Managing Director's Address

Telefonica SA
16 April 2002



                          MANAGING DIRECTOR'S ADDRESS



                        GENERAL MEETING OF SHAREHOLDERS

                                TELEFONICA, S.A.



                            Madrid, April 12, 2002


Good Morning, ladies and gentlemen Shareholders:

In his presentation, the President gave you a view regarding the situation
respecting the sector, pointed out the excellent earnings achieved by Telefonica
in 2001, and established the company's lines of strategy. On those bases, I
would like to focus my presentation on the importance of management strength
within the current boundaries of the sector, and accordingly I shall go into
this issue in depth in the next few minutes by stressing three points:


             First. Telefonica achieved some excellent earnings during 2001,
        something that constitutes a manifestation of the strength of our
        business and our solid financial condition, both of which are the fruits
        of a major management effort.


             Second. These earnings were achieved within a particularly
        difficult environment within the sector, a situation that will continue
        this year. In the light of the uncertainty that we saw a year ago, today
        we are confident of finding ourselves in a sector that is in
        transformation, with challenges but also with opportunities - as stated
        by the President, namely through broadband - that reveal healthy
        development. These are challenges and opportunities that demand that we
        operate with on-going maximum output.


             Third. In the current environment, taking the Group's capabilities
        - based upon strength, determination, proximity to the business and
        teamwork - one step further constitutes a fundamental element for
        ensuring the short-term earnings and building the foundation for the
        coming years. In this respect, I shall complete my presentation by
        mentioning the 'management priorities' on which we are focusing our
        efforts this year.


Therefore, I would like to explain to you the significance of the 2001 earnings,
the challenges we face and the priorities that we have marked out for the
current year, all with the objective of renewing the confidence that you, the
shareholders, have placed in our company.




2001: SOME EXCELLENT EARNINGS - THE FRUITS OF A MAJOR MANAGEMENT EFFORT


I shall begin by reviewing the earnings and principal management achievements of
2001.

In 2001, Telefonica achieved some excellent earnings. These earnings were the
fruit of the major management effort undertaken, and in turn confirm the
strength of our company. In the current context of the sector, our earnings take
on special relevance, since they constitute a differential element with respect
to our principal competitors, and therefore are a step forward in the on-going
positive development of Telefonica.


             The consolidated income for the year exceeded 31 billion euros,
        which represents an increase of 9% over last year, which at constant
        exchange rates will reach 13.8%.




             This upward movement is based fundamentally on the sustained growth
        and diversification of our customer base, which as mentioned by our
        President, increased by 15% during 2001, so much so that it exceeds 78
        million.


             Allow me to point out that each euro that we have brought in is the
        result of services provided to those many customers who have chosen us,
        despite the fact that they have many alternative choices. In addition,
        this growth came about in an environment with significant price
        reductions and difficult regulatory controls. The growth, the fruit of
        the organic growth of our business, is greater than that of most
        European telecommunications groups.


             In terms of markets, Spain contributed 50% to our income, Brazil
        19% and Argentina 13%. The remaining 18% belongs to other Latin American
        and European markets.


             Operating expenses increased by 7.5% during the year, which at the
        constant exchange rate would correspond to an increase of 11.5%, a rate
        of growth that is less than that of income as a result of the major
        effort to contain and rationalize costs. This effort has been of
        particular importance because of the absolute volume with our fixed-line
        operators, both in Spain and in Latin America, and with our mobile
        operators, where the high costs of acquiring customers has been reduced
        while efforts to achieve customer loyalty intensified.


             Consequently, the cost efficiency ratio has improved, dropping by
        2.6 percentage points to 46.5% in 2001. Likewise, the operating leverage
        (measured as fixed costs among total costs) also improved by 2.3
        percentage points to 45.2% in 2001. These data begin to reflect the
        results of a strong and on-going effort to increase our operating
        efficiency and flexibility, which every day becomes more difficult as
        higher levels are attained.


