Investors Conference Report

Telefonica SA
2 March 2001


International Investors Conference in Rio de Janeiro

TELEFONICA GATHERS MORE THAN 160 MAJOR INVESTORS TO EXPLAIN ITS STRATEGY AND
GROWTH PROSPECTS

Cesar Alierta: 'The Group does not envisage mergers between equals, but remains
receptive to consolidations by business lines'

Fernando Abril: 'Telefonica's organisation into specialised business lines is
one of the key factors explaining the Group's simultaneous achievement of growth
and profitability'

Cesar Alierta, Chairman of Telefonica, today opened the First International
Investors Conference held by the company.  The conference is intended to give
the financial community an understanding of the foundations and strengths
underpinning the Group's future growth, explain the development and stability
strategy for the upcoming years, and maintain Telefonica's policy of openness
and continuous dialogue with investors.

   Cesar Alierta has cited four basic factors to explain Telefonica's strong
foundations and growth potential: the broad customer base, deep operating
capabilities, the value of its intangible assets, and a flexible and
well-balanced business structure.

In relation to the first factor, the broad customer base, Telefonica manages
over 65 million customers in a natural market with more than 500 million
consumers and strong growth potential.  In this connection, the Group chairman
recalled that the forecast growth in Latin America, a region in which the
company is very well positioned, is larger than the current size of the Spanish
market.  All sources of growth, Alierta said, must be based on customers and
pursued by broadening the customer base, increasing their use and consumption of
existing services, and rolling out new services.

   In describing Telefonica's operating capabilities, Cesar Alierta emphasised
that the company has superior productivity levels in relation to its competitors
in European and Latin American markets.  Telefonica de Espana closed the year
with a ratio of 493 lines per employee, far higher than its closest competitor,
and Telesp is ranked first in the Latin American market with 790 lines per
employee.  In addition, Telefonica also holds the upper hand as measured by
market share in a highly competitive environment and has demonstrated the
management skills required to place past corporate acquisitions on the road to
profitability.

   The chairman of Telefonica cited several important contributions from the
Group's intangible assets, notably, the strength of the brand, through knowledge
of markets, confidence achieved amongst its clientele, and establishment of
permanent, fluid relations with regulators and authorities in the markets in
which the Group operates.

   All of these strengths are complemented by a flexible business structure and
organisation that allow the company to maintain its commanding position in fixed
telephony, wireless communication, Internet, broadband and contents, enabling it
to multiply the services offered to clients of all kinds.

   In his comments today, the Telefonica chairman has also referred to the
company's solid financial position, the result of a prudent investment policy
which has allowed it to maintain its credit rating, bucking the general
downgrading trend now being seen in Europe.  Cesar Alierta discussed the main
variables in the 2000 profit and loss account, the best in recent years for
Telefonica, with a 38.8% gain in net profit on the strength of a 24.1% rise in
revenues.  Alierta underscored that the company's ordinary operating profit
(EBITDA) is more than enough to finance its organic growth, thereby allowing the
overall debt level to be scaled down.

   Throughout his talk, Alierta also sought to answer some of the questions most
on investors' minds in recent days, dealing with topics such as the feasibility
of the UMTS project in Germany, uncertainties generated by the regulatory
framework, and the possibilities of the company taking an active part in the
sector's consolidation.

   The company chairman recognised that the market has not yet given its backing
to the UMTS project in Germany and assured his audience that Telefonica is
actively undertaking to improve the conditions for its entry into the German
market, of great importance for the Group strategy.  Specifically, Telefonica is
working to ensure that it will, from the very first day, count on a solid
customer basis, share network rollout costs with other operators, and have an
efficient organisation.

  Alierta expressed his confidence in the good results achieved by the policy of
permanent dialogue with regulators in each of the countries in which the company
operates and guaranteed investors that any policy of acquisitions or deals with
other groups will be carried out selectively and avoiding financial dilution;
that is, with companies that make for a good strategic fit with Telefonica's
competitive position and contribute EBITDA growth.  This has been seen in the
alliance with Portugal Telecom for the Brazilian market and in the purchase of
Motorola's assets in the Mexican wireless service market.

