Formation of New Company

Telefonica SA
18 July 2000


TELEFONICA MOVILES AND TERRA NETWORKS CREATE TERRA-MOBILE, THE GLOBAL MOBILE
PORTAL FOR TELEFONICA GROUP.

-  Terra Moviles aims rapidly to become the world's leading mobile internet
portal

-  Telefonica Mobiles' operators will offer Terra privileged access to
their mobile-internet access services

-  This takes Terra Networks another step towards its ambition of creating a
global multi-access portal 

-  The chief executive officer will be Eliseo Sanchez Trasobares


Madrid, 18 July 2000- Telefonica Mobiles and Terra Networks have set up Terra
Mobile, a new company charged with developing and operating Telefonica group's
global mobile portal.  Terra Mobile will be 51% owned by Telefonica Moviles and
49% by Terra Networks.  It aims to become a world-leading mobile internet portal
in terms of applications offered and number of visitors. To achieve this it can
draw heavily on the experience and market-leading positions of Terra Networks
and Telefonica Moviles in internet and mobile telephony.

The head office will stay in Madrid, Spain while some of the operations will run
from London.  The chairman of the new company will be Luis Martin de Bustamante
and the chief executive officer will be Eliseo Sanchez Trasobares.

A market-leading portal

Terra mobile aims to become the first-choice portal in all the markets where it
competes. It will have a complete range of services giving users convenient,
simple and flexible access to Wireless internet content across the globe.

Terra Mobile will operate internationally. In Spain and Latin America - natural
markets where Telefonica Moviles' and Terra Networks' are already the leading
mobile and internet players - as well as in Europe, Terra Mobile will spearhead
Telefonica's drive to develop the market and to provide the services before the
development of UMTS networks.

Mobile internet data services are a key growth avenue for both Telefonica
Moviles and Terra Networks over the next few years. The potential for value
creation is vast. Estimates put the potential market for mobile telephony in
countries where Terra Mobile will operate at 812 million users by 2004 - with
234 million using wireless internet services. Terra Mobile has been set up to
turn this potential into reality by leveraging the capacities of     
Telefonica's two most extensive business units.

Telefonica Moviles will offer access to the Terra Mobile portal across internet
access services in all the countries where it operates.  This service has just
launched in Spain, branded as e-mocion.  Similarly,  Terra Mobile will offer 
Telefonica Moviles clients an attractive range of content and services which
will boost traffic and growth for the group's mobile phone unit.

Terra Mobile represents a major step towards Terra Network's ultimate aim of 
offering a global range of services. It offers services to all mobile phone
users and is designed to evolve into a multi-access internet portal. In doing 
this it can count on Terra Networks' experience in providing services across the
web, the strength of the Terra brand and its massive content base and alliances.

Term Mobile's content

Term Mobile' content will be customised to the users' needs, distinct from 
conventional internet content and tailored to the size, resolution and mobility
of mobile receivers. Terra Mobile is there to make easier the everyday life of
its users and respond fully to their needs.

The Terra Mobile portal is independent.  This means it will be able to reach 
any mobile operator with internet access.  Putting out a wide and attractive
range of content will entice anyone who is using a mobile, Telefonica  client 
or not, to access its contents. The services offered across the portal will
include:

-  Information: both on request by users and also in 'push' mode, alerting users
to items of personal interest the moment they occur.

-  E-commerce allowing users to buy products and services from their mobiles. 
'm-commerce' is designed to offer consumers a better quality of life by making
common consumer items available wherever you are at the press of a keypad. The
m-commerce user can shop, buy tickets to shows, book hotels, trains, planes,
taxis etc simply and efficiently across their mobile.

-  Information management and personal communication services, allowing
companies, colleges and any other group with a common interest to access and
manage communal information across a variety of communication devices. These
services include messaging, personal organisers, schedules of events, calendars,
chat etc.  

-  Entertainment services allowing the user to play fun or mind-challenging
games or select personalised music and icons for the mobile.

This new generation of services is a breakthrough in the mobile offer making a 
receiver much more than a phone and offering internet access from anywhere you
may happen to be at any time.

Terra Mobile again shows Telefonica's determination to remain in the vanguard 
of  the new economy, which is driving business development and is the key to
competitiveness, wealth generation and social well-being in the future.

Telefonica Moviles and Terra Networks

Telefonica Moviles group's all Telefonica's mobile telephony interests
worldwide. With close to 24 million clients in Spain, Latin America (Argentina,
Brazil, Chile, El Salvador, Guatemala, Peru and Puerto Rico) and Morocco,
Telefonica, already leads the Spanish and Latin American markets. It plans to
reinforce its global position in mobile services by bidding for UMTS licensed in
the major European countries.

Terra Networks, www.terra.es is the leading provider of internet access in the
Spanish and Portuguese speaking world, whether as ISP to residential customers
and SOHO (small office home office) or in terms of content.  Its ISP business
has 2.6 million subscribers. It provided access to over a billion pages of
content last month. The terra portal gets 86 million visits per month. On May 16
Terra announced the acquisition of Lycos to create Terra Lycos: the world's
number one internet portal.


For further information
Telefonica Moviles, S.A.
Press Office                                             Tel: [phone]
Gran V1a, 28 - 8 Planta                                  Fax: [phone]
28013 - MADRID                                    e-mail: [e-mail]