             The increase in income, together with the containment of costs,
        generated an operating profit or EBITDA that was 7.4% higher than last
        year (13% at constant exchange rates), reaching 12.8 billion euros.


             As a percentage of income, the profit margin came to 41.2%, which
        places Telefonica among the leaders of the sector.


             In our company, we talk a great deal about EBITDA, but what exactly
        does it mean? What is its economic meaning? And why do we use it as a
        reference? EBITDA (earnings before interest, depreciation and taxes) is
        the most relevant indicator of the company's operating pulse; it
        constitutes an excellent barometer of the company's ability to generate
        cash from the business, and is the building block of the company's
        statement of earnings.


             In addition, EBITDA is the direct result of the development or
        growth of operations during the year, not otherwise affected by
        multi-year items or entries. The positive growth in income and the
        containment of costs was a constant throughout the Group during 2001,
        and therefore the growth in EBITDA is the result of generalized
        increases in profits for practically all of our companies.


             In 2001, we made investments valued at 7.9 billion euros, which
        assumes that we reinvested 26 euros for every 100 euros that we earned
        for the growth of the business.


             Our high investment level was for us the development engine in the
        principal markets in which we operate.


        For example, in Spain, Telefonica invested more than 3 billion euros in
        2001, an investment that was greater than that made by the rest of the
        sector in its entirety. Of this amount, a relevant percentage was
        dedicated to R&D activities and to advances connected to broadband
        which, as the President already said, constitutes an enormous
        opportunity for the development of new forms of communication for our
        customers.


        We are engaged in an on-going investment rationalization effort, which
        we intensified in 2001; this is an effort that responds to the need to
        reduce the capital intensiveness with which the businesses have been
        operating in order to make them compatible with the required minimum
        levels of profitability. This effort has borne fruit, since last year we
        were able to reduce the total investment volume by 13.2% with respect to
        the previous year - at the same time maintaining high quality of
        service.


        These reductions have been selective, since we increased the investments
        required for developing growth business such as broadband, and also in
        those countries where the demand so required. For example, in Brazil,
        where in 2001 our investments reached a figure of 2.675 billion euros,
        which in turn allowed us to fully meet the demands deriving from the
        strong growth in the business.


        As a result of the improvement in the operating profit and from this
        multi-year effort to rationalize investment, our operating earnings (or
        EBIT) grew at the significant rate of 9.5% (15% at constant exchange
        rate) to 5,400 millions euros.


             The Group's operating cash flow more than tripled last year,
        reaching 2,300 millions euros, as compared to 700 million euros in 2000.
        On a per share basis, the cash flow increased from 0.18 euros in 2000 to
        0.50 euros in 2001. We are particularly satisfied with this growth
        since, as mentioned by the President, this is what has allowed to us to
        meet challenges and take advantage of new opportunities, and this is
        moreso the best guarantee of strength and future profitability for the
        shareholders.


             Finally, net profits reached a figure of 2.1 billion euros, which
        signifies a drop of 15.9% with respect to the year 2000, basically
        because of lower extraordinary positive earnings, such as those that
        were derived in previous years from dropping some of our businesses from
        the stock market (Telefonica Moviles in 2000 and Terra in 1999), from
        increased amortization of goodwill stemming from a prudent up-dating of
        the business plans of some of our operations in Europe, and finally from
        the allocation of 369 million euros for cushioning the impact of the
        depreciation of the Argentine peso.


             The President has informed you about the earnings of other
        telecommunications companies comparable to ours, which I feel is
        testimony to the strength of Telefonica, and brutally reflects the
        difficult times through which the telecommunications sector is passing.
        As you can see, Telefonica is the only one of the major European
        telecommunications operators that showed positive net earnings in 2001.
        Although it is true that comparisons are never homogeneous, since they
        reflect different fundamental policies and different business mixes, in
        any case the difference is still relevant.


