Disclosures required

Telefonica SA
17 March 2008


DISCLOSURES REQUIRED UNDER ARTICLE 116.BIS OF THE SPANISH SECURITIES MARKET LAW


In accordance with section 116.bis of 'Ley 24/1988, de 28 de julio, del Mercado
de Valores' (Spanish Securities Markets Act), the Board of Directors of
Telefonica, S.A. has approved, in its meeting held on 27 February 2008, to make
available to Shareholders this Report regarding the matters that have been
included, pursuant to the aforementioned provision, in the Management Reports
that accompany the Annual Accounts of Telefonica, S.A. and its Consolidated
Group of Companies with respect to Fiscal Year 2007:

 a. Capital structure.

    At December 31, 2007, the share capital of Telefonica, S.A. was
    4,773,496,485 euros, represented by 4,773,496,485 fully paid ordinary shares
    of a single series, par value of 1 euro each, all recorded under the
    book-entry system and traded on the Spanish electronic trading system
    ('Continuous Markets') where they form part of the Ibex 35 index), on the
    four Spanish stock exchanges (Madrid, Barcelona, Valencia and Bilbao) and
    listed on the New York, London, Paris, Frankfurt, Tokyo, Buenos Aires, Sao
    Paulo and Lima Stock Exchanges. In October 2007, Telefonica, S.A. began
    taking steps to delist its shares from the Paris and Frankfurt stock
    exchanges. This will take place in the first quarter of 2008.

    At the time of writing, Telefonica, S.A. has no securities in issue that are
    convertible into Telefonica, S.A. shares.

 b. Restrictions on the transfer of securities.

    Nothing in the Company bylaws imposes any restriction or limitation on the
    free transfer of Telefonica, S.A. shares.

 c. Major shareholdings.

    The table below lists shareholders who, at December 31, 2007, to the best of
    the Company's knowledge, had significant direct or indirect shareholdings in
    the Company as defined in Royal Decree 1362/2007 implementing the Spanish
    Securities Markets Law 24/1998 as it relates to the need for transparent
    information on issuers whose securities are listed for trading in an
    official secondary market or other regulated market of the European Union':


                                 Total                Direct shareholding         Indirect shareholding
                          %           Shares           %          Shares           %            Shares

    BBVA (1)            6.258       298,717,001      6.257      298,699,855      0.000          17,146
    la Caixa (2)        5.483       261,746,565      0.002        102,233        5.481       261,644,332

        (1) Based on the information contained in Banco Bilbao Vizcaya
        Argentaria, S.A.'s Annual Report on Corporate Governance at December 31,
        2007.

        (2) Based on information provided by Caja de Ahorros y Pensiones de
        Barcelona, 'la Caixa' as at December 31, 2007 for the 2007 Annual Report
        on Corporate Governance. The 5.481% indirect shareholding in Telefonica,
        S.A. Telefonica Group's is owned by Criteria CaixaCorp, S.A.

 d. Restrictions on voting rights.

    According to Article 21 of the Company's bylaws no shareholder can exercise
    votes in respect of more than 10 per cent of the total shares with voting
    rights outstanding at any time, irrespective of the number of shares they
    may own. This restriction on the maximum number of votes that each
    shareholder can cast refers solely to shares owned by the shareholder
    concerned and cast on their own behalf. It does not include additional votes
    cast on behalf of other shareholders who may have appointed them as proxy,
    who are themselves likewise restricted by the 10 per cent voting ceiling.

    The 10 per cent limit described above also applies to the number of votes
    that can be cast either jointly or separately by two or more legal entity
    shareholders belonging to the same corporate group and to the number of
    votes that may be cast altogether by an individual or legal entity
    shareholder and any entity or entities that they directly or indirectly
    control and which are also shareholders.

 e. Shareholder pacts.

    Telefonica, S.A. has received no communication notifying the existence of
    shareholder pacts that affect the exercise of voting rights at Shareholders'
    Meetings or that impose restrictions or conditions on the free transfer of
    Telefonica, S.A. shares.

 f. Rules governing the appointment and replacement of Directors and the
    amendment of the Company's bylaws.

    Appointment, reappointment and ratification.

