Stake in Telecom Italia

Telefonica SA
03 May 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


Pursuant to the notice filed in April 28th in relation to TELEFONICA's
indirect holding in the share capital of TELECOM ITALIA, it is hereby reported
additional information with regard to this transaction, which is similar to that
filed with the supervisory authority in the Italian securities market, CONSOB,
by the Italian partners of TELEFONICA for this transaction -ASSICURAZIONI
GENERALI, INTESA SANPAOLO, MEDIOBANCA and SINTONIA S.A. (BENETTON Group)- :


-      TELEFONICA confirms that its pre-emptive right on the TELCO shares
held by abovementioned Italian shareholders will be subordinated to the
pre-emptive rights in favour of the latter. Furthermore, Italian shareholders,
before TELEFONICA may exercise its pre-emptive right, may indicate new
primary Italian investors, for whom TELEFONICA's approval is provided for.



-      Furthermore, it is hereby confirmed that the governance of TELCO will
be articulated according to proportionality criteria; it sets forth qualified
majorities- the achievement of which implies also the assent of TELEFONICA-
for certain specific, particularly significant transactions, among which those
which may change the shareholder structure (spin-offs, mergers and reserved
increases in share capital); should such qualified majorities not be reached, a
'deadlock' will occur and the relative resolutions will be taken with the
majority of votes, without prejudice to the right of dissenting shareholders to
exit the shareholder base of TELCO via the relevant spin- off.



A qualified majority is also required for the determination of TELCO's dividend
policy (and not of the dividend policy of the TELECOM ITALIA Group) which if not
reached will not cause a 'deadlock'.



If TELECOM ITALIA intended making divestments abroad exceeding 4 billion euro or
closing significant strategic alliances with telecom players, TELEFONICA, if
dissenting, will have the right to exit the shareholder base of TELCO via the
relevant spin- off.


-      As concerns the price for OLIMPIA's entire share capital indicated in
4.1 billion euro, it is confirmed that such price is provisional since OLIMPIA's
net financial position must be considered at the date of the closing of the
transaction, which, as already disclosed, will occur after the authorisations
and approvals of the competent authorities.



Lastly, the stakes in the capital of TELCO as a result of the transaction will
be the following: ASSICURAZIONI GENERALI 28.1%, INTESA SANPAOLO 10.6%,
MEDIOBANCA 10.6%, SINTONIA, S.A. (BENETTON Group) 8.4% and TELEFONICA, 42.3%.


Madrid, May 2nd, 2007


                      This information is provided by RNS
            The company news service from the London Stock Exchange