In summary, some decent earnings, which is most significant considering the
difficult business environment that characterized 2001. Some earnings that
reflect the major management effort made by the executives and employees of this
company in every business line and in every country in which we operate. These
efforts, given the complexity of the Group, may be very difficult to appreciate
within the confines of the consolidated figures. Therefore, allow me to
highlight what is the most relevant:


In Spain, our business showed very solid performance:


             At Telefonica de Espana, we met the fourth year of total
        liberalization head-on. Taking into consideration the fact that erosion
        of competition is cumulative, the fact that we lost market share in
        comparison to the previous year, the fact that we operated under
        additional price and profit pressure, and the fact that we had to deal
        with more and more regulatory measures that made doing business
        difficult for us, we were able to turn around the downward trend in
        operating profits, which as you have seen, amounted to 4.508 billion
        euros.


             Two factors played a key role: on the one hand, there was the
        constant improvement in efficiency throughout the year, despite the fact
        that it involved an ever-greater challenge, and on the other hand,
        innovation in products and services that allowed us to find new sources
        of income, and through the development of broadband, formed the
        foundation for taking advantage in the short-term of a new form of
        communications among our customers.


             Specifically, I must emphasize the major effort in launching ADSL,
        a service that now counts 375,000 customers, exceeding market objectives
        and positioning us as the leader behind Deutsche Telecom in penetrating
        the European market for this product, despite the fact that our
        regulatory environment is clearly most unfavorable.


             Telefonica Moviles Espana is the company that has most contributed
        to the growth in the Group's income and operating profit. It has 16.8
        million customers, thereby maintaining market share at levels in excess
        of 55%. This is translated into a 20% growth in income. Thanks to the
        customer-loyalty strategy and improvements in efficiency, the company
        was able to obtain an operating profit of 2.8 billion euros, which is
        57.3% more than in 2000, and which as a percentage of income hit a
        record figure of 49%, a trend that has been maintained during the first
        few months of 2002.


             This growth has been sustained furthermore by an innovation effort
        that has allowed the company to create services that customers find
        attractive and therefore increase use of the mobile telephone. One
        example of this is short messages, the use of which has increased to the
        point where it represents more than 13% of customer billings. These
        services are the vanguard of new ways in which the mobile telephone can
        be used with the take-off of GPRS and UMTS, and this is something that
        we are most decidedly going to increase.


Brazil, which was the principal growth engine of the Group in 2000, continued to
grow significantly last year. The certification of compliance with 'universality
goals' established by the regulatory agencies reflects the enormous efforts that
were made by Telesp in 2001, namely the installation of more than 3.7 million
lines, which translates into a penetration rate of 34% in Sao Paulo for
fixed-line telephone service.


This constitutes a step of enormous value since it opens, two years ahead of
time, new opportunities of growth in Brazil, within and outside of Sao Paulo.
Likewise, Telesp's earnings showed very favorable growth in 2001. In local
currency, income increased by 25% and the operating profit by 20%. And the net
earnings of Telesp last year equaled that of the entire Telefonica Group in
1996.


As I said when I referred to the growth in net earnings, the foreign-exchange
situation that was precipitated in Argentina at the end of the year brought
about a loss of 369 million euros on the 2001 financials. In addition, the
capital impact was 1.424 billion euros. As the President pointed out, throughout
2002, and depending upon changes in foreign-exchange rates, we will be showing
possible additional impacts of this condition in the profit & loss statement and
the Balance Sheet.


We have redirected our management efforts so as to preserve to the greatest
extent possible the value of our businesses. We are doing this by concentrating
our focus on generating cash, adapting investments to the particular situation
of the country in question, de-indexing the cost bases until a new rate
environment is negotiated, and finally making our companies operate in a more
integrated manner in order to avoid loss of liquidity from the Group.


We are convinced that these actions will place us in a favorable position to get
back onto the growth track after the crisis passes.


You can be fully assured that our operations in Argentina are in the best hands
possible, and I would like to express my appreciation to the management teams in
that country for the professionalism, commitment and dedication that they have
shown despite all of the difficulties that have beset them, with many of those
difficulties even being personal.


