Interim Results - Part 1

Telefonica SA
1 September 2000


PART 1

                                     Results
                                January-June 2000

Notes:

* The 1H99 results conform to the structure and inter-group activities in 2000
after the company's restructuring in 1999 by business line. Similarly, the
homogenisation of the accounting principles applied by the various companies
that make up the Telefonica group between the two periods has also been assumed
for figures corresponding to March and September 1999, most notably with the
reduction of revenues and expenses for the company Telesp Participacoes by
amounts corresponding to 30 June 1999 for a total of EUR430.6 million. This has
no effect whatsoever on the group's EBITDA on this date.

* The financial statements in this report do not include the effects of the
recent public tender offers by Telsp, TeleSudeste, Telefonica de Argentina and
Telefonica del Peru. The new shareholdings will be reflected in the consolidated
statements beginning July 1, 2000.

* Financial statements in this report have been compiled by translating the
company's accounts from pesetas into euros by business line. Sub-totals were
stated in euros, which could give rise to small rounding discrepancies.

INTRODUCTION

BASICS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS(*)

* In accordance with Spanish Generally Accepted Accounting Principles (GAAP),
the Brazilian company Celular CRT Participacoes, which as of August 2000 was
36.97%-owned by the Telefonica Group, was consolidated under the global
integration method in 2000. In 1999, this company was carried under the equity
method, except during December 1999 when it was consolidated under the global
integration method.

CRT Fixa is reported in the Telefonica Group's 2000 consolidated financial
statements at book value as of December 1999, given the transitory nature of its
position in this company.

* In accordance with agreements signed in early 2000 for the future sale of
Cablevision, this company is now included on the financial statements of the
Telefonica Group at a book value corresponding to December 1999 (accounted for
under the equity method in 1999).

* On June 29, 2000, Telefonica de Espana SAU signed an agreement to sell 100% of
its subsidiary Telefonica Sistemas de Ingenieria de Productos, S.A., (TSIP) to
Radiotronica S.A., which until the date of sale was consolidated under the
global integration method.

* In June 2000 the Terra Group acquired an additional 90% of Ifigenia Plus,
giving it 100% control of the company. Ifigenia Plus consolidated under the
global integration method.

* In June 2000, Media Park increased its share capital by 55,704 shares, or a
par value of EUR60.1 (Ptas. 10,000) each. The increase was fully subscribed by
Telefonica. This transaction gave Telefonica a 25% interest in the company,
which will be recorded on the Group's consolidated financial statements under
the equity method.

* In May 2000, Telefonica increased capital through non-cash share contribution
by the Argentine companies Vigil Corp. S.A. and Ambit, S.A. of 163,395,785
shares (100% of capital) and 35,562,111 (22.5% of capital) respectively.
Telefonica increased its share capital by 14,477,109 shares with a par value of
EUR1, at an issue premium of EUR8.5 each. This operation gave the Telefonica
Group a 62.58% shareholding in the Argentine company Atlantida Comunicaciones,
S.A. (up from 35.76% previously). Atlantida Comunicaciones, S.A. will for the
first time be consolidated under the global integration method on the Telefonica
Group's financial statements.

* During 1H00 Telefonica Data Mexico, which is 100%-owned subsidiary of
Telefonica Data, acquired 85% of Mexico's Optel Telecomunicaciones for EUR16.2
million. The company is consolidated under the global integration method.

* In May 2000, Telefonica incorporated Telefonica B2B Espana, S.L. and
Telefonica Emarketplace Espana, S.L., each via a capital increase of EUR6,000.
In March, it also incorporated Telefonica Moviles, S.A. via an initial share
capital of EUR3,005,060. The company is consolidated under the global
integration method.

* In June 2000, Telefonica created Zeleris Soluciones Integrales, S.L., a
100%-owned subsidiary.

* In the 1H00,Terra Networks acquired 100% of Terra Networks Uruguay, which is
consolidated under the global integration method.

(*)Referred only to the changes in the sphere of consolidation during the second
quarter.  

* In March 2000, Terra Networks Colombia Holding, S.A. was created. Terra
Networks, S.A. has an 80% direct shareholding in the company and an indirect
stake of 19.99% through its subsidiaries Telefonica Servicios y Contenidos por
la Red, S.A. and Terra Interactiva de Contenidos, S.A.

* In February 2000, Terra Networks Venezuela, S.A. was incorporated via a
capital increase of Bs. 640,000. This company is 100%-owned by Terra Networks,
S.A. and is consolidated under global integration method.

* During 1H00, Telefonica Media increased its stake in Antena 3 Television to
47.44% from 40.49% in June 1999. This company continues to be reported under the
equity method.

* Interocio Games, S.A. and Argentina's Patagonik Films Group, S.A., in which
Telefonica Media has interests of 50% and 30%, respectively, are being reported
this year under the equity method.

* The Telefonica Internacional Group sold 0.27% of US-based Infonet Services
Corporation as part of its IPO. The company continues to be reported under the
equity method.

                  TELEFONICA GROUP SELECTED FINANCIAL FIGURES

        (TISA operators consolidated under the full consolidation method)

Non-audited figures                      January-June
(million euros)
                                2000        1999       %Chg.

Operating revenues          13,278.0    10,731.1        23.7
EBITDA                       5,823.2     5,526.0         5.4
Operating profit             2,524.0     2,541.2        (0.7)
Income before taxes          1,840.9     1,906.7        (3.4)
Net income                     989.0     1,020.2        (3.0)
Net income per share            0.30        0.32        (6.3)

No. of shares, millions(1)   3,301.7     3,198.9         3.2

(1) Outstanding shares at the end of the period. Increases of 63,976,998 due to
bonus issues (1-for-50), 24,355,110 new shares from convertible bonds and
14,477,109 new shares for Vigil and Ambit after the agreement to acquire ATCO.
The number of shares includes the split (3-for-1) of 23/07/99, with share as of
June 1999 being adjusted accordingly.