    Telefonica, S.A.'s bylaws state that the Board of Directors shall have
    between five and twenty Directors who are appointed by shareholders at the
    Shareholders' Meeting. The Board of Directors may, in accordance with the
    Spanish Corporation Law and the Company bylaws, provisionally co-opt
    Directors to fill any vacant seats.

    The appointment of Directors to Telefonica, S.A. is as a general rule
    submitted for approval to the Shareholders' Meeting. Only in certain
    circumstances, when seats fall vacant after the conclusion of the General
    Meeting is it therefore necessary to co-opt Directors onto the board in
    accordance with the Spanish Corporation Law. Any such co-opted appointment
    is then ratified at the next Shareholders' Meeting.

    Also, in all cases, proposals to appoint Directors must follow the
    procedures set out in the Company's Board of Directors' Rules and be
    preceded by the appropriate favorable report by the Appointments,
    Compensation and Good Governance Committee and in the case of independent
    Directors, by the corresponding proposal by the committee.

    Therefore, in exercise of the powers delegated to it, the Appointments,
    Compensation and Good Governance Committee must report, based on criteria of
    objectivity and the best interests of the company, on proposals to appoint,
    re-appoint or remove Company Directors, taking into account the skills,
    knowledge and experience required of candidates to fill the vacancies.

    As a result, in accordance with its Rules, the Board of Directors,
    exercising the rights to co-opt and propose appointments to the
    Shareholders' Meeting, shall ensure that external or non-executive Directors
    are in an ample majority over the executive Directors. Similarly, it shall
    ensure that independent Directors make up at least one third of the total
    Board members.

    In all circumstances, where a Director is proposed to the Shareholders'
    Meeting for reappointment or ratification, the report of the Appointments,
    Compensation and Good Governance Committee, or in the case of independent
    Directors the proposal of this committee, shall include an assessment of the
    Director's past work and diligence in discharge of their duties during their
    period in office.

    Also, both the Board of Directors and the Appointments, Compensation and
    Good Governance Committee shall ensure, in fulfilling their respective
    duties, that all those proposed for appointment as Directors should be
    persons of acknowledged solvency, competence and experience who are willing
    to devote the time and effort necessary to the discharge of their functions,
    with particular attention paid to the selection of independent Directors.

    Directors are appointed for a period of five years, renewable for one or
    more subsequent five-year periods.

    As with appointments, proposals for the reappointment of Directors must be
    preceded by the corresponding report by the Appointments, Compensation and
    Good Governance Committee, and in the case of independent Directors by the
    corresponding proposal by the committee.

    Termination of appointment or removal.

    Directors' appointments shall end at the expiry of the period for which they
    were appointed or when shareholders at the General Shareholders' Meeting so
    decide in exercise of their powers under the law.

    Also, in accordance with Article 12 of the Board Rules, Directors must
    submit their resignation to the Board of Directors and formalize their
    resignation in the following circumstances:

         i. If they leave the executive post by virtue of which they sat on the
            Board or when the reasons for which they were appointed cease to
            apply.

        ii. If their circumstances become incompatible with their continued
            service on the Board or prohibit them from serving on the Board for
            one of the reasons specified under Spanish law.

        iii. If they are severely reprimanded by the Appointments, Compensation
            and Good Governance Committee for failure to fulfill any of their
            duties as Director.

        iv. If their continued presence on the Board could affect the credit or
            reputation of the Company in the markets or otherwise threaten the
            Company's interests.


    The Board of Directors shall not propose the termination of the appointment
    of any independent Director before the expiry of their statutory term,
    except in the event of just cause, recognized by the Board on the basis of a
    prior report submitted by the Appointments, Compensation and Good Governance
    Committee. Just cause shall be specifically understood to include cases
    where the Director has failed to fulfill their duties as Board member.

    The Board may also propose the termination of the appointments of
    independent Directors in the case of takeover bids, mergers or other similar
    corporate transactions that represent a change in the structure of the
    Company's capital.

    Amendments to the Company bylaws.

    The procedure for amending the bylaws is governed by Article 144 of the
    Spanish Corporation Law and requires any change to be approved by
    shareholders at the Shareholders' Meeting with the majorities stated in
    Article 103 of the same law. In accordance with the above, Article 14 of
    Telefonica, S.A.'s bylaws states that the power to amend Company's bylaws
    lies with shareholders acting at a General Shareholders' Meeting.


 g. Powers of Directors and, specifically, powers to issue or buy back shares.