With respect to UMTS operations in Europe, if indeed the impact on earnings is
limited because of the softness in business and the capitalization of expenses
up to marketing, we also had to deal in the first year with very difficult
market and regulatory conditions. We are managing our businesses by maintaining
open options, minimizing capital contributions so as to limit financial risk,
and acting pro-actively so that regulation of the market and market structure
approaches the economic realities of the telecommunications sector.


I would also like to point out that following its launching on the market, the
Quam brand already has close to 100,000 customers in Germany. And there is also
the fact that the strong measures adopted in the areas of investment and cost
rationalization, such as for example the sharing of infrastructures and the
financing agreements with equipment suppliers, have reduced the projected
investments by more than a third. In addition, in Italy and in agreement with
the rest of the partners, the decision was made to wait until the UMTS
technology becomes available, since current market conditions do not allow for
generating value with a GSM outlet.


We have made significant advances in the data and Internet business. At
Telefonica Data, the management aspect has been refocused, differentiating those
markets where we have fixed-line operators from those where we haven't. With
respect to the former, we have focused the effort on the demand for total
solutions from corporate customers, and at the same time we have considerably
reduced investment, taking maximum advantage of the networks of these fixed-line
telephone operators. In the new markets, the primary goal has been to attain the
minimum critical mass for making those operations launched in the last two years
profitable, and also taking advantage of our presence on these markets to
supplement service for our multi-national customers, above all in the financial
sector of Latin America.


If indeed in 2002 we expect to harness the results of this re-focusing more
fully, then in support of that we must emphasize that in 2001 the income volume
of Telefonica Data came to 1.85 billion euros, which translates into a growth of
28%.


Our Internet business has adapted itself to the new conditions of market demand,
it being supported more by the strengths and positioning of the Group.
Terra-Lycos has strengthened its position for meeting the demand for Internet
access, and has positioned itself in the broadband business, and it is presumed
that this will be a catalyst in reshaping its business model. In 2001, it
improved its operating margin by 127 million euros, with which it reduced its
negative contribution to the global EBITDA by more than a third.


We have also carried our different B2B initiatives closer to the Group's own
management processes. The purpose of this has been to accelerate the necessary
internal transformation and to serve by way of example and experience in
incorporating these initiatives in the demand for solutions from corporate
customers in the field of e-commerce, where we see signs and indicators of a
recovery and a selective attainment of expectations. With these movements, we
were able to reduce the resources used in these businesses by more than 50
million euros with respect to the year 2000.


At Admira, whose EBITDA has improved very substantially, thanks to the very
influential incorporation of Endemol, the consumption of resources and cash for
its operations is still high and profitability has not improved this year. The
growth of Admira's business has been mixed. In the area of distribution
operations, it was affected by the drop in the advertising market, falling to
its lowest level in the last 10 years, while our content production unit,
Endemol, has reaped major commercial successes, successes that have translated
into a 63% growth in income.


At TPI, income grew by more than 24%; business profits in Spain increased and
positions on the Brazilian market have been consolidated. Finally, we continued
to follow the path of development and growth announced since the flight from the
stock market.


All of these efforts in each of the businesses are only a small sample of the
complexity and diversity of Telefonica. This diversity is the source of numerous
opportunities, one of which is the attainment of major savings in financial
resources. In such respect, we have placed a major corporate effort on
horizontal initiatives, the purpose of which is to improve the efficiency of the
entire Group by centralizing activities and areas of support, and taking
advantage of economies of scale:


             We have consolidated the operations of Atento following a phase of
        growth of the Group's activities in Latin America. In 2001, investment
        was substantially reduced and the foundations were laid for an
        improvement in profits.


             The 'Advanced Procurement System' was implemented at all of our
        subsidiaries.


             The Shared Services Centers have now more than 2,500 employees, and
        have a presence in all of the principal markets in which we operate.


