Re Swap Agreement

Telefonica SA
28 November 2000

                           REPORT OF SIGNIFICANT. EVENT

Telefonica, S.A.', pursuant to the terms of section 82 of the Spanish Ley del
Mercado de Valores (Stock Market Act), hereby reports the following

                                SIGNIFICANT EVENT

Yesterday, 'Telefonica Internacional, S,A,' (TISA), a wholly owned subsidiary
of 'Telefonica, S.A', and other companies controlled by 'Portugal Telecom,
S.A.'  (PT), specifically  Portugal Telecom Investimentos SGPS, S.A., Inbrug
Investimentos y Servicos, SGPS. Lda. and Ptelecom Brasil, S.A., executed a  swap
of corporate holdings whereby:

a)  TISA has acquired the shares held directly and indirectly by PT in  the
holding  company that controls the carrier 'Telecomunicacoes de Sao  Paulo, 
S.A' (Telesp).  The shares thus acquired represent 23 percent of the share
capital of  'SP Telecomunicacoes Holding, S.A.'.

b)  PT has acquired the shares held directly and indirectly by TISA in  the
holding company that controls the carrier 'Telesp Celular, S.A.'.  The shares
thus acquired represent 35.8 percent of the share capital of 'Portelcom
Participacoes, S.A.'.

c)  In addition, TISA will pay to PT the amount of US$ 59,882,000 with the
    timing covenanted to such effect.

This transaction has been executed pursuant to a swap agreement entered into  on
19 July 2000, after having received prior authorisation  from  the  competent
Brazilian authority, ANATEL.

The transaction is framed within the Telefonica strategy of  increasing  its
equity stake in the telecommunications operators in which  it  already  holds
management control.

Madrid, 28 November 2000.


                               Jose Maria Mas Millet
                               DIRECTOR-SECRETARY