non- cash distribution

Telefonica SA
10 June 2005




Telefonica S.A., as provided in article 82 of the Spanish Stock Market Act (Ley
del Mercado de Valores), hereby reports:


Pursuant to the resolution adopted by the Annual General Shareholders' Meeting
of Telefonica, S.A. held on May 31st, 2005 regarding the extraordinary non-cash
distribution of additional paid-in capital by means of delivery to Telefonica,
S.A. shareholders of shares representing the capital stock held as treasury
stock in the proportion of one (1) share to every twenty- five (25) shares they
hold entitled to participated in the distribution, we hereby inform all
shareholders that the distribution, in accordance with the aforesaid General
Meeting resolution, will be made as follows:



•  Shareholders entitled to participate in the distribution. The right to
   receive the non-cash refund of the additional paid- in capital will accrue to
   anyone who, under Spanish law, has Telefonica, S.A. shareholder status at the
   end of the day on June 20th, 2005.



•  Settlement of fractions: Telefonica, S.A. shareholders who own a
   number of shares in excess of a multiple of 25 or that do not reach 25 
   ('Fractions'), and taking into account that for those Fractions they would 
   not be able to receive a share of Telefonica, S.A. but only fractions of a 
   share, will receive a cash amount equivalent to those fractions of a 
   Telefonica, S.A. share ('Compensation for Fractions')


For this purpose, the value of the Compensation for Fractions will be determined
according to the arithmetic mean of the weighted average prices of the
Telefonica, S.A. share in the Spanish interconnected stock market system ('
Mercado Continuo') on days 21, 22 and 23 of June 2005.



•  Agent for the distribution and for Fractions: 'Banco Bilbao Vizcaya
   Argentaria' (BBVA) shall act as Agent for the distribution and as Fractions
   Agent, and shall be responsible for coordinating and carrying out with the
   Spanish securities registrar, clearing and settlement company (IBERCLEAR- 
   'Sociedad de Gestion de los Sistemas de Registro, Compensacion y Liquidacion 
   de Valores') and its participating entities, the arrangements and operations
   necessary for implementing the distribution of the Additional Paid-in capital
   Reserve.



•  Delivery date: The delivery of the shares and of the Compensation for
   Fractions as may apply, will be done within five stock market trading days from
   June 24th, 2005.

Madrid, June 10th, 2005


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