             In other areas such as logistics and systems, the foundations have
        been put in place for moving even further forward in 2002.


             And after one year of intensive work, the real estate project began
        to bear fruit in this first half of the year as a process of freeing up
        space, improving costs and management transparency.


Outstanding financial management must be added as a factor to this positive
development in operations, because the more diverse, complex, multi-national and
rich the Group's business is, the more demanding, rigorous, pro-active and
difficult is its financial management. And structural policies, processes and
procedures that are neither joint or articulated nor casual, but rather have a
strict overlap with operations, are the most important.


Thus, this financial excellence in a particularly difficult year has allowed us
to maintain the quality of our Balance Sheet, reduce exposure to fluctuations in
foreign-exchange rates, allocate the cost of resources by business, optimize our
capital costs and maintain the best rating of the sector.


These achievements and many other achievements by the team of executives and the
more than 160,000 employees of Telefonica have formed the backbone of the
earnings for 2001, and have allowed us to face new challenges with confidence.


I would like to join the President in thanking everyone and offering them my
sincerest expressions of gratitude for the results achieved in 2001, and
encouraging them to continue working to even exceed those results in the future.


Today Telefonica is a company that is stronger than it was a year ago. It is a
company that is most prepared to successfully meet any future challenges and
opportunities.




A DIFFICULT ENVIRONMENT AND NEW CHALLENGES FOR THE FUTURE


And that's exactly the case. As we stated at the General Meeting of last year,
the environment in which our company had to operate in 2001 was particularly
difficult for the (telecommunications) sector.


We have been faced with the same problems as our competitors, and in addition,
we have had to confront specific situations such as the Argentine crisis.


But our leadership ability, and our ability to anticipate and adapt has allowed
us to confront these difficulties under conditions better than those of our
competitors, and moreover has allowed us to obtain better financial results.


The year 2002 began the same way. In the face of the uncertainties that we saw a
year ago, today we can clearly see that we are in a sector that is undergoing a
deep transformation, and consequently there are all sorts of major challenges
facing our company and its growth.


Although the global macro-economic situation continues to be weak, in the last
few months we have been seeing some signs of economic recovery in some markets,
as shown in consumer and business confidence indexes. We are expecting a
recovery around the second half of the year, and we are confident that this will
be especially felt in two of our most important bases: Brazil and Spain.


In the meantime, we have seen an attitude of prudence on the part of consumers,
an attitude that is conditioning demand and posing a challenge to realizing the
growth expectations of some business lines. We are also seeing a broadening in
the purchasing cycles of transmission capacity. The demand for advertising still
remains weak, and in general, decisions respecting investment in information
technology are being deferred.


The growing competition that we are experiencing in all of our markets and
which, as said before, have a year-to-year cumulative effect, poses a second
challenge. In 2001, we noted a more selective competitive pressure, one oriented
towards the most attractive segments and business:


             In the access area, cable operators, who in Spain ended 2001 with
        almost 600,000 users, have reinforced their focus on up-scale
        residential segments;


             With respect to alternative access operators, the wholesalers of
        ADSL facilities have been able to reach companies and the best
        residential customers with highly competitive broadband service;


             In the area of mobile telephone service, the number of competitors
        in Rio de Janeiro, our principal market in Brazil, went from 2 to 4;


             In the field of data, the drop in transmission prices has obliged
        us to move towards providing solutions, where we have to compete with
        new agents such as the large systems integrators or the companies
        involved in corporate software development;


             In the Internet area, companies that share solid positions in
        access devices are (now) gearing up to compete for all of the services
        offered the customer.


Competition is causing pressure on the profits of our businesses, which is
inexorably continuing. We are today a highly efficient operator. However, in
order to meet the challenges of the future with confidence, we must continue
with our multi-year efforts to improve efficiency, even with the knowledge that
the challenge will become greater as technological progress continues.


The regulatory question is another challenge. Despite all of the years that have
elapsed since the liberalization of the different markets in which we operate,
the economic impact from regulatory changes can be very high.


