Telefonica Earns 3,593 Million Euros Through June, Leaving It on Track to Meet All...

Telefonica Earns 3,593 Million Euros Through June, Leaving It on Track to Meet All Its 2008 Targets

The healthy results for the first half of the year underscore the
company's favourable business growth and reflect its strong
leadership, the importance of the diversification and integration of
its operations, and its proven ability to execute the strategy it has
laid out
MADRID--(Business Wire)--

Stripping out the impact of capital gains, net profit rose 29%
year-on-year and EPS by 32.1% to 0.767 euros. The company has
allocated 2,993 million euros to shareholder remuneration.

-- Results for the first half of 2008 were in line with the
growth targets for both the Group as a whole and for the
different geographic areas (Spain, rest of Europe, and Latin
America), leaving it on track to meet the financial targets
announced for 2008.

-- Telefonica (NYSE:TEF) (LSE:TDE) posted strong growth in
accesses across all of its business lines and regions and the
total now exceeds 245 million (+15.2%). The Company ended June
with 47 million accesses in Spain and 148 million in Latin
America, while its customer base in Europe stood at 43
million.

-- Organic growth in revenue remained at a healthy 6.7%, thanks
to the value contributed by the Company's geographic and
business diversification. Regionally, operations in Latin
America showed strong momentum, with a 12.2% increase, while
in Spain and Europe the operator continued to set itself
apart, with 2.1% and 6.2% growth, respectively.

-- Organic growth in OIBDA and operating income (OI) accelerated
sharply in the first half of the year, to 12% and 24%,
respectively.

-- Figures highlighted Telefonica's strong financial position,
with the Company reducing debt by 1,311 million euros since
December and leaving a net financial debt plus
commitments/OIBDA ratio of 2.2x, in line with the Company's
goals.

-- Cash generation also gathered pace, with operating cash flow
(OIBDA-CapEx) rising by 13.1% to 7,673 million euros.

-- Year-on-year variations are skewed by the extraordinary income
obtained in 2007 from divestments, the impact of exchange
rates and changes to the consolidation scope. If the effects
of these variations are taken into account, revenue grew 1.2%,
OIBDA fell 1.3%; operating income advanced 0.7% and net profit
dropped 6.2%.

Telefonica's results for the first half of the year show high
growth rates, extending the positive performance seen since early this
year. Once again in the second quarter, results benefited from the
Group's high geographical diversification and diversified services
mix, as well as from the Company's unique abilities, allowing it to
raise its profitability by streamlining costs and tapping synergies
stemming from the integrated management of its businesses and to set
itself apart from its peers.

In line with this favourable business performance, the Company
says it is on track to meet its financial objectives for this year,
both at the Group level and in the different geographic areas. From a
corporate standpoint, this means growth in revenue of +6/+8%, in OIBDA
of +7,5/+11% and in OI of +13/+19%. These forecasts continue to be
predicated on the comparison criteria(1 )used when the targets were
set established in February 2008.

During the first half of the year, the results for the Group and
those for Spain, Latin America and Europe have been affected, to
varying degrees, by exchange rates, changes in the consolidation scope
(Telemig and TVA in Latin America, and Airwave and Endemol in Europe),
the capital gains generated on the sales of Airwave and Sogecable, and
the change in the model applicable to public use telephony service in
Spain.

--245 million accesses--

Total accesses rose 15.2% compared to June 2007 to 245.1 million,
due to the high commercial activity recorded across markets. This
growth was underpinned by the increase in wireless (+19%), broadband
(+25.1%) and pay TV (+57.4%) accesses.

By type of access, Telefonica Group's mobile accesses stood close
to 182.7 million at the end of June, with around 15 million additional
customers (+54.3% year-on-year) in the six-month period. The main
contributors were Brazil (nearly 7 million customers, around 3 million
stripping out the incorporation of Telemig in April 2008), Mexico (1.6
million), Peru (1.3 million) and Germany (1.1 million).

Retail Internet broadband accesses stood at close to 11.5 million,
with a year-on-year rise of 25.1%, driven by the growing penetration
of voice, ADSL and Pay TV bundles. These bundles are key to expand the
broadband market and increase customer loyalty. Accesses in Spain
reached over 5 million (+18.3% year-on-year), 5.5 million in Latin
America (+26.1% year-on-year), and 917,000 in Europe (+69.7%
year-on-year). Net adds in the first half of 2008 totalled 1.1 million
accesses, of which 390,923 were in Spain, 489,981 in Latin America and
247,026 in Europe.

