Preferred Capital Securities

Telefonica SA
05 November 2002



Miguel Escrig Melia, in representation and on behalf of the Company
TELEFONICA FINANCE USA, L.L.C. (the 'Company'), in his position as a person
authorised by the Company, and duly empowered to this effect, before the Spanish
National Stock Market Commission (Comision Nacional del Mercado de Valores -
'CNMV') hereby declares that:


I.-     On October 22, 2002, the Board of Directors of the Company, duly
authorised to this effect by virtue of the Limited Liability Company Act of the
state of Delaware in the United States of America, and by the Amended and
Restated Limited Liability Company Agreement of the Company, have resolved to
issue a maximum of 2,000,000 Preferred Capital Securities with a liquidation
preference of 1,000 euros each, in accordance with the terms and conditions
outlined below (the 'Issue').


II.-     By way of this document, by virtue of that set forth in article 26 of
the Stock Market Law 24/1988, of July 28, and in the articles 5.2. a) and 9 of
Royal Decree 291/1992, of March 27, regarding Issues and Public Securities
Offerings, the mandatory Prior Announcement has been drawn up, corresponding to
the Issue, and stating that the principal characteristics of the Issue will be
as follows:


The Issuer of the Preferred Capital Securities.


The Issuer is TELEFONICA FINANCE USA, L.L.C. formed in accordance with the
Limited Liability Company Act of the state of Delaware in the United States of
America, on June 27, 2002, with its registered office at the Corporation Trust
Center, 1209 Orange Street, City of Wilmington, New Castle County, Delaware
19801.


The Company is a controlled subsidiary of TELEFONICA, S.A. (hereinafter,
TELEFONICA), which was incorporated in order to obtain financing for the
TELEFONICA Group, through the issuance of securities in connection with the
Issue.


Nature and features of the securities offered.


The securities comprising the Issue are Preferred Capital Securities of
TELEFONICA FINANCE USA, L.L.C., with a liquidation preference of 1,000 euros
each. Their basic features are as follows:


 a. Dividends


    The Preferred Capital Securities will provide their holders the right to
    receive a variable non-cumulative preferred dividend, to be paid quarterly
    in arrears, subject to the obtainment of sufficient Distributable Profit, as
    set forth in the Spanish Prospectus (Folleto Informativo). During the period
    commencing on the date of issuance and ending on the tenth anniversary of
    the first divident payment date, the preferred dividend rate will be set at
    three- month Euribor, with a minimum of 4.25% Effective Annual Rate (Tasa
    Anual Efectiva - 'T.A.E'), and a maximum of 7% Effective Annual Rate, and
    from the tenth anniversary of the first dividend payment date onwards the
    preferred dividend rate will be three- month Euribor plus a differential of
    4% Effective Annual Rate. The first dividend is to be paid on December 30,
    2002.






 b. Political rights


    The Preferred Capital Securities will not entitle the holder to political
    rights (such as the right to attend the General Securityholders' Meeting or
    voting rights), except in exceptional cases as set forth in the Spanish
    Prospectus.



 c. Redemption


    The Preferred Capital Securities will be perpetual. Nevertheless, the
    Company will be entitled to redeem the preferred capital securities in whole
    or in part following the tenth anniversary of the first dividend payment as
    well as in certain circumstances as set forth in the Spanish Prospectus



 d. Guarantee


    TELEFONICA will guarantee, jointly and irrevocably, the payments to be
    made by the Company in the form of preferred dividends, redemption amounts,
    liquidation distributions, and any other amounts related to the Preferred
    Capital Securities, under the terms and conditions set forth in the
    guarantee document described in the Spanish Prospectus, and of which an
    annexed copy will be attached.



 e. Trading on organised secondary markets


        It is anticipated that the Company, once the Preferred Capital
        Securities have been issued, subscribed and fully paid, will apply for
        the listing of the Preferred Capital Securities in their entirety on the
        Spanish Official market AIAF (Mercado de Renta Fija).


Receivers of the Public Offering.


The Issue of the Preferred Capital Securities of the Company TELEFONICA
FINANCE USA, L.L.C. will be aimed at all types of investors. However, Preferred
Capital Securities have not been and will not be registered under the United
States Securities Act of 1933, as amended, and may not be offered or sold in the
United States, absent registration or an applicable exemption from registration
requirements


The form in which the offering will be made.


It is expected that investors may present their subscriptions for securities
within a subscription period whose duration will be set forth in the Spanish
Prospectus. These subscriptions must be presented to the underwriting and
placement entities of the Issue, and will be attended to in chronological order,
in accordance with that stated in the Spanish Prospectus.


Entities collaborating in the Public Offering.


The placing and underwriting of the Issue will be carried out by BANCO BILBAO
VIZCAYA ARGENTARIA, S.A. (BBVA) and the CAJA DE AHORROS Y PENSIONES DE BARCELONA
('La Caixa').


The entity or entities responsible for liaison and payment regarding the
securities will be set forth in the Spanish Prospectus.


By virtue of that set forth,


IT IS REQUESTED that the Spanish National Stock Market Commission accept this
Prior Announcement regarding the Issue of Preferred Capital Securities described
above, and, prior to the fulfilment of the necessary requirements, proceed to
file this document on the Commission's corresponding Register.


Madrid, November 4, 2002


P.p. TELEFONICA FINANCE USA, L.L.C.


D. Miguel Escrig Melia





Restrictions



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 be unlawful prior to
registration or qualification under the securities laws of such jurisdiction.



Neither this communication nor any copy hereof may be distributed, directly or
indirectly, in or from the United States or to any U.S. person. Any failure to
comply with this restriction may constitute a violation of U.S. securities laws.
This document does not constitute an offer or invitation to purchase or
subscribe for any securities and neither this document nor anything contained
herein shall form the basis of or be relied upon in connection with any contract
or commitment whatsoever. The securities have not been and will not be
registered under the United States Securities Act of 1933, as amended, and may
not be offered or sold in the United States absent registration or an applicable
exemption from registration requirements.



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