Stock dividend-record date

Telefonica SA
28 February 2003


'TELEFONICA, S.A.', on behalf of whom and represented by Antonio Jesus Alonso
Ureba General Secretary and Secretary of the Board of Directors of this same
Company, hereby announces the following:

That yesterday, February 27th, 2003, the Prospectus corresponding to the
increase in the share capital of 'Telefonica, S.A.', to be charged to freely
disposable reserves, has been verified and registered by the Spanish National
Securities Market Commission, by which 99,157,490 new Company shares, will be
issued.

The new shares are ordinary shares of one single existing series, with a nominal
value of 1.00 Euro each, with the same rights as those Telefonica's shares
currently outstanding, and represented by book entries.The capital increase will
be made in its entirety to be charged to freely distributable reserves in the
proportion of one (1) new share for every fifty (50) currently existing shares
of the Company.

Telefonica, S.A. states its intetion to publish the corresponding official
announcement of the capital increase in the Official Gazette of the Mercantile
Register ('Boletin Oficial del Registro Mercantil' or 'BORME') of March 10th,
2003, thus Telefonica's shareholders who appear as such according to the
accounting records of the Spanish Securities Settlement and Clearance Service
('SCLV') or its member entities ('entidades adheridas') at 24:00 on this same
day will enjoy the right of free allocation of the new shares. In accordance
with this, the period for the free allocation of the new shares and for the
trading of the corresponding rights of free allocation will begin on March 11th,
2003, (working day following the publication of the aforementioned official
announcement) and will end on March 25th, 2003 .

The official announcement is the following:


                              TELEFONICA, S.A.

          Share capital increase on account of distributable reserves

In compliance with Article 158 of the Law of Corporations, it is made public
that the Standing Committee of the Board of Directors of TELEFONICA, S.A.
(hereinafter, 'TELEFONICA' or the 'Company') under the authorisation granted
in its favour by the Annual General Shareholders' Meeting of the Company held on
April 12th, 2002, resolved by way of the resolutions adopted on February 12th,
2003 to execute the resolution on the increase in the share capital of
Telefonica, S.A. to be charged to freely distributable reserves, to which C) and
D) paragraphs of point V of the Agenda of the aforementioned Shareholders'
Meeting, increasing the Company's share capital by the amount of Euros
99,157,490 through the issue of 99,157,490 new ordinary shares, which will be
freely allocated to the Company's shareholders in the proportion of one (1) new
share for every fifty (50) currently existing shares of the Company, with the
following characteristics:

Face value of the new shares: The face value of each new share will be Euro
1.00.

Form: The new shares will be represented by book entries and will be ruled by
the regulations of the Securities Market, being the Spanish Securities
Settlement and Clearance Service (hereinafter the 'SCLV') the entity in charge
of the accounting records.

Type of issue: The issue price is par value, that is to say, Euro 1.00 per
share. The issue will be completely paid-up out of distributable reserves.

No expenses or commissions will be charged by the Issuer for the allocation of
the new shares. Notwithstanding, the participating entities may apply, in
accordance with the current legislation in force, the commissions and expenses
for the allocation of the shares and for the trading of the free allocation
rights.

Balance sheet on which the operation will be based: In compliance with that
provided for in article 157.2 of the Law of Corporations, this operation will be
based on the Balance sheet approved by the Annual General Shareholders' Meeting
held on April 12th, 2002, and referred to December 31st, 2001. The said Balance
sheet was duly verified by the Company's Accounts Auditor 'Deloitte Espana,
S.L.' (previously named 'Arthur Andersen y Cia. S. Com.') on March 14th, 2002.

Free allocation rights: TELEFONICA's shareholders who appear as such
according to the accounting records of the SCLV or its member entities
('entidades adheridas') at 24:00 on the day of publication at the Official
Gazette of the Mercantil Register ('Boletin Oficial del Registro Mercantil' or
'BORME') of this announcement (March 10th, 2003), will enjoy the right of free
allocation of the new shares in the proportion of one (1) new share for every
fifty (50) held.

In order to maintain the ratio of one (1) new share for every fifty (50) old
ones held, the Company has renounced eleven (11) of the free allocation rights
derived from its treasury stock.

Period for the allocation and transfer of the rights of free allocation in the
Stock Exchange (hereinafter the 'Period of Free Allocation'):. The period for
the negotiation of the rights of free allocation on the Spanish Stock Exchanges
of Madrid, Barcelona, Bilbao and Valencia through the Automated Quotation System
('Sistema de interconexion Bursatil'), will begin on March 11th , 2003 and will
end on March 25th , 2003.

Non allocated shares: Once the period of free allocation of the new shares has
ended, the shares which are not allocated for reasons not attributable to
TELEFONICA, will be kept in deposit at the disposal of such person who may
evidence his/her rightful ownership. Once three years have elapsed from the end
of the period of free allocation, the shares which are still pending allocation
may be sold according to that provided for in article 59 of the Law of
Corporations, on behalf and at the risk of the persons concerned. The proceeds
of this sale, once the expenses of this sale and the above mentioned deposit are
deduced, shall be deposited at the disposal of the persons concerned at the Bank
of Spain ('Banco de Espana') or at the General Deposit Fund ('Caja General de
Depositos').

Disbursement: The disbursement will be made in its entirety from the disposable
reserves (specifically it will be debited to the Revaluation Reserve account
('Reserva de Revalorizacion'), coming under the name 'Revaluation of Tangible
Fixed Assets 1986' ('RVA Revalorizacion Inmovilizado Material 1986'), executed
under the provisions of article 3 of the Law of December 31st , 1945), and will
take place when the Company's competent governing body, once the period of free
allocation has ended, formally applies the reserves, in the amount of the
increase, to share capital.

Voting and economic rights: The new shares issued will entitle holders to
receive the entire amount of the dividends distributed from the time of the
ending of the free allocation period.

Issue prospectus: TELEFONICA has prepared an abridged informative prospectus,
in accordance with the requirements established under the Spanish Securities
Market Regulations, which has been verified and filed by the Spanish National
Securities Market Commission ('Comision Nacional del Mercado de Valores') on
February 27th, 2003, and is publicly available at TELEFONICA's registered
office (Gran Via 28, Madrid) and the Spanish National Securities Market
Commission.

Entities through which the allocation may be conducted: The allocation of the
new shares may be conducted through any entity member to the SCLV within the
period of free allocation.

Banco Bilbao Vizcaya Argentaria, S.A. will act as agent entity.

Listing on the Stock Exchange: The Company will apply for the listing of the
shares subject to this capital increase on the four Spanish Stock Exchanges and
on the Automated Quotation System ('Sistema de Interconexion Bursatil'- 'Mercado
Continuo'), as well as for listing on the foreign Stock Exchanges on which the
Company's shares are already traded, and their inclusion in the Stock Exchange
Automated Quotation System (SEAQ International).

Notwithstanding the foregoing, the applicable rules and regulations of the
respective countries in which the Company's shares are traded should be
considered, by virtue of the fact that the Company's shares are traded on the
stock exchanges of New York, London, Paris, Frankfurt, Tokyo, Buenos Aires,
Lima, and Sao Paulo.

                                                    Madrid, February 28th , 2003

                   The General Secretary and Secretary of the Board of Directors

                                                      Antonio Jesus Alonso Ureba



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