in-kind distribution

Telefonica SA
25 September 2003



'Telefonica S.A.', as provided in article 82 of the Spanish Stock Market Act
(Ley del Mercado de Valores), hereby reports the following


                               SIGNIFICANT EVENT


At its meeting of September 24th, 2003, the Company Board of Directors has
decided to execute-subject to verification prior to November 29th, 2003 by the
Comision Nacional del Mercado de Valores (Spanish National Securities Markets
Commission; hereinafter, CNMV) that the shares of 'Antena 3 de Television, S.A.'
(Antena 3) have been listed for trading-the resolution adopted by the
shareholders in the Annual General Meeting held on April 11th, 2003, on the
extraordinary in-kind distribution to the Company shareholders of the Paid-in
Surplus Reserve, by means of allotment of Antena 3 shares representing 30% of
the share capital of the latter company.


Shares to be distributed


The shares to be distributed represent 30% of the share capital of Antena 3.
Subsequent to the resolution adopted at the General Meeting of the latter
company on this past 29 August modifying the nominal value of its shares of one
euro to three euros, the shares to be distributed amount to a total of
16,666,800 shares of Antena 3.


Shareholders entitled to participate in the distribution


The right to receive Antena 3 shares according to the aforesaid General Meeting
resolution shall rest with those natural or legal persons on record as holders
of Telefonica shares in the books of the entities participating in the systems
managed by Iberclear ('Sociedad de Gestion de los Sistemas de Registro,
Compensacion y Liquidacion de Valores') at the end of the day following the day
on which Telefonica publishes the relevant official announcement in the Official
Gazette of the Mercantile Register (Boletin Oficial del Registro Mercantil) that
the CNMV has verified the listing for stock market trading of the Antena 3
shares.


            Exchange ratio


According to the resolution approved by the Telefonica shareholders in the April
11th, 2003 General Meeting, the exchange ratio has been set at 1 share of Antena
3 for every 297.351102851177 shares of Telefonica. This swap ratio is the result
of the division the number of Antena 3 shares included in the distribution
(16,666,800 shares) and the number of Telefonica shares entitled to participate
in that distribution (4,955,891,361 shares).






Adjustment of the exchange ratio


If the Company is carrying own shares of Telefonica as treasury stock at the
time the distribution of Antena 3 shares is determined, the provisions of
article 79.1 of the Law of Corporations (Ley de Sociedades Anonimas) shall
apply, such that the Antena 3 shares to which the shares held as treasury stock
would be entitled will be allotted proportionally to the rest of the outstanding
Telefonica shares. Such allotment will give rise to an adjustment of the
exchange ratio, which would have to be notified by means of the aforesaid
official notice in the Official Gazette of the Mercantile Register (Boletin
Oficial del Registro Mercantil).


Settlement of fractions


Likewise in accordance with the aforesaid General Meeting resolution, those
Telefonica shareholders that hold a fraction of an Antena 3 share on application
of the exchange ratio, will receive a cash payment for such fractions. The
payment will be arranged by two financial institutions that act as Agent for
share fractions and settle the fractions. For this purpose, the Antena 3 shares
are given a value, based on the valuation included in the proposal to the
General Meeting of Telefonica shareholders on the distribution (equal to the
carrying value of those shares on Telefonica's books), of 25.20 euros per share.










                                                    Madrid, September 24th, 2003




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