Issue of Debt

Telefonica SA
15 September 2000


TELEFONICA INCREASES GLOBAL BOND ISSUE BY $1 BILLION TO NEARLY $6 BILLION, GIVEN
STRONG DEMAND

*  Bond issue was increased nearly $1 billion above the approximately $5        
  billion initially offered.

*  Demand was nearly four times in the initial amount on offer in the issue,    
  the largest in dollars and euros by a Spanish group, reflecting Telefonica's
   solvency in financial markets.

*  Telefonica confirms that the transaction 'totally covers the refinancing 
   needs of the Group for 2001'.



Madrid, 14 September 2000 - Telefonica, through its subsidiary Telefonica
Europe, B.V., has successfully completed the global bond sale announced last
week. The total amount of the issue was raised by $1 billion to nearly $6
billion in light of strong investor demand, which was four times the initial
amount on offer. The bond issue is the first guaranteed by Telefonica to be
placed in the U.S. market.

The success of the bond issue underscores the solid reputation Telefonica enjoys
in international financial markets, as reflected in its ratings, which are
currently the among best of the European telecommunications companies.

The bond issue, for which prices were fixed today, was the first by a major
European telecommunications company since the revision of the sector by the
ratings companies during the month of August.

Jose Maria Alvarez-Pallete, Chief Financial Officer of Telefonica, S.A., said
'The success of this transaction completely covers the refinancing needs of the
Telefonica Group for the year 2001.'

The dollar-denominated portion of bond issue was divided into three tranches:

*  $1.250 billion in five-year bonds, with an interest rate of 7.35% or 144     
   basis points above U.S. Treasury bonds.
*  $2.500 billion in 10-year bonds, with an interest rate of 7.75%, or 204      
  basis points above U.S. Treasury Bonds.
*  $1.250 in 30-year bonds, with an interest rate of 8.25%, or 234 basis points
   above U.S. Treasury bonds.

The tranche of one billion euros has a five-year term and an interest rate of
6.125%, or 55 basis points above 'mid-swaps' which are referenced to Euribor.

Final prices for the bonds were in the lower end of the range established by the
market, another proof of the success of the transaction.

The global coordinators of the issue were Goldman Sachs & Co., J.P. Morgan &
Co., and Morgan Stanley Dean Witter. BBVA and InverCaixa were also global
coordinators for the tranche in euros.