CMT Resolutions

Telefonica SA
26 July 2002




                           JOAQUIN DE FUENTES BARDAJI

                             General Vicesecretary

                  and Vicesecretary of the Board of Directors

                              TELEFONICA, S.A.



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


                                   SIGNIFICANT EVENT


The Spanish Telecommunications Market Commission (Comision del Mercado de
las Telecomunicaciones) has informed Telefonica de Espana, S.A.U., a 100%-owned
subsidiary of Telefonica, S.A., of the resolutions adopted by its Board
regarding the two proceedings underway against this subsidiary.


On the one hand, the resolution relating to proceeding no. AJ 2001/5318, of July
23, 2002, declares Telefonica de Espana responsible for having breached the
Spanish Telecommunications Market Commission Board resolution which resolves the
interconnection conflict between the aforementioned company and Colt Telecom,
applying the OIR 2000 prices to the General Interconnection Agreement (Acuerdo
General de Interconexion) in force between both parties. The Board of the
Spanish Telecommunications Market Commission has decided to impose a 4,500,000
euro sanction on Telefonica de Espana.


On the other hand, the resolution relating to proceeding no. AJ 2002/5952, of
July 23, 2002, declares Telefonica de Espana responsible for having infringed
the regulations on Closed User Groups (Grupo Cerrado de Usuarios) and imposes a
fine of 18,000,000 euros.


     Both resolutions will be appealed by Telefonica de Espana, S.A.U.



                                                          Madrid, July 26, 2002.




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