Re Agreement

Telefonica SA
5 December 2000


An agreement has been signed with union representatives

TELEFONICA DE ESPANA MODIFIES THE CONDITIONS OF ITS INCENTIVE-BASED 
STREAMLINING PROGRAMME

The management of Telefonica de Espana has reached an agreement with union
representatives by which economic modifications are to be introduced in the
Incentive-based Streamlining Programme, included in the ERE (Expediente de
Regulacion de Empleo) Social Plan, the streamlining programme followed by
the Company.  The ERE, which was introduced in 1999, will close on December
31st of this year.  The modifications introduced aim to make this Plan more
attractive and to achieve the target of 10,849 fewer employees set forth in
the aforementioned Programme.

The agreement reached contains two basic points:

1. Improve economic conditions offered by Incentive-based Streamlining
   Programme

2. Guarantee the employment for the year 2001

The ERE has represented for Telefonica de Espana a significant effort in
order to comply with conditions imposed by the liberalization of the sector
now placing it as one of the most productive companies in the world (446
lines per employee).