Exchange Offer

Telefonica SA
4 July 2000


TELEFONICA, S.A. in accordance with that stated in article 82 of the Spanish
Stock Market Law and that set forth in the Circular Letter 14/1998 of the
Spanish Securities Commission of December 28th, 1998, hereby announces the
following:

                          SIGNIFICANT EVENT

          Execution of capital increase to attend exchange 
                   of Telefonica de Argentina shares

Telefonica has today executed the first of its capital increases approved by the
Extraordinary Shareholders' Meeting of February 4th, 2000, this being in order
to address the exchange of the shares of its Latin American subsidiaries on
which Telefonica has launched public tender offers.

The capital increase executed will mean the issue of 157,951,446 new Telefonica
shares, of a nominal value of 1 euro each, issued with a premium of euros 8.129
per share, to be delivered to shareholders and holders of 'American Depositary
Shares' (ADS) of Telefonica de Argentina, S.A. shares that have accepted the
exchange offer.

The distribution of the shares to the aforementioned share and ADR holders will
be completed over the next few days, once the new shares have been listed on the
Spanish stock exchanges. The shares will also be traded on the New York (as
ADS), Buenos Aires and the other exchanges on which Telefonica shares are
listed.

Madrid, July 4th 2000