Telefonica Group results

During the first half of 2000 Telefonica launched bids to acquire the minority
share positions of various Latin American operators. As a result of the large
percentage of shares obtained (to give a picture of management results that is
true to the company's economic reality) all managerial comments in this report
refer to the financial performance of the Telefonica Group assuming
consolidation under the global integration method of the companies in which
Telefonica Internacional has managerial control, namely Telesp, TeleSudeste
Celular, Telefonica CTC Chile, Telefonica de Argentina, Telefonica del Peru,
Publiguias and CRT Celular.

The Telefonica Group posted net profits of EUR989 million during the first half
of 2000, the figure is down 3.04% from the same period of 2000.

This result was principally affected by lower capital gains from the sale of
shareholdings in the first half of 2000 compared with the same period of 1999,
when significant extraordinary revenue was recorded under this heading (EUR962
million), most notably from the IPO of TPI-Paginas Amarillas, and the sale of
Temasa. 

In addition to this extraordinary item, there were other factors  worth noting.
These items include extraordinary charges made during the first half of 2000,
related to the updating of Telefonica de Espana staff commitments and the
write-down of investments made during 2000. All are in line with prudent
accounting principles applied in other quarters, for a total of EUR320 million,
once the fiscal effect has been considered.

Without these extraordinary factors, the Group's net profit would have risen
14.0%.

In addition, Terra Network's results, as a result of that company's ambitious
expansion plan, significantly affected the Group's earnings as a whole on a
consolidated basis. The negative  contribution of this subsidiary, which we
expect to be one of the Group's key growth drivers in the future, totalled
EUR111.7 million. Without this, Group net profit would have grown 7.1% and the
increase in net profits, adjusted for the three extraordinary  items mentioned
above, would have increased from 14.02% to 27.2%.

In addition to the factors mentioned above, it should also be noted that the
first-time consolidation of certain recently-created companies, which are
currently investing heavily in response to prospects of future growth, also
negatively affected this 1H00 results. Medi Telecom in Morocco is an example of
such a case.

The results should not be extrapolated for the year as a whole  because these
factors are non-recurrent and, more importantly, the high level of acceptance
for the bids of the Latin American  companies should significantly boost net
profits during 2H00 as a  result of smaller minority interests to be deducted.

Despite its decline in net profits, at the consolidated level,  the Group's
strong operating performance should be noted,  illustrated by consolidated
EBITDA of EUR5.823 billion the figure is up 5.4% from 1H99 primarily because of
excellent revenue performance. Revenues increased 23.7% year-over-year to
EUR13.278 billion.

Telefonica Moviles Espana also performed acceptionally well. Net profits rose
44.2% compared to 1H99. The increase was due in large  part to strong revenue
performance, which increased 32.9% from  the same period of 1999. This led to an
increase of 34.6% in EBITDA, which marks a slight improvement in the first
quarter's margin. The improvement demonstrates the positive effect economies of
scale have when linked to the larger client base, particularly when the net adds
of clients during the period is taken into account. The number of net additions
totalled 2.4 million, up 45.7% from 1H99 to 11,450,687 clients as of June 30,
2000. The figure is up 45.7% from 1H99.

We should also note Telefonica Internacional companies' growing contribution to
the Group's EBITDA which is in line with the  economic recovery being enjoyed in
the region.

Telefonica  Moviles  Espana's and Telefonica Internacional's  results offset the
declines in EBITDA reported by both Telefonica  de Espana (-13.6%), as a result
of market liberalisation and  deregulation, and Telefonica Data (-23.1%) as a
result of the first-time consolidation of European Telecom International, as
well as Terra  Network's (EUR153.9 million) negative contribution to the Group's
EBITDA.

SIGNIFICANT EVENTS:

* On August 18, 2000, the Group 3G consortium (Telefonica Group subsidiary
Telefonica InterContinental, 57%, and Finnish operator Sonera, 43%) was awarded
one of Six German UMTS licences.

With a final bid of EUR8.409 billion (Ptas. 1.4 trillion), Telefonica Moviles 
won a third generation licence (two blocks of 5 MHz each) that will allow it to
provide multimedia services; offer high speed Internet access; and distribute
content via mobile telephone in Europe's largest market.  Telefonica Moviles
intends to begin operating in Germany in 2002 and plans to capture more than 2
million clients in the first two years. The Group 3G consortium will present
unique high quality range of voice and content services. Subsequently,
Telefonica  Moviles, S.A. won an additional block of 5 MHz in the unpaired
auction with a bid of EUR63 million.

*  On August 10, 2000, Telefonica S.A.'s Board of Directors unanimously agreed
to appoint Fernando Abril-Martorell and Luis Lada as new board members.  The two
replace the company's former Chairman and Telefonica Moviles' former 
Chairman Luis Martin de Bustamante.  At the same meeting, Femando
Abril-Martorell was appointed Chief Operating Officer and a proposal was made to
the Board of Directors of Telefoinica Moviles, S.A. to appoint Luis Lada
Executive Chairman of Telefonica Moviles.

*  On the same day, Terra Networks Board of Directors unanimously approved the 
appointment of Joaquim Agut Executive Chairman.  He replaces Juan Villalonga as
Executive Chairman of the company.

*  On August 9, 2000, Endemol bought Guardian Media Group's 50% stake in GMG 
Endemol.  The acquisition brings Endemol's ownership to 100%. The company,   one
of the United Kingdom's largest independent TV production companies, will be
renamed Endemol Entertainment UK plc.

