Clarification Final Results

Telefonica SA
15 April 2002



 INFORMATION REQUESTED BY THE SPANISH NATIONAL SECURITIES AND MARKET COMMISSION
REGARDING 2001 TELEFONICA, S.A.'S INDIVIDUAL ANNUAL ACCOUNTS AND THE TELEFONICA
                      GROUP'S CONSOLIDATED ANNUAL ACCOUNTS


In answer to the request made by the Spanish National Securities and Market
Commission regarding certain information included in Telefonica, S.A 's
individual annual accounts and the Telefonica Group's consolidated annual
accounts, corresponding to the fiscal year that closed at December 31st, 2001,
Telefonica, S.A informs that:


1. Uncertainty expressed in the audit reports on the annual accounts in relation
   with the Telefonica Group's investment in Argentina.


    The audit reports on Telefonica, S.A.'s annual accounts and those of the
    Telefonica Group include a degree of uncertainty regarding the impact that
    certain events could have on the investments held by the Group in Argentina.


    It should be underlined that the qualified opinion issued by the auditors
    corresponds to the uncertainty and is not a question of an error or a breach
    of the generally recognised accounting principles and norms. That is to say,
    the Telefonica Group's annual accounts do not need to include any
    adjustments to the provisions made, neither do they require the registering
    of additional provisions to cover events that have arisen and have not been
    previously considered.


    Therefore, the uncertainty expressed by the auditor reflects the existence
    of a situation whose final outcome cannot be foreseen at the date of the
    auditors'issuing of the report, as this depends on the evolution of the
    situation. As a consequence, the Telefonica Group is unable to form a
    feasible opinion as to what degree, if this should be the case, the annual
    accounts should be adjusted.

    Therefore, the Telefonica Group, and this is also the conclusion reached by
    the the auditors, neither had, nor currently have, any possibility of making
    a reasonable estimate, be it specifically or globally, neither is it
    possible to include in the annual accounts the effect of the aforementioned
    currency forecasts, as these items depend on future events whose outcome is
    unforeseeable.


    In order to draw up the annual accounts for fiscal 2001, the Telefonica
    Group carried out a thorough analysis, including all the necessary tasks, in
    order to quantify and register all those provisions deemed necessary
    applying the information provided, the events that had taken place to date
    and the accounting norms in force, which included the announcement made by
    the Institute for the Accounting and Auditing of Accounts (Instituto de
    Contabilidad y Auditoria de Cuentas). This analysis, which was subsequently
    audited, studied the solvency of assets, evaluated the viability of
    investments and analysed the degree to which the goodwill could be
    recovered, etc. Nevertheless, as we have mentioned before, events that could
    take place in the future cannot to objectively assessed and these may, as
    the auditors have stated, affect the annual accounts for fiscal 2001.


    The Group, and its auditors, assessed, applying prudent criteria, the
    provisions needed to cover the investments made in Argentina at December
    31st, 2001, at all times considering the sustaining of the businesses
    managed by the participated companies, and in a situation in which, despite
    the outcome of unforeseen future events, further provisions could be deemed
    excessive or even unnecessary. The auditor draws a similar conclusion
    stating in the report a certain degree of uncertainty and stating that no
    errors or breaches in accounting principles exist.


    Finally, with an aim to reflecting the highest degree of transparency, the
    Telefonica Group's consolidated annual accounts for fiscal 2001 set forth
    all the relevant information on the items that this letter outlines. The
    information provides a detailed breakdown of the effect the devaluation of
    the Argentinian peso has had on the consolidated annual accounts, as well as
    the effect of this on fiscal 2002 depending on the latest exchange rate
    registered for this currency prior to the drawing up of this information.


 2. UMTS licences


    The table below provides a breakdown of the Telefonica Group companies that
    have acquired UMTS licences, along with the amount paid for each licence.


                 Companies               Million euros      Telefonica Group's             Country
                                                            proportional stake
    Group 3G UMTS Holding GmbH            8,471.0               4,491.3                    Germany
    3G Mobile Telecommunications GmbH       117.0                 108.5                    Austria
    3G Mobile AG                             32.5                  30.1                Switzerland


    The companies mentioned above are registered in the Telefonica Group's
    consolidated accounts applying the global integration method. Likewise, the
    Group holds a stake in the Italian company Ipse 2000, S.p.A. whose UMTS
    licence carried an acquisition price of Euros 3,269 million (Euros 1,514.9
    million for the Telefonica Group's proportional stake), and is valued
    applying the equity method.


    Whatever the case, Telefonica will provide information on any change in
    value that could take place during the updating of the business plans for
    the UMTS licences, and this will be announced through its quarterly and
    six-monthly publications.

 3. Companies whose equity is lower than half its share capital.


        The Telefonica Group's consolidated annual accounts corresponding to
        fiscal 2001, reflect the existence of several companies that at December
        31st, 2001 registered equity which was lower that half the share
        capital. This is a temporary circumstance that often occurs in large
        corporations.


        These companies are referred to individually in Annex I of the
        Telefonica Group's consolidated annual accounts and its Management
        Report.


        These companies should be analysed, dividing them into different groups,
        whithin each of which the situations are comparable.



 a. companies that are being wound up, and that the result of this process solely
    depends on the finalising of the pertinent legal procedures. Any material
    effect these companies may have on the Group's results has already been duly
    registered.


 b. Companies that are non- active and do not have personnel, regarding which the
    decision to initiate the winding up process has already been taken. In the
    same way as those mentioned in the previous paragraph, any material effect
    on the Group's result has already been duly registered.


 c. Companies whose size is irrelevante within the Telefonica Group (companies
    whose total figure for shareholders'equity is below Euros 2 million)


 d. Foreign companies whose local legislation sets forth that if their
    shareholders'equity is below half their share capital, their net worth is
    not considered to be unstable therefore, legally speaking, no action is
    needed to re- establish the balance.


 e. Companies whose net worth has regained a balanced position at the date of
    this document.


 f. Companies whose operating losses have reflected the shareholder equity
    situation previously described and whose net worth balance will be duly re-
    established within the legal periods imposed to this effect, be this through
    financing or the capitalisation of loans or any other way deemed necessary.


        In order to provide some idea as to the relevance of all the companies
        referred to in Annex 1 of the Annual Report, twenty companies represent
        93 percent of the total figure for the share capital of this group of
        companies.


        Excluding the Group's companies in Argentina, due to the situation
        previously mentioned, to date only two of these companies reflect the
        need to re- establish the balance of their net worth, which is foreseen
        to occur in the near future. The economic amount of the necessary
        contribution for the aforementioned re-establishment represents 0.27% of
        the Telefonica, S.A.'s consolidated equity.


                                                        Madrid, April 15th, 2002




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