New Internal Code of Conduct

Telefonica SA
07 November 2002




The Board of Directors has approved a new Internal Code of Conduct and its
corresponding Compliance Program


TELEFONICA IMPLEMENTS NEW GOOD GOVERNANCE PRACTICES

At its meeting held on October 30, the Board of Directors of Telefonica, S.A.
approved a new Internal Code of Conduct that amends and supplements the one
currently in force from June 24, 1998, a clear demonstration of the Company's
interest in adopting best practices for Good Governance.


The new Internal Code of Conduct is a Code of Ethics for Telefonica management
and employees, governing all areas relating to the securities markets, and is
intended to strengthen controls over confidential activities and situations
involving conflicts of interest, in addition to adapting the regulation to the
Group's new structure, which currently has new lines of activity and a larger
number of traded companies.


The Code of Conduct refers both to personal trades by management and members of
the Telefonica Board of Directors, as well as to the treatment of confidential
information and notification of conflicts of interest.


To ensure compliance with this new code of conduct, the Board of Directors has
also approved the creation of a Committee, comprising five of the Company's
General Directors, and a Compliance Unit, responsible for ensuring the proper
application of this internal Code.


With the approval of this new Internal Code of Conduct, Telefonica has taken a
further step in adopting new practices for Good Governance, according to the
most recent recommendations of the New York Stock Exchange Corporation (NYSE),
which last June made public the conclusions of an extensive study that had been
performed in order to recommend to listed companies Corporate Governance
practices applying to management ethics and transparency.


Even before implementing this recommendation, last June 26 the Telefonica Board
of Directors had already approved a reorganization of its Committees, assigning
the new Good Governance responsibilities to the Appointments and Compensation
Committee and providing for new membership on all Board Committees, which are
henceforth to consist of non-executive Directors.




Madrid, November 7, 2002


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