Differences Spanish - US GAAP

Telefonica SA
9 July 2002



                            ANTONIO J. ALONSO UREBA

                          Director, General Secretary

                    and Secretary 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 announces the following.


                               SIGNIFICANT EVENT

Due to the importance placed by the media on the registering of Telefonica's
financial statements in accordance with American generally accepted accounting
principles (US GAAP) Telefonica would like to state the following:


 1. That the U.S. Securities and Exchange Commission, in accordance with its
    rules and regulations, requires all foreign companies quoted on its markets,
    to submit their financial statements (balance sheet, statement of income,
    and source and application of funds) applying US generally accepted
    accounting principles (US GAAP)


 2. Due to the differences between Spanish generally accepted accounting
    principles and US GAAP, certain divergences frequently arise. These may
    affect items set forth in the balance sheet as well as those in the income
    statement.


 3. In this particular case, the difference between the Spanish statement of
    income, and the one which is reconciled with US GAAP, lies principally in
    the impairment charge to goodwill related to certain companies (Endemol,
    Lycos, etc.) recorded under US GAAP.


    This goodwill does not exist under Spanish generally accepted accounting
    principles, and therefore such impairment is not required.


    It should also be noted that in this respect no change or correction in
    accounting principles has been made for the fiscal year 2001.


 4. It must also be highlighted that the Telefonica Group's stockholders' equity
    at 31/12/01, under US GAAP and therefore including the aforementioned
    impairment, amounted to Euros 31,770 million compared with Euros 25,862
    million recorded under Spanish generally accepted accounting principles.


 5. The document which includes the information required by the SEC, and
    therefore applies US GAAP ('20 F'), was sent to the Spanish Securities
    Commission on July 2nd and has been available to shareholders and to the
    general public at Telefonica's internet web sites since July 3rd.


                                                          Madrid, July 9th, 2002



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