Interim Dividend Distribution

Telefonica SA
23 February 2005


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

According to the shareholder remuneration policy approved by the Company's Board
of Directors, and in accordance with the resolution adopted at its meeting of
January 26th, 2005, Telefonica's Board of Directors, at its meeting held today,
has approved to distribute an interim dividend, from 2004 net income, of a fix
gross amount of Euro 0.23  for each outstanding share with the right to receive
dividends of the Company.

The payment of this dividend shall be executed, as it has been already
announced, on May 13th , 2005, through the participating entities in Iberclear
(Sociedad de Gestion de los Sistemas de Registro, Compensacion y Liquidacion de
Valores, S.A.), the Spanish entity in charge of  registration, clearing and
settlement of securities. Tax withholding shall be made on gross amounts as
required by applicable legislation.

Likewise, and in accordance with the aforementioned resolution adopted at its
meeting of January 26th , 2005,  the Board of Directors has resolved to propose
to the next Annual General Shareholders Meeting, the distribution of a dividend
in cash, from the  Additional Paid-in Capital Reserve, of a fixed amount of Euro
0.27  per share. The payment of this dividend is subject to its approval by the
above mentioned Annual General Shareholders Meeting, and shall be made in
accordance with what it was announced by the Company, on November 11th, 2005.

By distributing both of the above mentioned dividends, Telefonica's Board of
Directors implements the resolution adopted at its meeting held on January 26th
2005, to distribute a total amount of Euro 0.50 per share corresponding to
fiscal year 2004.

Madrid, February 23rd , 2005.


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