*  On the same day, Telefonica Europe B.V. announced plans to begin the
placement of a global bond issue for the equivalent of up to US$5 billion, 
depending on market conditions, beginning the week of September 4, 2000.  Any
funds raised will be allocated to general financing requirements.

*  On August 2, 2000, Telefonica S.A. completed the capital increase to  finance
its takeover of Dutch company Endemol Entertainment Holding N.V.  A total of
213,409,097 new shares were issued. As a result, the Telefonica Group now owns
99.2% of the company.

*  On August 1, 2000, Telefonica B2B announced the purchase of 54% of
Mercador.com. a leading Brazilian business-to-business e-commerce portal for the
trade of supermarket-related goods and services.

*  On July 31, 2000, Telefonica and the other shareholders in TBS Participacoes
signed an agreement to sell all their TBS shares to Brasil Telecom. TBS owned
85.19% of CRT, Rio Grande do Sul State's fixed and cellular operator, and held 
management control of the company.  Telefonica maintains its majority stake in
CRT Celular, the cellular operator spun-off from CRT.

*  On July 26, 2000, Telefonica's Board of Directors announced that it had
appointed Cesar Alierta to replace Juan Villalonga as the company's Executive 
Chairman. The Board Of Directors stressed the Company's ongoing commitment to
all pending strategic operations.

*  On July 25, 2000, Telefonica B2B and Cornestone Internet Solutions (provider
of integrated B2B e-commerce solutions) announced a joint venture to create a
vertical B2B portal for the food industry in Spain, Portugal and Latin America.

*  On July 21, 2000, Telefonica Internacional and Portugal Telecom signed an
'equity swap' agreement, pursuant to which Portugal Telecom is to transfer to  
Telefonica Internacional 23% of SP Telecomunicacoes Holding, S.A. the holding 
company which controls Telesp. Telefonica Internacional, in turn, is to transfer
to Portugal Telecom 35.8% of Portelcom Participacoes, S.A., the holding company
that controls Telesp Celular Participacoes. TISA will also pay
Portugal Telecom US$59.88 million in instalments. Upon completion of the
transaction Telefonica will own 86.64% economic interest in Telesp and 87.51%
controlling interest.

*  On July 18, 2000, Telefonica Moviles and Terra Networks announced the
creation of Terra Mobile to develop and run the Telefonica Group's global mobile
portal. Terra Mobile is 51%-owned by Telefonica Moviles and 49% by Terra
Networks. It will operate internationally, both in Telefonica Moviles and Terra
Networks domestic markets, and new countries in Europe, where it will
'spearhead' Telefonica's drive to develop the market and provide accessible 
from 3rd generation handsets and preferably from UTMS handsets.

At the end of July, Terra Mobile announced its acquisition of 100% of lobox, one
of Europe's leading independent mobile portals and content providers.  lobox
currently has more than 1 million registered users in the UK, Finland, Sweden
and Germany, and it plans to enter the French, Italian, Dutch and Norwegian
markets in the near future.

*  On July 17, 2000, Terra Networks announced its purchase of a majority stake 
in 'La Ciudad,' one of Colombia's leading portals. 'La Ciudad' has four local
partners, El Tiempo, Semana, El Colombiano and E Pais.  Under the agreement,
each of these partners will merge their respective Internet portals into
'laciudad.com'.  Exclusivity agreements have also been reached for the supply of
content by these partners to Terra's Colombian portal.

*  Also announced on July, 17, 2000 was the incorporation of nine first class 
Spanish hotel groups (AC Hoteles, Fiesta Hoteles, H10  Hoteles, Grupo Husa,
Grupo Pinero, Hesperia Hoteles, Hoteles Catalonia, Mac Hoteles and Med Playa)
into the shareholder base of the hotels portal created in April 2000 by
Telefonica and Sol Melia, together with Barcelo, Iberostar and BBVA. This portal
specialises in e-commerce between companies and suppliers in the Spanish hotel
chains' markets: Spain, the Mediterranean and Latin America. The portal plans to
start operating in the next few months, and the aim is for it to be fully
functional in Spain before the end of the year so that it can then be   rolled
out in Latin America and the Mediterranean region immediately.  The 
corresponding investment is expected to be approximately EUR30 million in the
first two years of operation.

*  On July 7, 2000, Terra Networks and Lotus Development Corp, world leader in
messaging, groupware and knowledge management, announced a strategic agreement 
to develop Internet projects, representing an initial step towards the creation
of a global instant messaging service called Instan Terra.

*  On July 5, 2000, Telefonica Moviles and BBVA agreed to create Movilpago
Holding, each retaining a 50% stake, for the purposes of developing and
marketing a mobile phone-based payment system.  This service is complementary to
the usage of the mobile handsets by the actual payment systems, open to the
participation of new partners and compatible with all operators and financial
entities. The goal is to offer this service, which should be available in Spain
by next Autumn, in 30 countries during the next two years.  This agreement   
places the mobile operator and financial institution on the leading edge of
innovations in m-commerce and m-payment. Movilpago expects to have 5 million
clients in Spain by 2005 and 500,000 point of sale (POS) terminals.  In
addition, it aims to have 100 million clients and 5 million POS terminals world
wide.

In addition July 5, 2000, Telefonica, BBVA, Iberia and Repsol YPF announced the
creation of a company to develop an Internet purchasing portal (e-procurement) 
which would facilitate the four companies' purchasing of non-productive goods
and services not directly involved in their core activities. The new company, in
which each partner holds an equal stake, is the first of its kind to be
established in Spain.  Other local partners based in the countries in which the
portal is to be developed are to be incorporated later.

