CapEx is brought forward

Telefonica SA
16 January 2007

Press Release


16/01/2007


                       TELEFONICA BRINGS CAPEX FORWARD
               TO MEET INCREASING DEMAND IN THE BROADBAND MARKET


  • The significant growth in the ADSL and wireless telephony businesses has
    led the Company to increase CapEx in 2006 of just under €8 billion


  • The increase in demand, as evidenced by higher than forecast growth in the
    customer base, traffic and services, has enabled the Company to raise its
    revenue growth guidance (from a range of 34%-37% to above 37%(1)) for 2006


  • Telefonica's 2009 target for broadband accesses is between 5.6 and 6.1
    million in the retail market in Spain alone, compared to the 3.4 million
    registered as of 30 September, 2006

Madrid, 16 January, 2007.-  The speed with which broadband has been developing
in Spain and Latin America and the mobile telephony coverage requirements of
Europe and Latin America have led Telefonica to bring its planned CapEx forward
in time, as part of its strategic focus on customers and their needs.
Accordingly, Telefonica plans to end 2006 with CapEx (primarily investment in
infrastructure) of just under €8 billion, an increase of over 50% on the
previous year's figure and above the CapEx forecast for 2007.

This additional CapEx corresponds primarily to greater investment in broadband
networks in Spain and Latin America in response to the need to bring higher
capacity and new services to households, triggered by higher than forecast
customer and market growth.

In addition to the investment opportunity in fixed and wireless broadband, the
reasons for bringing CapEx forward also lie with a faster roll out of third
generation networks, mainly in Germany. In order to meet growing traffic and
customer needs investments have also been made in second generation networks
(GSM) in Latin America (mainly Brazil), which have in turn translated into
higher than forecast revenues for 2006 for Telefonica Group.

At September 2006, Telefonica had 196 million customers worldwide, of which 138
million were mobile telephony customers and 7.3 million were retail broadband
users, 45% more than in the same period the year earlier. Broadband accesses in
Spain and Brazil are particularly noteworthy, standing at 3.4 million and 1.5
million, respectively. As for Latin America, the total number of broadband
accesses amounted to 3.5 million.

In Spain alone, Telefonica aims to have between 5.6 and 6.1 million retail
broadband users by 2009, compared to the 3.4 million registered as of 30
September, 2006. As part of the Telefonica Group's commitment to the development
of broadband access in its operating markets, it is worth highlighting the
announcement of investment in both fixed broadband and wireless - in Spain alone
- of €9 billion between 2006 and 2009.

                                 TELEFONICA

                          RETAIL BROADBAND CONNECTIONS


At 30 September 2006                               Millions           Yoy change, %

Total SPAIN                                          3.41                + 42.3%
Total LATIN AMERICA                                  3.47                + 43.3%
Total EUROPE                                         0.37                +103.8%

Total                                                7.2                  +45%

In line with this commitment and as part of the company's goal to remain leader
in the digital era, the effort to provide an increasing number of value added
services over broadband is noteworthy. At 30 September 2006, Telefonica de
Espana had over 2.9 million operative services, of which ADSL Solutions stands
out with over 328,967 units. Imagenio, another service that has underpinned the
spread of broadband in Spain, has over 304,000 active customers.

The investment effort by Telefonica is equally the result of its leadership
position in the overall telecommunications industry thanks to its large business
and geographical scale, which in turn enables the company to leverage the growth
opportunities provided by the sector. With its customer-centric focus,
Telefonica is seeking to make its service offering tailored, easy to use and
reliable.

One year ago, the Company announced a CapEx forecast of approximately €7.2
billion(2) . The result of the acceleration of the investment plan is to raise
this figure to an estimate of €7.700-7.750 billion2. Factoring in real exchange
rates and the consolidation of the Colombia Telecom and Iberbanda businesses
will bring the final total investment figure of just under €8 billion.


_____________________________________________________________________

DISCLAIMER

This document contains statements that constitute forward looking statements in
its general meaning and within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements appear in a number of places in this
document and include statements regarding the intent, belief or current
expectations of the customer base, estimates regarding future growth in the
different business lines and the global business, market share, financial
results and other aspects of the activity and situation relating to the Company.
The forward-looking statements in this document can be identified, in some
instances, by the use of words such as 'expects', 'anticipates', 'intends',
'believes', and similar language or the negative thereof or by forward-looking
nature of discussions of strategy, plans or intentions.

Such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and other important factors that could cause
actual developments or results to differ materially from thos expressed in our
forward looking statements.

Analysts and investors are cautioned not to place undue reliance on those
forward looking statements which speak only as of the date of this document.
Telefonica undertakes no obligation to release publicly the results of any
revisions to these forward looking statements which may be made to reflect
events and circumstances after the date of this document, including, without
limitation, changes in Telefonica's business or acquisition strategy or to
reflect the occurrence of unanticipated events. Analysts and investors are
encouraged to consult the Company's Annual Report as well as periodic filings
filed with the relevant Securities Markets Regulators, and in particular with
the Spanish Market Regulator.


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(1)  Assuming constant 2005 exchange rates and excluding changes to the
     consolidation perimeter with the exception of O2 Group (included in
     February-December 2006)


(2)  Assuming constant 2005 exchange rates and excluding changes to the
     consolidation perimeter with the exception of O2 Group (included in
     February-December 2006)


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