Pay TV accesses stood at over 2 million at end of the first half
of the year, up 57.4% on the prior year, due to net adds of close to
280,000 accesses in the first half (+25% compared to the same period
of 2007). The Company currently offers Pay TV services in Spain, the
Czech Republic, Peru, Chile, Colombia and Brazil.

--Solid revenues'growth--

The expansion of the Group's customer base and the increased usage
led to revenues of 28,149 million euros in the first six months of
2008, for a year-on-year increase of 1.2%. Changes in the
consolidation perimeter subtract 2.8 percentage points to revenue
growth, while the impact of foreign exchange rates reduced the growth
by another 2.8 percentage points. Year-on-year revenue growth was 1.2%
in the April-June 2008 period.

In organic terms(2), revenue growth stood at 6.7% for the
six-month period, mainly driven by the significant increase in
Telefonica Latinoamerica (4.3 percentage points contribution to
growth) and, to a lesser degree, in Telefonica Europe (1.6 percentage
points contribution in the half-year period). By concept, wireless
service revenues, with a growing contribution of data services, along
with wireline broadband and Pay TV, were the main organic revenue
growth drivers.

In absolute terms, Telefonica Latinoamerica consolidated its
position as the largest contributor to total Group revenue, with a
weight of 37.4%. Telefonica Espana and Telefonica Europe accounted for
36.7% and 24.9% of the Telefonica Group's total revenue, respectively.

In the first half of 2008 Telefonica Group's operating expenses
totalled 17,846 million euros, 1.5% down year-on-year. Stripping out
the effects of foreign exchange rates, operating expenses would be up
1.7%.

Gain on sale of fixed assets totalled 237 million euros in the
first half of 2008 and were mainly generated on the sale of the stake
in Sogecable (143 million euros) and the Real State programmes of
Telefonica Espana and Telefonica Europe. In the first half of 2007,
capital gains of 1,296 million euros were recognised on the sale of
Airwave.

Operating income before depreciation and amortisation (OIBDA)
stood at 11,123 million euros for the first half of 2008, down 1.3% on
the same period of 2007, due to recognition of the aforementioned
capital gains on the sale of Airwave in the second quarter of 2007.
These capital gains also explain the year-on-year change in OIBDA in
the second quarter of 2008 (-6.8%). OIBDA margin for January-June 2008
stood at 39.5%.

In organic terms(3), the rise in OIBDA in the first half of 2008
would be 1.5%. However, the organic(4) growth in OIBDA excluding
capital gains would have reached 12% in the first half of 2008,
significantly above revenue growth (+5.3 percentage points), showing
an outstanding acceleration with respect to the first quarter of the
year (+8.2% to March). Telefonica Latinoamerica (+5.5 percentage
points) and Telefonica Espana (+4.6 percentage points) are the main
contributors to this growth.

In absolute terms, Telefonica Espana accounted for 46.5% of total
Group OIBDA, while Telefonica Latinoamerica and Telefonica Europe
contributed 34.4% and 18.3% to the total Group OIBDA, respectively.

Depreciation and amortisation in the first half of 2008 totalled
4,521 million euros, down 4.1% year-on-year. Telefonica Europe
includes the amortisation of the purchase price allocation made
following the O2 Group acquisition (351 million euros) and the
Telefonica O2 Czech Republic acquisition (87 million euros).

Operating income totalled 6,602 million euros for the period from
January to June 2008, with 0.7% year-on-year growth, due to
recognition in 2007 of the aforementioned capital gains on the sale of
Airwave. In organic terms(4), growth in operating income would be
3.5%. Stripping out also impacts from capital gains (Sogecable and
Airwave) year-on-year growth would stand at 24.2%. Therefore, an
acceleration in organic(4) growth rates (excluding capital gains) is
reflected along the different income statement items below revenues
(revenues: +6.7%; OIBDA: +12% and operating income: +24%).

Cumulative financial expense totalled 1,388 million euros at June
2008, down 3.4% on the expense recognised in the same period of 2007,
mainly due to the 11% decline in average debt, which has generated
savings of 171 million euros.

