Real Estate Efficiency Plan

Telefonica SA
19 December 2002

PRESS RELEASE


TELEFONICA GROUP STARTS SECOND STAGE OF REAL ESTATE EFFICIENCY PLAN


  • Some 349 properties will be put up for sale in this second stage. They
    will be auctioned via internet, by phone or by participating at auction
    halls.


  • The first stage is nearing its end and sales have been made or are under
    advanced negotiation for 23 of the projected 35 offices, for prices
    approximately 7% above their appraised value, bringing in revenues of 309
    million euros.



Madrid, December 19, 2002. The Telefonica Group has started the second stage of
its real estate efficiency plan.


The first stage, covering a package of 35 properties, has resulted in sale,
executed or committed, of 19 buildings, for 258 million euros, that is, 60.8% of
the aggregate value of the 35 properties offered. The selling price obtained was
7% higher than the appraised value and the disposals have generated capital
gains of 126 million euros. In addition, the Group has nearly closed sale of
four other buildings, which, together with the 19 buildings mentioned above,
will generate the 309 million euros in revenues mentioned above (72.8% of the
total).


Total sale of this package of 35 properties will generate capital gains of 167
million euros.


The second stage, whose implementation has begun in the current month of
December, will put on the market some 341 smaller sized buildings, distributed
throughout Spain, for 387 million euros. The sale of this new package of
buildings is expected to conclude in April 2003.


This operation is part of the efficiency plan being pursued by the Telefonica
Group with its real estate assets. The main goals of the plan are to use areas
freed up by technological advances in telephone switching exchanges,
construction of the Ciudad de las Telecomunicaciones ('Telecommunications City')
and sale of the buildings rendered unnecessary as a result of the efficiency
plan.


Internet auction of buildings


The main novelty in the marketing of this second package of buildings is that
prospective buyers, in addition to making direct purchases or visiting the
auction halls personally, will also have the option of executing the purchase by
telephone or placing bids via internet. This will be the largest internet
auction to date.


Servihabitat is the firm commissioned to market and auction the buildings.
Atento will manage the telephone sales, Adquira and Atrea (all are Telefonica
Group companies) will provide technological support and also collaborate in the
internet sale of this package of buildings. The process will therefore employ
the Group's technological capabilities to foster the use of electronic real
estate markets.


Persons interested in purchasing any of the buildings offered should register
via internet by visiting www.servihabitat.com/telefonica or request the
registration form by calling (34) 902 25 75 25. In addition, a deposit must be
posted equal to 2% of the base price of the properties for which the bidder
wants to bid. The deposit made in respect of properties that are not awarded
shall be refunded in 10 days. Deposits for properties that are awarded will be
maintained pending full payment of the final price.


The final, non-renewable time limit for registering and making the deposit ends
on March 14, 2003 for telephone or internet bidders and March 21, 2003 for
bidders who choose to participate at the auction hall.


During the period prior to the auction, Inmobiliaria Telefonica may sell a
property if the price offered is above the base price and the sale is considered
sufficiently interesting. It may also add or withdraw buildings from the sale
process.


General information on each building can be obtained at the www.servihabitat.com
/telefonica web page, and interested parties can obtain more detailed
information and arrange appointments to visit the properties by calling (34) 902
25 75 25.



The Telefonica Real Estate Efficiency Plan


The Telefonica Group has real estate assets comprising 6.48 million square
meters (sqm), some 3.87 million sqm of which are in Spain.


Technological advances, regulatory changes and the evolution of the Group
workforce are allowing, thanks to a unified central management, space to be
freed up, with a potential for 1.17 million sqm of free space in five years. The
real estate asset disposal plan involves this space.


The efficiency is achieved by means of important efforts to streamline the space
used for the network, management activities and industrial operations, and by
means of the creation of the Ciudad de las Comunicaciones. These rationalization
initiatives involve concentrating switching exchange equipment, implementing new
concepts of work positions and new logistics and commercial models and building
more efficient spaces, which allows space to be freed up for sale in the market.


The result of the efficiency plan is materialized through strict property sales,
involving no medium or long-term leases. The Group expects to obtain 995 million
euros-the difference between the building sale prices plus the savings in rent
and maintenance expenses, on the one hand, and the cost of building the Ciudad
de las Comunicaciones and executing the efficiency plan, on the other. The
disposals do not entail undertakings for long-term leases.

                         DISTRIBUTION BY TYPE OF BUILDING TO BE AUCTIONED
                                   OR SOLD IN THE SECOND STAGE

                                  Num. Buildings           Built Area (sqm)           Auction Price (euros)

COMMERCIAL                                  103                     70,661                       92,967,670

INDUSTRIAL                                   89                    179,357                      119,282,180

OFFICES                                      80                    120,143                      151,386,682

RESIDENTIAL                                  39                     20,145                       17,919,755

OTHER USES                                   38                     11,273                        6,246,771

TOTAL                                       349                    401,579                      387,803,058



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