Strategic Alliance

Telefonica SA
4 January 2000

              AGREEMENT BETWEEN 'TELEFONICA, S.A.' AND 'HMT&F
                  INCORPORATED' ON ARGENTINEAN COMPANIES.

'Telefonica,  S.A.'  and  the  investment  fund  'Hicks, Muse, Tate & Furst
Incorporated' the core shareholder of 'Citicorp Equity Investments' -CEI-, with
its head offices in Dallas ( Texas), have reached a memorandum of understanding
to form a strategic alliance that will share out the assets of the Argentinean
companies Cointel, Cablevision and Torneos y Competencias.  This operation 
could amount to a total figure of $ US 4 billion.

In line with this agreement, Telefonica will acquire 50 per cent of Cointel's
share capital and a 50 per cent of Telefonica de Argentina, S.A.'s management
fee through the acquisition of a stake in CEI of no less that 97.5% which will 
be paid in 'Telefonica, S.A.' shares. Telefonica already holds a 50 per cent 
stake in Cointel, which, in turn, holds a 51 per cent of 'Telefonica de 
Argentina, S.A.'s' share capital.

The memorandum of understanding also includes the sale of Telefonica's stake in
the Argentinean company 'Cablevision, S.A.' which complements the agreement
finalized a few days ago by which Telefonica acquired from CEI and the Vigil
Group 70 per cent of the share capital of the Argentinean companies 'Atlantida
Comunicaciones, S.A.' (ATC0) and 'AC. Inversora, S.A.'.

The investment fund 'Hicks, Muse, Tate & Furst Incorporated' and CEI's other
shareholders will incorporate a new company that will hold a majority stake in
Cablevision, and will be the holder of the aforementioned Telefonica, S.A.
shares.

This transaction will be formalized before the end of May of this year and is
expected to be completed by third quarter 2000, as certain regulatory  and
contractual aspects must previously be fulfilled.

                                                  Madrid, January 4th, 2000.