Stmnt re 2nd Capital Increase

Telefonica SA
25 January 2001


'TELEFONICA, S.A.', in accordance with that stated in article 82 of the Spanish
Stock Market Law, hereby announces the following.

                              SIGNIFICANT EVENT

The Board of Directors of 'Telefonica, SA.', on its meeting held today, has
resolved to execute the second capital increase on the Company's share capital,
to be charged to freely disposable reserves, as approved by the Annual
Shareholders' Meeting of April 7th, 2000, through the issuance and listing of
new ordinary Company shares, of the same series and carrying the same rights as
those currently outstanding, with a nominal value of one euro each, and of an
amount equal to 2 per cent of the Company's share capital.

This capital increase shall be effected wholly subject to the conditions
established in the resolution corresponding to point V, paragraphs  D), E) and
F), of the agenda of the Annual General Shareholders' Meeting of April 7th,
2000, and the new shares shall be issued in accordance with the provisions of
the Securities Markets Act 24/1988 of July 28 and other pertinent regulations.

For this purpose, once the procedures established by law to satisfy the prior
legal requirements in order to execute the capital increase have been fulfilled,
the corresponding announcement shall be published in the Official Gazette of the
Mercantile Register, thus marking the start of the period of free allotment of
the new shares to whomsoever is a shareholder at the end of the day on which
this announcement is published, in the ratio of one new share for every fifty
old shares held. In order to achieve this, Company shareholders will be those
natural or juridical persons who at the close of the day immediately prior to
the date of the beginning of the aforementioned free allotment period, appear as
the holders of Company shares on the accounting registers of the member entities
of the Securities Settlement and Clearing Service.

The period of free allotment shall be fifteen days, during which time the right
to free allotment corresponding to shareholders may be exercised through any
member institution of the Securities Settlement and Clearing Service, and may
also be issued or traded under the same conditions as the shares from which they
derive.

Lastly, the new shares shall be entitled to receive the full sum of dividends
resolved to be distributed as from the date of their issue, and their admission
to official listing on the markets where the Company's shares already trade
shall be requested as soon as possible.