Preliminary contacts Pirelli

Telefonica SA
12 February 2007


As provided in article 82 of the Spanish Stock Market Act (Ley del Mercado de
Valores), TELEFONICA, S.A  hereby reports the following


SIGNIFICANT EVENT


With regard to the communication sent to the Commissione Nazionale per le
Societa e la Borsa (CONSOB) by PIRELLI & C. S.p.A., TELEFONICA, S.A. states
the following:


-  TELEFONICA, S.A. has been offered the possibility of acquiring a
   minority stake in the capital of the Italian corporation OLIMPIA S.p.A., 
   which is the major shareholder of TELECOM ITALIA.



-  Preliminary contacts have been maintained with PIRELLI, which is the major 
   shareholder of the aforementioned company.



-   No agreement has been reached with PIRELLI in relation to this possible
    investment, its terms or possible conditions.


In any case, TELEFONICA, S.A. confirms its financial commitments with respect
to its investments and acquisitions publicly stated at the Investors Conference
held in Valencia, in May 2006.


Madrid,  February 12th, 2007.


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