*  Also on July 5, 2000, Telefonica's public tender offer for the outstanding  
shares of four of its Latin American subsidiaries (Telefonica de Argentina,
Telesp, TeleSudeste and Telefonica del Peru) closed.  The acceptance level of
the offerings was extremely high, (91.8% for Telefonica de Argentina's free
float; 83.2% for that of Telesp; 86.5% for TeleSudeste Celular; and  93% for
Telefonica del Peru).  As a result, Telefonica SA reached, including Cointel, 
97.9%, 87.5%, 89.3% and 97.04% controlling interest in the companies', free
floats respectively. The capital increases that were carried out resulted in the
issuance of the following new shares by Telefonica S.A.: 157,951,446 for
Telefonica de Argentina, 371,350,753 for Telesp, 90,517,917 for TeleSudeste and
80,954,801 for Telefefonica del Peru.

*  June 27, 2000, Telefonica launched Zeleris, the first e-fulfilment company in
the Spanish and Portuguese-speaking world. The company will offer an integrated
package at all stages of the e-commerce process. To this end, the company is
developing an advanced integrated technology platform, which is highly flexible
and can be adapted to different requirements. In addition, Zeleris has begun to
establish a network of local and international alliances to make e-commerce more
efficient. The venture started with an investment plan amounting to EUR83
million for the first three years and is to begin operating in Spain and Brazil
in August, and in Chile, Mexico and Argentina before the end of the year.
Zeleris aims to be present in 15 countries at the end of 2001, with a headcount
of 500 and revenues of EUR421 million by 2003.

*  On June 20, 2000, ACEA-Telefonica announced a merger with Telexis-a Fiat
Group company-in order to create Atlanet, a company which will offer a full
range of voice, data and Internet services for business and private clients in
Italy.  Telefonica Data is to invest EUR105 million in the operation and the
shareholder structure will be as follows: 34% Telefonica Data, 33% ACEA and 33%
FIAT-IFIL, Telefonica will be in charge of the new company's management.

*  On June 5, 2000, Telefonica reached an agreement with Bertelsmann AG to
acquire MediaWays GmbH, a company specialising in Internet, data transmission 
and other value-added services for corporations, which will represent a
springboard for Telefonica Data's expansion in Europe.  The acquisition will be
made in Telefonica Data shares, or Telefonica SA shares if Telefonica Data is
not floated by December 31, 2001. Bertelsmann can expect Telefonica to turn the
shares into cash via an investment bank, after January 31, 2001.  The total 
purchase price is US$1.6 billion, with an adjustment mechanism depending on the
degree to which the revenue target for 2000 is met.

*  On May 17, 2000, Terra Networks and Lycos reached a merger agreement under 
which Terra will acquire Lycos in a share exchange transaction at a price of
US$97.55 per share, which is equivalent to US$12.5 billion in Terra shares. 
This transaction will create one of the world's three largest Internet companies
(to be known as Terra-Lycos), which will be based on an exclusive platform
encompassing Internet services, new media, branded content, e-commerce and
next-generation communication technologies.  Terra-Lycos is to operate in 37
countries and currently has more than 60 million clients in North America, Latin
America, Asia and  Europe, with 40 million unique visitors and 175 million page
views per day.  Bertelsmann will participate in this alliance, with a commitment
to purchase advertising and e-commerce services worth approximately US$1
billion, with an obligation to pay US$325 million to Terra-Lycos for services in
the first two years of the agreement and the rest of the
additional services between the third and the fifth year of the agreement. 
Before the merger is complete, Terra Networks will hold a capital increase which
Telefonica has agreed to subscribe the corresponding shares an a pro rata basis,
as well as any that are not taken up by other Terra shareholders. Once the
capital increase is completed, Terra-Lycos is expected to have US$3 billion in
cash, which would make it one of the strongest Internet companies in financial
terms.

*  In June 2000, TelePizza and Terra Networks signed a joint venture agreement
to develop an e-commerce platform enabling products such as videos, books, CDs,
pre-paid cards and entertainment to be delivered within one to 24 hours. In July
the companies created a 50/50 joint venture called 'A tu hora', which will
specialise in e-commerce convenience products.

*  On May 10, 2000, Terra Networks and Vignette, a leading e-mail applications 
developer, reached a cooperation agreement whereby Terra Networks will use
Vignette's technology as a unified platform for its global e-commerce
activities.

*  On May 4, 2000, Terra Networks acquired IDT Corporation's 49% stake in Terra
Networks Access Service (a Terra company which operates as an access provider in
the US), plus its 10% holding in Terra Networks Interactive Services (which
operates Terra's portal business in the US) reinforce the development of its
US-based Internet businesses, taking 100% ownership of its US assets.  IDT will
receive ordinary Terra shares in exchange for these holdings, increasing its
stake in the company 1.32%.

                              THE TELEFONICA GROUP                   

MARKET SIZE

(Thousands)        June                   %      Weighted figures(*)       %    
                                        Chg                              Chg
                   2000       1999      00/99    June 2000    June 1999   00/99
Lines in service  40,525.1    36,679.1  10.5      24,806.2     22,343.5   11.0
Spain             19,797.8    18,689.2   5.9      19,797.8     18,689.2    5.9
Other countries(1)20,727.3    17,989.8  15.2       5,008.4      3,654.3   37.1
Cellular clients  20,739.8    11,930.6  73.8      13,842.1      7,727.7   79.1
Spain             11,450.7     6,540.2  75.1      11,450.7      6,540.2   75.1
Other countries(2) 9,289.1     5,390.4  72.3       2,391.4      1,187.5  101.4
Pay-TV clients       892.2       634.1  40.7         404.5        329.5   22.8
Spain                550.5       320.2  72.0         267.7        219.6   21.9
Other countries(3)   341.7       313.9   8.9         136.8        109.9   24.5
TOTAL             62,157.1    49,243.8  26.2      39,052.8     30,400.7   28.5

(*)  Weighted for the economic interest held in each company.
(1) 1999 and 2000 figures do not include CRT's lines due to the transitory
nature of the shareholding in this company.
(2) 1999 and 2000 figures do not include Telesp celluar subscribers due to the
transitory nature of the shareholding in this company.
(3) 1999 and 2000 figures do not include Cablevision clients, due to the
transitory nature of the shareholding in this company.