   On this point the Telefonica chairman made it clear that the Group 'does not
envisage mergers between equals, but is receptive to operations to consolidate
business lines, provided such deals make for a good strategic fit'.  In any
event, Alierta explained, Telefonica's financial and operating position will
allow it to successfully face takeover operations 'and we will not turn our
backs on the opportunities that may arise, provided they complement and
reinforce the company's strengths'.

The four priorities charted by Fernando Abril

   Following the chairman's talk, Fernando Abril, C.O.O. of Telefonica, focused
his comments to the more than 160 investors attending the conference on
explaining the company's organisational model and the management priorities that
have been charted for the Group and the different business lines.

   Fernando Abril stressed that the company's conduct is based on solid
long-lasting business fundamentals and explained the objectives of each business
line, grouping the priorities charged by the company's management into four
basic goals:
* Improve earnings in the consolidated businesses
* Push ahead with expansion in Latin America
* Make developing businesses profitable
* Maintain an active policy of promoting new businesses

   In his discussion of the well established business lines, the Telefonica
C.O.O. assured that the priority is to expand the existing customer base and
maximise cash flow long term.  In this group of businesses, including Telefonica
de Espana, Telefonica Moviles Espana and Latam operators such as Telesp, amongst
others, Abril announced that 'we cannot and will not fail'.

   Completion of the main stages in the deregulation process, with the opening
of the local loop and adjustments of tariffs, has stabilised the regulatory
framework for Telefonica de Espana.  In Abril's view, it is now time to
concentrate on two essential goals, namely to: (I) triumph in the broadband
battle by implementing ADSL, expanding and segmenting the customer base, and
broadening the range of products and services; and (ii) continue achieving
efficiency gains.  The later objective will be accomplished by redistributing
resources toward a more commercial-minded organisation and recasting the company
as an e-business.
 
   In relation to Telefonica Moviles, Abril told his listeners that after its
success in achieving strong market penetration and leadership, the company's
strategy will be based on monitoring profitability per client and traffic
shares.  The company will seek to strengthen its customer loyalty-building
campaigns and fortify the solid position achieved in the corporate segment,
while broadening its portfolio of products.

   After the excellent results obtained by Telesp in 2000, the C.O.O. of
Telefonica stated that 2001 will also be a growth year.  The main objective
charted for the Brazilian operator is focused on accelerating achievement of the
'targets' agreed with the regulators, opening the door to new opportunities in
the local market.

   On the second priority set by the management team, that is, expansion in
Latin America, Abril explained that the idea is to leverage the Group's
leadership position in the region to grow the business in markets where the
company has not yet established a presence.

   The success achieved in Sao Paulo and in the development of other parts of
Brazil, a country which accounts for 40% of the Latin American
telecommunications market, should serve as a springboard for successful pursuit
of new objectives in the region through acquisitions.  This strategy will be
accompanied by development and consolidation of operations in areas such as
northern Argentina and Mexico that have joined the Group recently.

   Making its developing businesses profitable is the third pillar of the
strategy defined by Telefonica and explained by the C.O.O..  Abril underscored
his confidence in Terra-Lycos and the strategic value of Telefonica Media and
contents for the Group.  In both cases the goal of the respective management
teams is to concentrate on accelerating progress toward the break-even point and
capture synergies from collaboration with other business lines.  The Telefonica
C.O.O. touched on the need to promote development of new businesses and exploit
the opportunities open to Telefonica on the basis of its financial and
operational strength and market leadership.

   Lastly, Fernando Abril endorsed Telefonica's organisation in specialised
business lines under a Group management that adds value, calling this model 'one
of the key factors in explaining the Group's simultaneous achievement of growth
and profitability.'  This model, he stated, facilitates access to new
opportunities , partners and alliances and harnesses the full capacity of the
company.

Madrid, March 1st, 2001