Free cash flow generated by the Telefonica Group in 2008 amounted
3,422 million euros of which 1,124 million euros were assigned to
Telefonica's share buyback program, 1,869 million euros to Telefonica
S.A. dividend payment and 372 million euros to commitment
cancellations derived mainly from the pre-retirements plans. Due to
the fact that financial and real estate net divestments for the period
amounted to 493 million euros (basically coming from the disposal of
the Company's stake in Sogecable and for the payment for the
acquisition of Telemig), net financial debt decreased in 550 million
euros. Also, net debt was reduced by an additional 761 million euros
because of foreign exchange impact, changes in the consolidation
perimeter and other effects on financial accounts. All this has been
translated in a decrease of 1,311 million euros with respect to the
net financial debt at the end of the fiscal year 2007 (45,284 million
euros), leaving the net financial debt of the Telefonica Group at June
2008 at 43,973 million euros.

Leverage ratio (net debt/OIBDA) continues to fall to 2 times at
June 2008, compared to 2.1 times at March 2008, thanks to both the
reduction in net financial debt in the period and higher OIBDA. Net
financial debt + commitments over OIBDA(5) stood at 2.2 times, in line
with the Company's objectives.

In the first half of the year, the Telefonica Group's financing
activity, excluding short term Commercial Paper Programmes activity,
stood at approximately 2,400 million euros. Financing activity was
less intense than in previous periods due to the instability of the
credit markets and the Group's liquidity position.

The tax provision for the first half of the year totalled 1,520
million euros, implying a tax rate of 29.2%. However, the Telefonica
Group's cash outflow is being lower in 2008 as lower negative tax
bases from past periods together with unused fiscal deductions are
compensated.

Minority interests fell by 14.3% year-on-year and reduced
cumulative net profit in the first half of 2008 by 97 million euros.
Minority interests in Telesp and Telefonica O2 Czech Republic account
for the bulk of profit attributable to minority interests in absolute
terms.

As a result of the above, consolidated net income for the first
half of 2008 amounted to 3,593 million euros, down 6.2% on the same
period of 2007. This decrease is mainly due to the recognition in 2007
of capital gains on the sale of Airwave. Stripping out the impact of
sale of assets (Airwave and Sogecable), net income at June 2008 would
be up 29%. Basic earnings per share stood at 0.767 euros for the
half-year period.

In the period from January to June 2008, CapEx amounted to 3,450
million euros, with operating cash flow (OIBDA-CapEx) at 7,673 million
euros. By region, Telefonica Espana contributed 4,122 million euros,
Telefonica Latinoamerica accounted for 2,332 million euros and
Telefonica Europe contributed 1,177 million euros. Operating Cash Flow
grew 12.9% year-on-year in organic terms excluding capital gains(6).

With respect to shareholder returns, the Company will pay a
dividend of 1 euro per share on account of 2008 profits. In addition,
from the start of the year to July 17 2008, the Company has executed
67.6% of its programme to buy back 100 million shares in 2008.

RESULTS BY REGIONAL BUSINESS UNITS

TELEFONICA ESPANA

Telefonica Espana's accesses totalled 47 million at the end of the
first half of 2008, up 3.9% year-on-year. Underpinning this increase
was the growth in wireless telephony (+5.1% year-on-year to over 23.2
million accesses) and in wireline, Internet broadband (+18.3% to over
5 million accesses).

Considering current operating environment, Telefonica Espana
obtained solid first half 2008 results, showing the defensive profile
of the Company as well as the differential advantages of being an
integrated operator. Thus, the better revenues performance of the
wireline business -with a higher percentage of fixed revenues (60% of
total revenues)-, offsets the greater impact of current environment in
wireless voice usage; moreover, greater businesses integration enables
a more efficient cost management and getting synergies.

Revenues grew 1.4% year-on-year in the first six months to 10,331
million euros, with year-on-year growth of 0.8% posted in the second
quarter of 2008. In the first half of 2008, like-for-like revenue
growth(7) stands at 2.1%, after posting a 1.5% like-for-line growth in
the second quarter.

Operating income before depreciation and amortisation (OIBDA) rose
by 12.8% in the second quarter, to give a year-on-year growth of 9.5%
in the first half of 2008 to 5,173 million euros, leaving an OIBDA
margin of 50.1%. Excluding one-off effects(8) accounted for in the
first half of 2007 and 2008, OIBDA growth would stand at 2% in the
quarter and at 2.4% in the year to date.

According to the criteria established to set 2008 financial
guidance, OIBDA growth at Telefonica Espana would stand at 6.2% for
the six months up to June 2008.