THE TELEFONICA GROUP: RESULTS BY COMPANY (*)

Non audited figures                     Revenues                EBITDA
(million euros)                         Jan-Jun                 Jan-Jun
                               2000    1999     % Chg   2000    1999     %Chg
Telefonica de Espana Group   5,138.7   5,046.6    1.8  2,350.1  2,719.8  (13.6)
Telefonica Moviles Espana    2,224.9   1,674.0   32.9    814.1    604.9   34.6
Telefonica Data Group          338.6     288.3   17.4    41.2      53.6  (23.1)
Terra Networks Group            80.6       3.0    n.a.  (153.9)   (10.8)   n.s.
TISA Group                   6,095.6   4,445.6   37.1  2,854.2  2,187.7   30.5
Other subsidiaries           1,002.1     618.0   62.1    (87.6)    11.5    c.s.
Disposals                   (1,602.5) (1,344.8)  19.2      5.0    (40.6)   c.s.
GROUP                       13,278.0  10,731.1   23.7  5,823.2  5,526.0    5.4

(*) TISA operators consolidated by fully consolidation method

RESULTS ANALIZED BY COMPANY

TELEFONICA DE ESPANA GROUP

First-half 2000 results of the Telefonica de Espana Group, the  business line
embracing all Telefonica's fixed-line business in Spain,  reflect  the 
company's  success  in  adapting to the newly  liberalised  market, where 
competition  is  fierce and still  growing,  and  the  price  war  initiated
last year is becoming more aggressive.

On  July 23, 2000, a liberalisation measures package was approved. The 
measures,  which  included fixing Internet access flat  rate  tariff  at 
EUR16.5  (Ptas.  2,750) during off-peak times, as part of a bid  to  boost  the
growth  of  the Internet access market; the launch of  local  call  vouchers, 
similar to the existing Europa 15 and Pais 30 products  (both  of  which have
significantly boosted traffic); authorisation to  provide  indirect  access  for
local connections (which will  boost  interconnect  traffic  with other
operators); and lastly the unbundling of the  local  loop,  though  precise 
marketing terms and  conditions  for  this  last  measure,  have yet to be
defined. These measures are scheduled  to  take effect  on November 1, 2000, in
the case of the first two, and  November 15,  2000  and January 1, 2001,
respectively, in the case  of  the  last two.  The  financial impact of their
implementation will depend  on  the precise  terms  ultimately  set. Whatever 
these  may  be,  because  the changes  do  not come into effect until late this
year/early next  year, their impact on 2000 financial results will be
negligible.

Subsequently,  as  a  result of developing a price-capping  system,  the
government   approved   price-caps  for  all  fixed-telephony   services,
including  fixed-to-mobile, which will limit  cumulative  increases  for  2001
and 2002 to a maximum of annual CPI-9% and CPI-8%, respectively.

Operating revenues reported by the Telefonica de Espana Group (EUR5,138.7
billion) as of June 30, 2000, were 1.8% higher than in the first six months of 
1999. Thanks to positive consumption patterns, tight controls on market share
loss and continued expansion in ISDN and services to other telcos, the
subsidiary reported operating revenues of EUR4,785.5 billion. The figure is down
just 1.8% from the six months of 1999, improving and confirming the healthy
revenue performance recorded in the first quarter of the year.

Market liberalisation and the success of discount schemes such as Bononet,
Europa 15, Pais 30 and Novacom multiplan, have resulted in higher telephone
consumption use in all areas. Traffic per line per day is now 16.1 minutes, up 
22.2%, while the total traffic volume in minutes for the first six months of
2000 totalled 50.401 billion, 26.1% higher than in the first six months of 1999.
 Outgoing traffic increased by 21.1% while incoming traffic was 63.3% ahead of
the first half of 1999.

The main drivers of outgoing traffic growth in the first six months were
fixed-to-mobile and Internet traffic, which rose by 42% and 121.3%,
respectively.  Meanwhile, provincial traffic, increased 8%, domestic long
distance 6% and international long distance from the fixed network 33.5%.

The success of Telefonica's various discount plans (181,651 subscribers
signed-up to the 'Europa 15' plan by June, while the 'Pais 30' plan for DLD
traffic had attracted 486,895 subscribers, way ahead of forecast) has been key
to sustaining volume growth in minutes sufficient to keep revenues from
Telefonica de Espana traffic in the same levels of the first quarter of 2000,
with a 5.9% decline from the same period in 1999, since effective prices were
reduced approximately 23%.

Telefonica de Espana's strong revenue performance, which is expected to continue
in coming months, was due mainly to the aggressive expansion under ISDN and
Wholesale services. The advances made under these headings to a great degree
offset the decline in revenues per minute due to tariff reductions, loss of
market share and the increasing volume of discount plans.  The expansion of  new
services (Internet Access, ISDN, broadband services, Centrex, Intelligent
Network, and VPN), which rose 41.2% and now makes up almost 16% of total
revenues, is a reflection of the company's determined bid to secure growth in
emerging business areas.

Telefonica de Espana also continues investing in broader bandwidth services and
has stepped up the roll-out of access services using ADSL technology. 
Subscribers to this service already exceed 15,000, which is in line with an
accelerated plan to boost Internet penetration in Spain.