    Powers of Directors.

    The Chairman of the Company, as Executive Chairman, is delegated all powers
    by the Board of Directors except where such delegation is prohibited by Law,
    by the Company bylaws or by the Regulations of the Board of Directors, whose
    Article 5.4 establishes the powers reserved to the Board of Directors.
    Specifically, the Board of Directors reserves the powers, inter alia, to:
    (i) approve the general policies and strategies of the Company; (ii)
    evaluate the performance of the Board of Directors, its committees and the
    Chairman; (iii) appoint senior executives, as well as the remuneration of
    directors and senior executives; and (iv) decide strategic investments.

    Meanwhile, the Chief Executive Officer has been delegated all the Board's
    powers to conduct the business and act as the senior executive for all areas
    of the Company's business, except where such delegation is prohibited by
    law, by the Company bylaws, or by the Regulations of the Board of Directors
    in its article 5.4.

    In addition, the other executive Directors are delegated the usual powers of
    representation and administration appropriate to the nature and needs of
    their roles.

    Powers to issue shares.

    At the Ordinary Shareholders' Meeting of Telefonica, S.A. on June 21, 2006,
    the Board of Directors was authorized under Article 153.1.b) of the Spanish
    Corporation Law, to increase the Company's capital by up to 2,460 million
    euros, equivalent to half the Company's subscribed and paid share capital at
    that date, one or several times within a maximum of five years of that date.
    The Board of Directors has not exercised these delegated powers to date.

    Also, at the General Shareholders' Meeting of Telefonica, S.A. on May 10,
    2007, the Board of Directors was authorized under Articles 153.1.b) and
    159.2 of the Spanish Corporation Law to issue bonds exchangeable for or
    convertible into shares in the Company, this power being exercisable one or
    several times within a maximum of five years of that date. The Board of
    Directors has not exercised this power to date.

    Powers to buy back shares.

    At the Ordinary Shareholders' Meeting of Telefonica, S.A. on May 10, 2007,
    the Board of Directors was authorized, in accordance with Articles 75 ff of
    the Spanish Corporation Law, to buy back its own shares either directly or
    via companies belonging to the Group. This authorization was granted for 18
    months from that date and includes the specific limitation that at no point
    may the nominal value of treasury shares acquired, added to the those
    already held by Telefonica, S.A. and those held by any of the subsidiaries
    that it controls, exceed five per cent of the share capital at the time of
    acquisition.

 h. Significant agreements outstanding that would come into force, be amended or
    expire in the event of a change of control following a takeover.

    The Company has no significant agreements outstanding that would come into
    force, be amended or expire in the event of a change of control following a
    takeover.

 i. Agreements between the Company and its directors, managers or employees that
    provide for compensation in the event of resignation or unfair dismissal or
    if the employment relationship should be terminated because of a takeover
    bid.

    In general, the contracts of executive directors and some managers of the
    steering committee include a clause giving them the right to receive the
    economic compensation indicated below in the event that their employment
    relationship is ended for reasons attributable to the Company and/or due to
    objective reasons such as a change of ownership. However, if the employment
    relationship is terminated for a breach attributable to the executive
    director and director, the director will not be entitled to any compensation
    whatsoever. That notwithstanding, in certain cases the termination benefit
    to be received by the executive director o director, according to their
    contract, does not meet these general criteria, but rather are based on
    other circumstances of a personal or professional nature or on when the
    contract was signed. The agreed economic compensation for the termination of
    the employment relationship, where applicable, consists of three years of
    salary plus another year based on length of service at the Company. The
    annual salary on which the indemnity is based is the director's last fixed
    salary and the average amount of the last two variable payments received by
    contract.

    Meanwhile, contracts that tie employees to the Company under a common
    employment relationship due to include indemnity clauses for the termination
    of their employment. In these cases, the employee is entitled to any
    indemnity set forth in prevailing labor legislation. This notwithstanding,
    contracts of some Company employees, depending on their level and seniority,
    as well as their personal or professional circumstances or when they signed
    their contracts, establish their right to receive compensation in the same
    cases as in he preceding paragraph, generally consisting of a year and a
    half of salary. The annual salary on which the indemnity is based is the
    last fixed salary and the average amount of the last two variable payments
    received by contract.


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