stake acquisition- TEM Mejico

Telefonica SA
22 December 2005


NOTIFICATION OF SIGNIFICANT EVENT

Telefonica, S.A., in compliance with article 82 of Law 24/1988, July 29, of the
Securities Market Law and related provisions, and in order to make public a
Notice of Corporate Action,. hereby reports the following

SIGNIFICANT EVENT

Yesterday, Telefonica Moviles, S.A. ('TEM'), subsidiary of Telefonica, S.A., and
its partner in Mexico,  Mr Alejandro Burillo Azcarraga, reached an agreement for
TEM's acquisition of 8% of Telefonica Moviles Mexico, S.A. de C.V.'s share
capital owned by Mr Burillo, thus allowing TEM to reach a 100% stake of its
Mexican subsidiary. Both parties have informed the competition authorities of
the transaction, as provided for under Mexican legislation.

This transaction allows  TEM to acquire 100% of Telefonica Moviles Mexico, S.A.
de C.V. share capital prior to its call options exercise period, that permitted
the acquisition of 4% of the share capital during third quarter of 2007 and the
remaining 4% of the share capital during third quarter  of 2008 (or 8% in the
absence of partial exercise during 2007)

This acquisition implies a disbursement for TEM of 177 thousand euros. This
transaction performed by TEM and structured thorough an exchange of Telefonica
Moviles Mexico S.A. shares for Telefonica S.A. shares allows Mr Burillo to
became shareholder of the head company of the Telefonica Group. This operation
does not imply a material increase in TEM's debt as, following the International
Accounting Standards, the minimum Group Burillo's put option exercise price was
accounted as debt and as of November 30, 2005 (counting interest earned to that
date) amounted to 153 millions euros.

The acquisition by  TEM of  8% Telefonica Moviles Mexico, S.A. de C.V., share
capital, which was already provided for under the shareholders agreement entered
into with Burillo Group in 2002, terminates those agreements, and resolves the
put and call options over Telefonica Moviles Mexico, S.A. de C.V. shares ruled
by those agreements.

Mr. Alejandro Burillo Azcarraga, will remain as a member of TEM Board of
Directors as well as linked to Telefonica Moviles Mexico, S.A. de C.V. as an
strategic advisor.

Attached find press announcement distributed to the media.


Press Release

TELEFONICA MOVILES BRINGS FORWARD THE ACQUISITION OF 100% OF ITS MEXICAN
SUBSIDIARY

•         Telefonica Moviles has reached an agreement to acquire the 8% of
Telefonica Moviles Mexico held by Alejandro Burillo, bringing forward the time
frame established by the accord between the shareholders, which set the first
date for executing the call and put options on the shares in the third quarter
of 2007.

•         Through this acquisition, Telefonica Moviles increases its stake in a
company with high growth potential and significant scope for cash flow
generation in the medium term.

•         Alejandro Burillo, Chairman of  Grupo Burillo, will become a
shareholder of Telefonica, S.A. and will continue as a member of the Board of
Directors of  Telefonica Moviles.

Madrid, 21 December 2005.- Telefonica Moviles has reached an agreement to
acquire the 8% stake of Telefonica Moviles Mexico held by its partner Alejandro
Burillo. As a result, Telefonica Moviles now owns 100% of its Mexican
subsidiary.

The transaction, which has been made known to the Mexican Anti-Trust Authority
(Cofeco), represents a cost to Telefonica Moviles of 177 million euros. It is
being carried out by Telefonica Moviles and structured via the exchange of
shares of Telefonica Moviles Mexico S.A. for shares of Telefonica S.A., so that
Alejando Burillo will become a stockholder of the parent company of the
Telefonica Group.

The operation will not involve any significant increase in Telefonica Moviles'
debt as, under International Financial Reporting Standards (IFRS), the minimum
price for Grupo Burillo's put option has been booked as debt. At 30 November
2005, calculated according to interest paid to that date, it had a value of 153
million euros.

The acquisition of 8% of Telefonica Moviles Mexico will allow Telefonica Moviles
to increase its holding in a company which has high growth potential and
significant scope for cash flow generation in the medium term, bringing forward
the dates established in the agreement made between the shareholders for this
acquisition. That agreement established the first date for executing the call
option in the third quarter of 2007 (4% stake) and the third quarter of 2008 for
the remaining 4% (or 8% if the option was not partially exercised in 2007).

The Mexican cellular market, with a penetration rate of around 43% at the close
of 2005, has significant growth potential with market consensus forecasts
suggesting that the penetration rate will be over 60% by the end of 2008 (nearly
70 million customers). The same forecasts imply that the Mexican market could
generate service revenues of over 10 billion euros in 2008.

The transaction is yet another example of the Telefonica Group's commitment to
the economy and in particular to the telecoms sector of Mexico , which the group
considers to a  strategic market.

Alejandro Burillo will stay on as Telefonica Moviles' strategic advisor in
Mexico, bringing with him his extensive knowledge of the Mexican economy. He
will also remain on Telefonica Moviles' Board of Directors.

More information in the web page: http://www.telefonicamoviles.com

Direccion de Division de Comunicacion    Tel: [phone]
Paseo de Recoletos, 7 y 9                Fax: [phone]
28004 Madrid                          
                                         e-mail: [e-mail]



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