Telefonica de Espana posted operating costs of EUR2,934.3 billion for the  first
six months of 2000, an increase of 16.7% from the corresponding period of 1999,
though the Group's operating costs, before interconnections, rose by just 1.6%
thanks to reductions in personnel expenses and efforts to contain other costs
not related to revenue generation.

Telefonica de Espana's interconnection costs, the main driver of the increase 
in operating costs, climbed 34.7% due to the increasing number of fixed-mobile
interconnections, which make up 92.9% of the total. They are growing in line
with the rapid expansion of the mobile telephony market even though the increase
was partially offset by price reductions implemented in July 1999 and January
2000.

Personnel expenses at Telefonica de Espana were down 4.4% compared to the
previous year.  These overall cost savings were achieved despite the increase in
personnel expenses necessary to expand the sales force.  The total headcount at
Telefonica de Espana as of June 30, 2000 was 45,637, which is 11.8% lower than
the corresponding 1999 period, giving Telefonica de Espana a productivity ratio
of 433.8 lines per employee.

It is worth noting that Works, Supplies and External Services rose 18.8%
compared to the previous year mainly because of increased outsourcing.  Other 
expenses at  Telefonica de Espana, including business expenses linked to
advertising and marketing, but excluding outsourcing, edged up 2.6% from 1H99
figures, reflecting the company's concerted efforts to defend its market share
and maintain its market lead.

These revenue and expense performances brought the Group's EBITDA to EUR2,350.1
billion, a 13.6% decline, which, after deductions from cumulative depreciation
and amortisation charges for the first half of 2000, set Telefonica de Espana's
first-half Operating Profit at EUR900.3 billion, which is 17.4% below the figure
reported for the first half of 1999.

TELEFONICA MOVILES ESPANA

The Spanish market continued to grow rapidly during the first six months of
2000, taking the mobile penetration rate to 50%, in line with the average for
Western Europe. The quarter-over-quarter increase was 6pp, setting the change
since June 1999 at an unprecedented 25pp, one of the most rapid expansions to
date recorded in the world.

During the first six months of 2000 Telefonica Moviles Espana (TME)'s net adds
to its client base was 2,398,340 customers, a 45.7% increase from the same
period of 1999.  It is particularly important to note that the equivalent to a 
share of the overall net adds on the GSM market is still in excess of 50%,
despite having the lowest SAC on the Spanish market.

All-in-all, as of June 30, 2000, TME had a total customer base of 11,450,687. 
More than 35.7% of the figure corresponds to contract clients.  On the basis of
data supplied by competitors, TME now has 5.3 million more clients than the
second-ranked Spanish operator, which is a 57% wider lead than during the
corresponding 1999 period.

As in most European countries, the prepaid system, which in TME's case is
commercialized under MoviStar Activa brand, remained the main engine for growth
during the first half of 2000, and represented 77.3% of net adds.

Now that overall growth rates are beginning to ease, marketing initiatives
designed to reward TME's best clients are meeting with considerable success. 
The launch of MoviStar Plus has helped boost TME's already clear lead in the
highest value-added segments, most notably:

*  The net adds in contract clients is well in excess of half a million, almost
three times the net adds in the first six months of last year.  

*  A clear trend to switch to contract payment methods is becoming apparent
amongst the better prepaid clients, with five times as many users migrating from
prepaid to contract in the first six months of 2000 than in the same period last
year.

*  Corporate contracts continue to show strong growth, as companies take
advantage of the features of the MoviStar Enlace and, especially, MoviStar 
Corporativo 2000 services, which have almost tripled the number of corporate
clients relative to June last year and has also helped marginally increase this
client category's weighing in the overall client mix, despite the spectacular
take-off of the prepaid system mentioned above.

Thanks to the above, TME's estimated share of total mobile traffic is now six 
percentage points higher than its share of the stated user base-twice the size 
of the differential that existed during the corresponding 1999 period. More
significant still is the fact that, even though more than 5.1 million users
joined the overall GSM client base in one year, TME's estimated share of total
digital traffic has remained unchanged, suggesting that TME is continuing to win
higher value-added clients among new customers as the market expands.

Another point of note is that this qualitative change has not prevented TME from
achieving simultaneous reductions in SAC (down 11% relative to the same period
last year), and this, together with economies of scale, has helped  broaden its
EBITDA margins despite a 24% reduction in prices.

In terms of minutes, traffic managed by the TME networks in the first six months
increased 67% on the same period last year, to 9,563 billion minutes.  As for
data services, use of SMS continued to rise, with 870 million messages sent in
the first half of 2000, 570% more than during the first six months of 1999.
Overall, data services now account for 8% of total revenues generated by
MoviStar clients.

In recent months Telefonica Moviles Espana has strengthen its lead in this area
with various initiatives, most notably:

*  The market launch of its Wireless integrated-service provider (WISP) under 
the commercial name 'e-mocion' an open service for all portals, giving users
open and personalised access thus promoting easier, more flexible web browsing.
The service will evolve further as new technologies become available. E-mocion
had the support of 60 content providers at the end of June 2000 and more than
165,000 calls were recorded that month.

*  Movilpago service is, a unique system which complementary to the usage of
mobile for transactions through traditional means of payment. The service makes
possible to use existing mobile phones to make all kinds of payments safely,
quickly, easily and without needing to change handset, SIM card or current
account.  This initiative was developed jointly by Telefonica Moviles, S.A.  and
certain shareholders in Telefonica, S.A. and is open to new potential partners
and also to any and all mobile phone users, regardless of the service provider
or bank they are using.

*  The June 2000 launch of the first pre-market test of GPRS in Valladolid and
the signature of various collaborative agreements to develop new Wireless
Internet services and applications in partnership with world leading players
incuding, amongst others, Ericsson, Microsoft, Motorola, Nokia and Sun
Microsystems and soon to be joined by others.