CapEx at Telefonica Espana totalled 1,051 million euros in the
first half, with investment focused on growing the broadband
businesses and on optical fiber and 3G deployment. Telefonica Espana
generated operating cash flow (OIBDA-CapEx) of 4,122 million euros in
the January-June 2008 period, posting a 11.6% year-on-year growth.

--Fixed business--

The Spanish wireline access market grew by an estimated 1.9%
year-on-year (June 2008 vs. June 2007).

The Company's wireline telephony accesses totalled 15.7 million at
the end of June 2008 (-1.6% vs. June 2007) after registering a net
loss of 172,028 lines in the second quarter of 2008 and 248,725 in the
first six months of 2008, mainly related to loop unbundling and to an
increase of competitive intensity in the market.

Estimated net adds in the Spanish wireline broadband internet
access market in the second quarter amounted to 0.3 million.
Accordingly, at the end of June 2008 estimated size of the wireline
broadband Internet access market topped 8.7 million accesses, up 17.4%
on June 2007.

Telefonica's retail Internet broadband accesses net adds totalled
169,098 in the second quarter and 390,923 in the first half of 2008,
resulting in an 18.3% year-on-year increase in accesses to over 5
million at the end of June 2008. The Company remains market leader
with an estimated share of over 57%.

In the pay TV business, Telefonica 's estimated market share stood
at over 13% at the end of June 2008, with 22,513 new customers added
in the second quarter (32,307 in the same period in 2007) and 65,471
in the first half of 2008. Pay TV customers totalled 576,558 (+27.9%
year-on-year).

The total number of Duo and Trio bundles surpassed 4.2 million
units at the end of June 2008. This means that more than 83% of the
Company's retail broadband accesses were part of a double or triple
offer bundle at the end of June 2008.

Revenues totalled 6,213 million euros in the first half of 2008
(+1.1% year-on-year), with a 1.3% year-on-year growth posted in the
second quarter. Growth in like-for-like terms(9) was 2.2% in
January-June 2008 and 2.5% in the second quarter. Operating expenses
totalled 3,299 million euros in the first half of 2008 (-4.8%
year-on-year), having fallen by 6.1% in the second quarter.

Operating income before depreciation and amortisation (OIBDA) in
the second quarter grew by a noteworthy 23.3% year-on-year, partly due
to the lower provisions associated with the workforce restructuring
programme and other special effects. Stripping out these impacts(10),
OIBDA growth would stand at 2.7%. OIBDA amounted to 3,045 million
euros in the first half, up 15.9% year-on-year (+3.3% excluding
one-off effects(6)). The OIBDA margin stood at 47.5% in the quarter
and 49% in the first half of 2008.

CapEx amounted to 702 million euros in the first half of 2008,
leaving operating cash flow (OIBDA-CapEx) of 2,343 million euros.

--Mobile business--

The Spanish wireless market surpassed 51.9 million lines at the
end of June 2008, with an estimated penetration rate of 113% (+7
percentage points higher vs. June 2007).

In this context, Telefonica Espana reported net adds of 217,060
lines in the second quarter of 2008 (289,006 in the second quarter of
2007) and continued to target higher value customers, reporting a
solid 310,868 net contract gain (389,887 in the same period of 2007).
Net adds in the first half of 2008 totalled 398,885 lines,
highlighting the 616,101 contract adds achieved (776,860 in the same
period of 2007).

At the end of June 2008 the customer base topped 23.2 million, up
5.1% year-on-year, underpinned by a 10.4% rise in contract customers,
which now make up 61.4% of the total customer base (+2.9 percentage
points vs. June 2007).

Revenues increased slightly (+0.2%) in the second quarter of 2008,
held back by the smaller contribution of wholesale revenues
(interconnection, roaming...) and lower handset sales, that offset the
better evolution of customer revenues. Year-to-date, revenues stood at
4,817 million euros, up 1.4% year-on-year. Meanwhile, operating
expenses dropped 0.4% vs. the same quarter a year earlier due to the
Company's improved efficiency, totalling in the first six months of
the year 2,714 million euros, a slight year-on-year increase of 1.4%.

Operating income before depreciation and amortisation (OIBDA) grew
1.1% vs the second quarter of 2007 and 1.6% in the first half to 2,147
million euros. The Company has therefore maintained its operating
efficiency, with an OIBDA margin in the quarter of 45.4% and of 44.6%
in the year to date (+0.1 p.p. vs. the period January-June 2007).

CapEx in the first half stood at 349 million euros, generating
operating cash flow (OIBDA-CapEx) of 1,798 million euros.

