Joint Venture Telefonica-PT

Telefonica SA
18 October 2002



                               SIGNIFICANT EVENT


In accordance with the provisions of article 82 of Law 24/1988 of July 28th, of
the Securities Market and ancillary regulations and for public disclosures as an
Official Statement of Significant Event, we hereby acknowledge that today
Telefonica Moviles, S.A. Portugal Telecom SGPS, S.A. and PT Moveis SGPS, S.A
have entered into the definitive contracts that record the incorporation and
rules of governance of the Joint Venture that will group all the wireless assets
in Brail of Groups' Telefonica and Portugal Telecom.


The subscribed contracts derives from the agreement signed on January 2001
between both groups, which was notified to the Stock Market throughout the
corresponding Official Statement of Significant Event.


In relation with the agreements subscribed with Portugal Telecom, Telefonica
Moviles, S.A. has agreed to purchase from Portugal Telecom shares representing
14.68% of the share capital of the Brazilian entity Telesp Celular
Participacoes, S.A


The company will be Brazil's, as well as South America's, largest cellular
operator, with close to 13 million customers (of which 3.5 million are contract
customers) and a potential market of more than 94 million people.


The holding company, which will be jointly managed by Telefonica Moviles and
Portugal Telecom, will have a solid capital structure and will record positive
net earnings and cash generation growth from the beginning.


According to Cesar Alierta, President of Telefonica, 'The new joint venture
company starts out from a position of undisputed leadership in the Brazilian
mobile phone market. The formula for creating it, by the integration of 100% of
the mobile assets of PT and Telefonica in the country, is the best way to
achieve the goal of creating maximum shareholder value. The decision was taken
after an analysis of the legislation regarding new authorizations for mobile
telephony in Brazil, which will lead the new company to implement the migration
of the current cellular concessions to the new SMP authorizations.'


Miguel Horta e Costa, Chief Executive Officer of PT, said 'We have now created a
company that, with 13 million subscribers, is the leading operator in Brazil and
has a strong and sustainable lead in all the major states. The new Company will
generate operating free cash flow from launch and the ability to derive
substantial synergies that will generate further value for its shareholders.'


The joint venture will obtain significant synergies from the considerable
economies of scale derived from its size, from the application of the two
groups' best practices and by leveraging Telefonica Moviles's and Portugal
Telecom's combined commercial leadership position in Brazil. Both groups are
pioneers in Brazil's cellular market in using the latest technological
developments to offer their customers the best range of voice products and
services, mobile data transmission and mobile internet access.

The holding company expects to obtain synergies which will be significantly
greater than the costs and investments derived from migrating from the current
cellular concessions (SMC) to PCS authorizations (SMP).


The combined company's solid customer base, its leadership in the markets where
it operates, and the strength of its balance sheet reinforce Telefonica Moviles'
and Portugal Telecom's positions at the head of mobile telephone development in
the Brazilian market, both now and in future.


The joint venture will operate in areas which provide more than 70% of Brazil's
total GDP, and where it commands more than a 60% market share. The new company
will combine Portugal Telecom's and Telefonica Moviles' assets in Telesp Celular
(Sao Paulo), Global Telecom (Santa Catarina and Parana), Tele Sudeste Celular
(Rio de Janeiro and Espiritu Santo), CRT Celular (Rio Grande do Sul) and Tele
Leste Celular (Bahia and Sergipe).


The holding company will be owned at 50% by each of the groups, and a joint
management team has already been put in place.


The constitution of the new company is an expression of both groups' confidence
in the Brazilian economy in general and in the telecommunications sector in
particular.


The completion of this process regarding the constitution of the joint venture
is now pending regulatory approval from the Brazilian authorities (ANATEL).






Madrid, October 18th , 2002



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