Operating revenues as of June 30, 2000 totalled EUR2,224.9 billion, 32.9% higher
than in the first six months of 1999, although strictly speaking the  figures
are not comparable since this year sums accrued by contract clients as  'points'
under the MoviStar Plus programme have been ccounted for by deducting the
corresponding sums from actual revenues.

EBITDA, meanwhile, was 34.6%, which is up from the first six months of 1999,  
to EUR814.1  billion, bringing first half net profit to EUR345.1 billion, 44.2%
ahead of last year's interim figure.

TELEFONCIA INTERNACIONAL GROUP

As of June 30, 2000, the Telefonica Internacional Group was managing 18.2
million lines, an increase of 17.9% from the number of lines run by Group
managed companies in the second quarter last year.

Growth was driven by the strong expansion of lines in service at Telesp, 27.3%,
-more than 2 million new lines brought into service since June 1999- to upwards
of 9 million. Telefonica de Argentina also secured a major advance, 13.3%, in
lines in service thanks to a more active commercial policy, while the 5%
increase recorded by Telefonica del Peril was due to the 'telefono popular'
product already accounting for 16% of lines in service. Telefonica El Salvador 
and Telefonica Centroamerica Guatemala had 22,030 and 1,581 lines in service,
respectively, as of June 30, 2000.

This significant growth in plant in service was accompanied at all Group
companies by steadily rising traffic per line per day, delivered mainly by the
recent leap in Internet use and fixed-mobile interconnection.

The number of mobile phone clients managed by Telefonica Internacional rose
68.1% compared to the first of half of 1999 to 7.6 million customers.  During
first half 2000, the customer base recorded net adds of 1,157,000 overall.

One of the best performing operators was Unifon (Argentina), which registered 
growth of 30.5% during the first half of 2000, or 320,000 more customers than at
the end of December 1999. In Brazil, the number of customers increased 557,000
or 17%, since end-1999, to give a total of 3.9 million customers (3.3 million at
end-1999). TeleSudeste saw a particularly strong 16.4% increase in its client
base, equivalent to 300,000 more customers than at end-1999. The other operators
(Chile, Peru, Guatemala and El Salvador) posted a 14.2% increase in their client
base, 280,000 more clients than six months previously.

A key factor in this growth included the development of the prepaid service, 
which has increased 1.2 million new clients since January 2000.  The development
of prepaid development has helped to bring down subscriber acquisition costs.
This fact, along with tighter controls on bad debt expenses, should boost the
profitability of the Group's mobile phone operators.

In value-added services, a 1H00 milestone was the launching of the WAP service
in Brazil. Shortmessage services are another priority area this year.  In that 
regard, Brazilian operators have already launched the MoviStar 'Aviso' service,
and the news alert service is up and running in Argentina.  Another initiative
was the launch of MoviStar Gestion, geared to corporate customers, at
TeleSudeste, Tele Leste and in Argentina.  Finally, the automatic roaming
agreements struck between Group operators will secure them a competitive
advantage in their respective markets.

Latin American investments contributed EUR124.9 million to first-half 2000
results, an increase of 30.7% from June 1999, and was mainly driven by the
higher income contribution from Brazilian operators.

*  Brazilian operators contributed a joint EUR62.0 million to Telefonica 
Internacional results, as opposed to the zero contribution of first-half 1999. 
Strong operating performance and the country's monetary stability were the main
factors driving the improvement.

   -Telesp net income of EUR247 million was 120% higher than first half 1999 
figures. Main factors at work were strong revenues accompanied by tight control
of operating costs. Telesp's strategy accent on growth and productivity has
lifted its productivity ratios to amongst the highest in the world, with 642
lines per employee.

   -Brazilian mobile phone operators, TeleSudeste in particular, secured
sizeable advances in their customer base, which translated to 33% higher
revenues in euros and increased net income of EUR31 million.  Celular CRT,
meantime, reported net income of EUR20 million.

*  Net income at Telefonica de Argentina dropped 7.8% in euros, in the first 
half of 2000 the company's fiscal year (October 99-March 2000), despite positive
EBITDA performance. The drop in net income is largely explained by higher
operating costs forced by the advent of competition in basic telephony; heavier
commercial spending resulting from rapidly expanding mobile telephone customer
base; and network roll-out on a major scale, permitting operational start-up
last May in Cordoba, in the north of the Country's. The company's financial
costs have also risen because of the additional debt taken on to fund
its 1999 acquisition of PCS licenses.

*  Telefonica del Peru's net income rose 33.1% in euros, thanks to sound
operating performance.  EBITDA growth of 8% in euros was accompanied by solid
performance in non-operating figures, specifically the positive monetary
correction reported in the period after a negative monetary correction in the
first half of 1999.

Operating revenues increased 16% in euros. Main factors favouring the rise were
growth of lines in service and the higher revenues raised from public telephony,
mobile services, cable TV and corporate communications, offsetting  the lower
revenues from long-distance calls.  At the end of 1999 the introduction of
competition in this segment affected tariffs but without causing significant
loss of market share.

*  At the close of second quarter 2000, Telefonica CTC Chile contributed EUR14.5
million losses to consolidated results against the positive numbers of the same
period last year. The cause, in this case, was a 5% decrease in EBITDA in euro
terms, owing mainly to the dent caused in local telephony revenues by the new
tariff decree phased in since May 1999, and the higher commercial costs of
mobile phone business.  Another factor was the switch from billing by minute to
billing by second in all services and with greatest impact on the long-distance
business.