In Spain, there is effective competition in practically all of the
telecommunications sectors. Proof of this lies in the significant loss of
(market) share that Telefonica has experienced in some business lines and
segments, the major drops in price or the fact that today our competitors can
use our own networks for replicating our products and services supplied to the
market.


Despite this, the actions taken by the regulatory agencies continue to be
intense, which places limitations on the degrees of freedom with which market
forces act on the development of business. It is a difficult thing when
regulatory actions make up for the lack of investment by our competitors, and
the zeal to fill the space occupied by them runs the risk of destroying the
profitability of the business.


There is no regulatory alternative that replaces the investment-profitability
combination. There is none.


And we are at a critical time. We have put forth great efforts in the field of
broadband, which has presented itself as a great opportunity, and is still in
need of heavy investments. However, this field demands a stable and predictable
regulatory model that will guarantee its profitability. A model based on an
'ex-post' action and on the general rules of competition that is focused on the
growth of the market, and which does not permanently compensate for the
operating or financial insufficiencies of our competitors.


And there are now several international experiences that evidence the
suitability of such a model, such as is the case in the United States or
Switzerland , where priority in developing the broadband market is being given a
priori.


Finally, I would like to focus on the matter of the impact of the Argentine
crisis, for which we still see no clear end in sight. We have been in Argentina
for 12 years. The crisis that is being experienced is the most serious that we
have seen in our days in that country.


With an 11.5% contribution to EBITDA last year, you will easily understand that
our maximum attention will have to be devoted to this until such time as the
Argentine crisis subsidies and economic recovery begins.


These challenges are not rhetorical. They are real and we are continuing the
feel their effects on the first quarter earnings for 2002, which as we hope will
be a good year for business.




MANAGEMENT PRIORITIES FOR 2002

For meeting these goals, management strength constitutes a critical element
today more than ever. It will ensure for us positive short-term earnings and
allow us to lay the foundations on which to build the future.

In the context of the company's strategic development as delineated by the
President, I would like to highlight the 'management priorities' on which we are
focusing our efforts this year.

In the areas of fixed-line telephone service, data and Internet, I will point
out four priorities:


             First. To attain the objectives of the broadband plan. As mentioned
        earlier by our President, the future of fixed-line telephony passes
        through broadband, and Telefonica aspires to be the leader among the
        European operators in the growth of this business. Therefore, we have
        marked out the objective of attaining a figure of 900,000 ADSL users in
        Spain and more than 500,000 in Latin America at the end of 2002. Not
        only is it important for us to achieve our market penetration
        objectives, but to attain them within the established economic
        parameters: operating costs, investment per line and income per line.
        This is the only way in which we can build solid foundations for this
        new business for the next three years.


             Second. To intensify commercial coordination in broadband and
        internet for developing the demand for new services and accelerating the
        growth of the market. As the principal engine of the sector, Telefonica
        is the one who should be the leader in the growth and development of
        this new business in our natural markets, growth and development for
        which our own competitors will be the beneficiaries. This priority
        requires a two-fold orientation.


             On the one hand, to take advantage of the unique situation in which
        we find ourselves for providing a differential and integral service to
        our end-customers, supporting ourselves on our positions as content
        supplier, ISP, portal, and provider of access through the different
        companies of the Group. On the other hand, to move deeper in a
        commercial direction by serving the needs of our customers in a more
        integral manner.


             Third. To ensure the growth of the data business for companies in
        the markets in which we are already present. We have already mentioned
        that 2001 was a year of repositioning in the data business. And this is
        not an easy task. The year 2002 is fundamental to fully harnessing the
        advantages of this re-focusing and laying the foundations for the new
        model that is centered on the companies' business.


        We must consolidate our position in the markets in which we already have
        a presence, doing this jointly with fixed-line operators, strengthening
        share in communications and data income, and increasing the number of
        customers who use value-added services.


