Issue of Equity

Telefonica SA
5 December 2000


               TO THE SPANISH NATIONAL SECURITIES MARKET COMMISSION

                              PRIOR COMMUNICATION

Diego L. Lozano Romeral, acting on behalf of TELEFONICA, S.A. (the 'Company'  or
'Telefonica') in his capacity as Vice secretary of the Board of Directors of the
Company, and duly empowered to this effect, before  the  Spanish  National
Securities Market Commission, hereby declares that:

I.         The Company's Extraordinary Shareholders' Meeting held on February 4,
2000 resolved to increase  the share capital of the Company, with  foreseen
incomplete subscription  and total exclusion of the pre-emptive  rights, 
through the  issue and listing of 110,000,000 ordinary Company shares of a
nominal value of one (1) euro each (the 'Issue').

II         On  March  30, 2000 the Spanish Securities Market Commission (CNMV)
verified  and  registered the abridged prospectus of the Capital Increase 
regarding the Issue (the 'Prospectus').

III        As the subscription period for the Company's shares could not
commence until certain conditions and authorizations referred to in the
Prospectus had been fulfilled and granted, and the periods set forth in article
25.1 of Royal Decree 291/1992, of March 27th, regarding issues and public
offerings have concluded, in compliance with First Additional Stipulation,
paragraph 3, of the aforementioned legal text, and in article 3 of the Circular
2/1999, of April 22nd, of the Spanish National Securities Market Commission,
certain specific types of prospectuses are approved, in accordance with
article 26 of Law 24/1988, of July 28th of the Stock Market, amended, among
others, by Law 37/1998, of November 16th, and articles 5.2.a.) and 9 of the
aforementioned Royal Decree, the Company has therefore proceeded to draw up the
preceptive Prior Communication corresponding to the Issue.

1.         Issuer of the ordinary shares

The  Issuer is TELEFONICA S.A., with its registered head office in Madrid,  Gran
Via 28 and its Fiscal Identification Number (C.I.F). A-28/015865, registered in
the Madrid Mercantile Register, in volume 12,534, Page 21, Sheet M-6,164.

The  Company  forms  part of the Telefonica Group to the  effect set forth in
article  4  of  the  Stock  Market Law, with this acting  as  the  head  of  the
aforementioned group.


2.         Nature and characteristics of the securities to be offered

The  securities issued are ordinary Telefonica shares, with a face value of  one
 Euro each that constitute a single series, and will attribute  to their  
holders identical  rights.(hereinafter, the 'Shares of the New Issue'). The
basic characteristics of the Issue will be the following:

a)   Aim of the Issue

     The  Issue is to be launched in order to address the exchange for up to
500,000,000 shares of the Argentinean company CEI Citicorp Holdings, SA    
(hereafter 'CEI').

     The exchange of shares will result in the Company indirectly acquiring,  as
a consequence of the position of control that the Company will take up in CEI
subsequent to the execution of the capital increase stated in this  Prior 
Communication, 50% of the share capital of the Argentinean company Compania de 
Inversiones  de Telecomunicaciones,  S.A., which holds 51% of the share capital
of Telefonica de Argentina, S.A. and 50% of its management fee; and
approximately all additional 30% of the share capital of Atlantida  de 
Comunicaciones, S.A. (hereinafter 'Cointel', 'TASA' and 'ATCO' respectively).

b)    Issue rate

      The  maximum  issue  rate at which the Shares of the New  Issue  will  be
issued  will be 14 euros (a nominal value of 1 euro plus a maximum  issue  
premium  of  13  euros). The Annual General Shareholders Meeting  of  the
Company  approved a difference by which the issue premium could  stand
at  between 10 and 13 euros, basing the calculation of this in accordance
with  that  set  forth  in article 159.1.c) of the  amended  text  of  the
Corporate Law.

      Should  the  issue premium be set at 13 euros and, therefore,  the  issue
rate  stand  at 14 euros, the total maximum amount for the  Issue,  would
amount to euros, 1,540,000,000.

c)    Representation of the Shares of New Issue.

      The newly issued shares will be represented by book entries registered by
the Clearance and Settlement Service (SCLV), the entity  responsible for the
carrying of the accounts register

d)    Trading on secondary markets

      The  Company  will  apply  for the listing of these  shares  on  the  four
Spanish  Stock  Exchanges,  Barcelona,  Bilbao,  Madrid  and  Valencia, (through
the Spanish Automated Quotation System).

      Likewise, the Company will apply for their listing on the London, Paris,
Frankfurt, Buenos  Aires,  Lima and New York (1) stock exchanges, along with
that of Sao Paulo and the other Brazilian stock exchanges (2), and their
inclusion in the Stock Exchange Automated Quotation System (SEAQ International).

(1)   The  trading on the New York Stock Exchange will take place on the form 
of American Depositary Shares (ADSs)  represented  by American  Depositary 
Receipts  (ADRs). According  to  North  American legislation, an ADS is the 
unit by  which  a  US shareholder holds the shares of the foreign issuer that
has agreed  to establish and ADR program. One ADS may correspond to one or more
of the issuer's shares. An ADR is the instrument issued by the depositary entity
of the ADSs, which is given to the US investor so that he may demonstrate the
ownership of the ADSs he holds.
(2)   The Company shares traded on the Brazilian Stock exchanges will be
represented by Brazilian Depositary Receipts (BDRs).


3.   Group of subscribers to whom the issue will be offered

The Company's Annual General Shareholders Meeting approved the total
exclusion of pre-emptive rights on the shares of the New Issue due to the    
fact that it was in the company's interest that the shareholders of CEI take up
shares in the Company's share capital in order to execute the indirect
acquisition of 50% of the share capital in C0INTEL, which holds a 51% stake in
the share capital of TASA  and 50% of its management fee;  and  approximately, 
an additional 30%  of  the  share capital of ATCO. Therefore, the Issue is
exclusively  aimed  at  the  shareholders  of  CEI  (International   Equity
Investment  Inc. (Citibank Group); HMTF-Argentina Media Investments Ltd. (AMI 
Group); and Repuiblica Holdings Limited and International Investment Union Ltd.
(Republica Group).

4.   Subscription date for the Shares of the New Issue.

The Board of Directors and, in its place, any person so empowered by the
Shareholders' Meeting, is authorised to set the date of the execution of
the capital increase, within a maximum period of one (1) year dating from
February 4th, 2000, the date on which the resolutions regarding this  capital
increase were undertaken.

At the same time as the executing of the resolution on the capital
increase by the Board of Directors or the person empowered by the Board,
the Shares from the New Issue will be subscribed to and registered in the
accounts of the Clearance and Settlement Service (SCLV).

In witness thereof,

IT IS REQUESTED that the Spanish Securities and Exchange Commission (Commission
Nacional del Mercado de Valores), in acknowledging the filing of this Prior 
Communication  relative to the Issue  of  ordinary  shares  of  the Company, 
admits it and, after having completed the required  formalities,
proceeds to register it in the corresponding Register.


     Madrid, December 4, 2000.

     TELEFONICA, S.A. 


     Diego Lozano Romeral
     Vice Secretary of the Board of Directors

     This  communication  shall  not constitute an  Offer  to  sell  or  the
     solicitation  of  an Offer to buy, nor shall there be any sale of          
    securities  in any  jurisdiction  in  which  such offer, solicitation  or   
   sale  would he unlawful prior to registration or qualification under the     
  securities laws of such jurisdiction.