TELEFONICA DATA GROUP

Second quarter 2000 saw major advances in the geographical roll-out of
Telefonica Data's operations. Telefonica Data Uruguay completed its launch and
began offering LMIDS services in May. Telefonica Data USA, based in Puerto Rico,
has also won the LMDS licence for the 39 GHz band.

Also in 2Q00, Telefonica Data acquired a majority stake in Optel
Telecomunicaciones SA de C.V. This company has its headquarters in Mexico City
and runs a data network with nodes in 17 cities throughout Mexico.  The  network
currently supports VPN (Virtual Private Network) and Internet access services.

In Europe, Telefonica Data acquired Bertelsmann group subsidiary MediaWays,  
Germany's largest IP network operator after Deutsche Telekom, with 270 nodes and
150,000 IP ports. It also reinforced its Italian operations, linking up with
Fiat subsidiary Telexis to create Atlanet.  The equity is 33%-owned by Fiat
Ifil, which contributes a large client base and national high-speed trunk
network; 33% by Acea, which has an extensive fibre-network in Rome; and the
other 34% by Telefonica Data, contributing the Group's financial 
backing and its expertise in data services.

The development and launch of new services received a boost June 2000 via a
collaboration agreement with Verisign, aimed at strengthening and enhancing  
the security and capabilities of Internet information services and IP VPNs.  At
the end of June 2000, Telefonica Data launched the first ever IP-technology
fixed wire service aimed at the corporate sector.  In Latin America, the
Corporate Business Unit of Brazilian operator TELESP launched its own IP-network
ADSL services last June under the brand name Speedy (Speedy Net and Speedy IP).

In the commercial field, Terra Networks signed a deal whereby Telefonica Data 
will provide connection to the backbone of its international and access networks
in countries where both firms are present.  The agreement also envisages
coordinated strategies in new market entries.  In Spain, InfoNegocio-offering
high-speed Internet access, corporate web-hosting and e-mail to SMEs- continued
its rapid growth, to more than 133,000 customers; a 48% increase send the end of
March 2000.

In Latin America, the Corporate Business Units of Telesp in Brazil and
Telefonica del Peru signed deals with the Bank of Brazil and Banco de Credito 
de Peru, respectively, to provide services including corporate voice and data
transmission.

Telefonica Data Internet Centres (TICs) also started up in Madrid and Sao Paulo,
with similar centres scheduled to open in Buenos Aires, Santiago, Miami  and
Lima before year-end 2000.  The centres offer web-hosting, web-housing and other
ASP (Application Service Provider) services.

Telefonica Data Group revenues were EUR338.6 million for the six months end 
June 30, 2000, a 17.4% increase from the same period 1999. However, the global 
integration of European Telecom International produced a EUR7.5 million drop in
EBITDA. Excluding this Telefonica Data Group would have posted EBITDA of EUR48.8
million for the first half of 2000 and an EBITDA margin of 14.8%. The
consolidation of both European Telecom International, and ACEA-Telefonica also
affected net income which was a 65.9% fall as of June 1999.

Telefonica Data Group consolidates seven companies under the global integration
method: Telefonica DataCorp, Telefonica Data Espana, Interdomain, Optel,
European Telecom International, Rey Moreno and Telegan.  The others are reported
under the equity method.  The re-organisation process by global business lines
which recently began is still in its early stages and datacoms business in Sao
Paulo, Argentina, Peru and Chile continues to be run by the parent companies.

TELEFONICA MEDIA GROUP

The main changes affecting Telefonica Media consolidation scope as of June 1999
were the consolidation of Telefonica Internacional's media assets (ATCO, AC
Inversora and Tornos y Competencias), conducted in the fourth quarter of 1999,
and the raising of its ownership stake in ATCO, in the second quarter this year,
from 35.76% to 62.58%.  This last operation gave Telefonica Media management
control in May 2000, at which time the company was consolidated under the global
integration method (the equity method in the opening quarter). Its recent
takeovers of free-to-air TV channels Telefe and Azul, subsidiaries of ATCO and
AC Inversora, respectively, have increased the losses of the Telefonica Media
Group.  Both firms, however, provide ample room for managerial
improvements once they are integrated within the Telefonica Group, as occurred
before with Antena 3.

Other important changes include the entry of Onda Cero, carried by the global 
integration method, and the Group's shareholding in Pearson, carried by the
equity method. Neither of these holdings were included in Telefonica Media
figures for first-half 1999.

These Telefonica Media investments worked through as almost a doubling of the
Group's losses versus first-half 1999, as far as EUR61.1 million at the close of
June 2000. The 32.4% higher earnings posted by Antena 3 and the contribution by
its Pearson stake failed to offset the negative effect of new additions Onda
Cero, ATCO and AC Inversora, and continuing losses at Via Digital, which
deepened 64.6% to 65.4 million euros.

Antena 3
Operating revenues rose 16.0% compared to the first-half of 1999 to EUR313
million, despite the drop in viewer numbers caused by the Spanish version of
'Big Brother.' The channel's share dropped to a 20% low in May 2000 but
recovered to 21% in June 2000. EBITDA rose 14% to EUR110.2 million, while
pre-tax income rose 22.2% to EUR101.1 million thanks to lower financial costs. 
Net income, which totalled more than EUR70.8 million, was 14% up from June 1999,
despite the tax credit booked in 1Q99 as a result of prior-year losses.

Telefonica Media held 47.4% of Antena 3TV as of June 30, 2000.

Via Digital

First-half 2000 results, again, demonstrated the intense subscriber acquisition
efforts.  This strategy, which was characterised by heavy advertising and
promotional spending, increased client numbers to 550,530 as of June 30, 2000,
an 72% increase compared to June 1999 and was three months ahead of the
company's target, with more than 110,000 new subscriptions compared to less than
32,000 during the same period last year.

Net revenues stood 86% higher at EUR98 million.

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