        Particularly in the Brazilian market, where our market share situation
        is much weaker, we aspire to end the year with a share of corporate
        services equivalent to what we already have in long-distance services.


              Fourth. To develop Telesp for capturing the growth potential of
        the Brazilian economy. We have made an enormous investment effort in
        fixed-line telephone service in Sao Paulo, which culminated with the
        attainment of universalization goals two years ahead of time. Today we
        have a relevant customer base and an operation that is the most
        efficient in the world.


        This year, in order to benefit to the maximum from what we expected
        would be a very vigorous economic growth during the second half, we are
        focusing on developing new services that will stimulate consumption,
        supplementing our long-distance services within and outside the State.
        We are looking to develop our broadband service in order to reach market
        penetration levels equivalent to those in Spain, along with the same
        economic parameters. And to expand our share of data services to
        companies.


In the area of mobile telephone service, as commented by our President, we want
to be the prime operator in the Spanish- and Portuguese-speaking markets.
Therefore, this year it is important:


             To accelerate JV with PT in order to materialize the benefits
        thereof as quickly as possible. It has been a long road. It has entailed
        resignations and the best will and effort by both parties. There have
        been necessary efforts with other companies, such as meeting the goals
        at Telesp.


             It is now important that we speed up its development, integrating
        the assets of both companies in brand, networks, services and systems in
        an effort to merge them into the leader of mobile telephone services in
        Brazil, where jointly we have 12 million users, and thereby harness the
        growth potential of the market and materialize synergies and economies
        of scale, which constitute the principal raison d'etre behind its
        creation.


             To accelerate the takeover of operations involving new cellular
        assets in Mexico. We are investing more than US$3 billion dollars in the
        number two Latin American market in size and number one in growth rate.
        Our experience in 2001 told us about the hard competitive conditions.
        Therefore, after Pegaso is acquired, we must move quickly to integrate
        our assets in Mexico so that we can share in the strong expansion that
        this market is experiencing.


             To stimulate the commercial growth of the new mobile telephone
        services. We commented before that short messages already represent 13%
        of our income from mobile telephone service in Spain, and the doors are
        being opened to new uses of mobile telephones by our customers. This
        year we are continuing to stimulate new uses and applications for the
        mobile telephone through GPRS technology; this will be a catalyst in a
        qualitative change on the road to third-generation services. The Spanish
        market is the platform for developing these types of services and
        extending them to other markets.


In the area of media and content, we are focusing on improving the performance
of our operations in order to maximize profitability and minimize use of cash.
Falling within this context is the new corporate content and multi-platform
services unit that will be placed in operation shortly. Likewise, the
restructuring initiatives in the distribution business are basic to coping as
best as possible with another difficult year in the advertising sector.


Finally, and for the entire Group, we shall continue to pay special attention to
the management initiatives respecting shared resources in an effort to reduce
pressure on costs in the future. This is a key element of looking ahead. The
diversity of businesses and geographies in which our company operates creates
the opportunity and need for a unified management of resources, thereby
attaining economies of scale and in turn generating and harnessing a high value.
And I have already mentioned the different horizontal initiatives that we shall
continue to take this year.


These are, to be sure, the principal management priorities on which we are
working. They also form the basis of our company's long-term development. These
priorities will be the road for materializing the major growth opportunities
through broadband services provided to corporations and individuals.


And they will reinforce our functioning as a unique enterprise with companies
focused on meeting the needs of different segments of customers with areas of
resources shared by all.




IN SUMMARY...


We are delighted with the financial results obtained during a difficult year,
and this is the fruit of the management efforts that have been made, and which
make Telefonica a company that is structurally better prepared to confront the
future.


We are confident that we shall attain the ambitious objectives that have been
marked out for us by our President.


Last year, we assured you that the management team would do its best to turn our
aspirations into realities. And that's precisely what it did. Today, once again,
we reiterate to you our total commitment to attain the objectives outlined here.


Thank you very much.



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