements the contract of 8 May 2002 in accordance with the terms
reported to the market and maintains the established share-exchange terms (77%
of the resulting company for the current shareholders of Sogecable and 23% for
the current shareholders of Via Digital, assuming all shareholders exchange
their shares).

In addition, Telefonica de Contenidos and Sogecable have both agreed detailed
action plans and periods for implementing the conditions set by the government
in the resolutions of the Cabinet ('Consejo de Ministros') announced on 29
November 2002. In these plans, Telefonica de Contenidos and Sogecable have
accepted the conditions set by the government, without prejudice to the joint
lodging of appeals against certain of these (channel distribution requirements,
joint marketing of sales packages, price caps and the forbidding of strategic
alliances).

Lastly, the parties and their main shareholders have established a financial
structure for Sogecable that ensures the viability of the company that results
from the integration of the two businesses.

Sogecable and Telefonica de Contenidos shall jointly inform the Spanish
competition authorities (the 'Servicio de Defensa de la Competencia') of the
contents of the agreement signed today.


                                                         Madrid, 29 January 2003



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