RESULTS BY REGIONAL BUSINESS UNITS

TELEFONICA LATINOAMERICA

The second quarter of the year saw further significant expansion
of the Latin American telecommunications market in all the countries
in the region, both in wireless and in the growth areas of the fixed
business: broadband and pay TV. In this context, Telefonica
Latinoamerica focus continues on the capture of growth in the region
based on two key levers: commercial strength in its mobile business
and progress in the transformation of its fixed business activities,
with a growing weight of Internet, broadband and pay TV services.

Thanks to these successful policies, Telefonica Latinoamerica's
customer base totalled 147.9 million accesses at the end of June 2008,
an increase of 26.1 million over the last 12 months and up 21.4%
year-on-year.

After reporting 5.8 million net adds(11) in the quarter and 8.9
million in the year to date, Telefonica Latinoamerica reached a total
of 113.5 million mobile accesses (+27.1% from June 2007; +22.3%
organic(12)), with solid growth across all its operations. In fixed
telephony Telefonica Latinoamerica pressed ahead with the
transformation of its operations, with the contribution of growth
businesses (broadband, pay TV and data) continuing to improve. Here
the company is redoubling its efforts to promote bundled services. As
a result, Telefonica Latinoamerica's fixed business now has a customer
base of almost 34.4 million accesses (fixed telephony, broadband and
pay TV), year-on-year growth of 5.7%.

-- Broadband, net adds over the last 12 months totalled 1.1
million (489,981 in the first half of 2008), taking the
customer base to 5.5 million.

-- Telefonica Latinoamerica now has 1.4 million pay TV customers,
up from 799,627 in June 2007, with operations in Peru, Chile,
Colombia and Brazil.

-- Fixed telephony accesses stood at 25.8 million at the end of
the quarter, 1.9% up from June 2007, with net adds of 376,609
customers in the first half.

Revenues in the first half of 2008 amounted to 10,531 million
euros, 9.4% more than in the same period of 2007 in current euros.
Organic(13) revenue growth in the first six months stood at 12.2%, in
line with the figure for the first quarter of the year. The countries
contributing most to topline growth include Brazil and Venezuela, each
with 2.5 percentage points, followed by Mexico and Argentina, with 2.3
percentage points, each. Operating expenses lagged revenue growth
(+7.6% in current euros and +11.5% in constant euros).

Operating income before depreciation and amortisation (OIBDA) grew
13% in constant euros in the first half to 3,831 million euros, and by
15.8% in organic terms(4), a sharp rise compared with the first
quarter (+11.8%). By country, Venezuela contributed most to organic
OIBDA growth (4.2 percentage points), followed by Mexico (4 percentage
points).

In this scenario of market expansion and increased commercial
activity and business transformation, Telefonica Latinoamerica is
continuing to improve its already high efficiency levels. The company
achieved an OIBDA margin of 36.4% in the first half, an improvement of
1.2 percentage points on the same period in 2007.

Telefonica Latinoamerica's CapEx in the first half of 2008
amounted to 1,499 million euros, with investment largely deployed in
developing commercial activities for the wireline broadband and TV
businesses in addition to enhancing the coverage and capacity of its
wireless GSM networks and the first investments in the rollout of 3G
(including the 3G licences awarded in Brazil at the end of 2007).
Telefonica Latinoamerica generated operating cash flow (OIBDA-CapEx)
of 2,332 million euros in the first half of the year, 7.6% up in
constant euros vs. the same period in 2007 (+7.7% year-on-year in
organic terms(14)).

BRAZIL

Telefonica ended June 2008 with 56.1 million accesses in Brazil
thanks to Vivo's continued market leadership and a strong performance
by Telesp. Vivo now has over 40 million accesses and is the leader of
Latin America's largest wireless market. Its position has been further
cemented by the incorporation of the customers of Telemig in the
second quarter of 2008. In the broadband market, Telefonica's number
of accesses increased by 26.7% year-on-year to 2.3 million, while pay
TV accesses totalled 346,894. Thanks to the transformation of its
wireline business, Telefonica keeps 11.9 million fixed telephony
accesses in Brazil, where the company is strongly betting for bundled
services and the development of segmented offerings for each type of
client.

Thanks to a strong commercial performance and the incorporation of
Telemig, Telefonica reported revenues of 4,205 million euros in Brazil
in the first half of 2008, up 8.8% in local currency on the same
period in 2007. Revenue growth has accelerated from the 6.7%
year-on-year growth rate reported in the first quarter. Telefonica
achieved OIBDA of 1,608 million euros in Brazil to June 2008, up 2% in
local currency on the same period of 2007.

