Merger, etc

Telefonica SA
20 June 2000


ACE A-TELFONICA MERGES IN ITALY WITH FIAT UNIT TELEXIS

*  Agreement marks another stage in the expansion of Telefonica Data in Europe.

*  Telefonica will have management control of the merged company.

Madrid, 20 June 2000 - ACE A-Telefonica SpA, the affiliate of the Telefonica
Group in Italy, today announced its intention to merge with Telexis, a member of
the FIAT Group, forming a new company which will offer a  complete  range  of
services to business and residential customers throughout the country.
particularly in Internet services.

The transaction involves an investment of 105 million euros by Telefonica Data,
ACE A-Telefonica will bring to the new company its fiber optic network in Rome,
while  Telexis will provide a broad client base (consisting of companies in  the
FIAT Group), experienced personnel and a nationwide high-speed backbone network.

The equity structure of the new company will be as follows: Telefonica Data,
34%; ACEA, 33% and FIAT-IFIL, 33%. Telefonica will have management control of
the merged company, with a majority representation on the board of directors and
will appoint the Chief Executive Officer. The president and vice-president of
the company will be named every three years, in alternation, by ACEA and
FIAT-IFIL

The  three  partners intend to hold an initial public offering of shares in  the
company after 12 months from the signing of the agreement, providing  market
conditions permit it.

Today's  agreement  follows Telefonica Data's acquisition of mediaWays, from 
the Bertelsmann Group last June 5. Both deals are part of the expansion strategy
of the Telefonica Group in  Europe. The operation in Germany will  serve as a
platform for Telefonica Data en Central Europe, while the one announced, today
marks the creation of another platform, this one in Southern Europe, for the
company's data transmission and internet business, as well as other value-added
services for companies.

'The  merger of ACE A-Telefonica with Telexis, the telecommunications company 
of the FIAT Group, raises the commitment of Telefonica to become a leader in 
the telecommunications sector in Italy,' said Antonio Viana-Baptista,  president
of Telefonica Data.  'With  this  deal, we are combining  our  experience in
telecommunications around the world with the knowledge of the  Italian market
held by Telexis, which has over 1.100 business clients, and by ACE A.'

Telefonica Data, a Telefonica Group company, is a leader in providing global
telecommunications services for business. It offers data transmission and
Internet services, telephony and voice over IP, Internet-based  information 
services, advanced client solutions and satellite services.