CapEx in the first half amounted to 704 million euros, with the
consolidation of GSM networks and investment in UMTS accounting for
the lion's share, along with the fastest-growing services in the
wireline businesses (broadband, pay TV and data). CapEx includes the
3G licences awarded to Vivo at the end of 2007. Meanwhile,
Telefonica's operating cash flow (OIBDA-CapEx) in Brazil amounted to
903 million euros in the first six months of 2008.

--Vivo--

The Brazilian wireless telephony market bolstered its position as
Latin America's fastest growing market, adding more than 26 million
accesses over the last 12 months. It had a penetration rate of 69.5%
in June 2008, an increase of 13.1 percentage points year-on-year. In
this context, Vivo remains as nmarket leader with over 40.4 million
accesses (+33.7% vs. June 2007, +19.7% in organic terms(15)) and has a
market share of 30.4%.

Vivo's strong performance fuelled a 23.5% year-on year revenue
increase in local currency in the second quarter (+11.6% organic(8)),
with service revenues up 24.9% in the quarter (12.1% organic(8)).
Revenues rose 19.6% in the first half in local currency to 1,379
million euros (+13.3% organic(8)), underpinned by service revenues
(+20.9% year-on-year, +14.2% organic(8)). Operating income before
depreciation and amortisation (OIBDA) increased by 29.6% in the second
quarter in local currency (+9.2% organic8), contributing to a 22.1%
year-on-year increase in OIBDA in the first half to 356 million euros
(+12.9% organic(8)).

--Telesp--

New telecommunications technologies/services grew sharply in the
Sao Paolo market, which is becoming the most dynamic and innovative in
Latin America. Against this backdrop, Telesp managed 15.7 million
accesses at the end of June 2008, up 3.7% from June 2007. At the end
of June Telesp managed 11.9 million fixed telephony accesses (-1.1%
year-on-year), with significant growth in broadband and consolidating
a more competitive pay TV offering.

Telesp continued to enhance its broadband service, increasing ADSL
speeds. Having registered net adds of 129,390 accesses in the quarter
(+5.9% year-on-year) and 227,462 in the first half of 2008 (+11.1%
year-on-year), Telesp managed a total of 2.3 million accesses (a
year-on-year increase of 26.7%). The company estimates that it
accounted for approximately 64% of total market growth in the quarter,
attaining a market share of 66% at the end of June. In pay TV, Telesp
has built a competitive offering on TVA's assets. A total of 346,894
Telefonica customers in Brazil are enjoying the service, after having
recorded a net adds figure of 64,558 accesses in the second quarter of
2008 (+25.5% from the previous quarter) and 115,987 accesses in the
first half.

Consequently, Telesp's revenue grew 5.4% year-on-year in the
second quarter (+4.6% organic(16)) and to 3,022 million euros in the
half year, up 4.7% year-on-year in local currency (+3.9% organic(17)).
Despite the higher costs, the pick-up in revenue growth and the lower
impact of non-recurrent factors are behind a substantial improvement
in operating income before depreciation and amortisation (OIBDA). This
grew 0.5% year-on-year in local currency in the second quarter and
totalled 1,232 million euros in the first half, down 4.1% year-on-year
in local currency (vs. the -8.6% drop reported in the first quarter).

CapEx in the first half amounted to 345 million euros, with
increasing investment in broadband projects and corporate networks,
while operating cash flow (OIBDA-CapEx) totalled 887 million euros.

ARGENTINA

Growth in the telecommunications market in Argentina remained
strong in the first half of 2008, with the wireless and broadband
businesses both registering significant expansion. Telefonica remains
market leader with over 20 million accesses at the end of June 2008,
10.4% more than a year earlier. Underpinning this growth was the
capture of 1.8 million new wireless customers and 307,451 broadband
accesses over the last 12 months for respective totals of 14.1 million
lines (+14.9% year-on-year) and 966,404 accesses (+46.7%
year-on-year).

The strong operating momentum fuelled a 19.9% year-on-year
increase in local currency in revenues in the first half of 2008.
Operating income before depreciation and amortisation (OIBDA) improved
significantly in the second quarter (+28.2% in local currency) and
totalled 386 million euros in the first half (+12.2% in local currency
vs. January-June 2007).

First-half CapEx amounted to 125 million euros, leaving operating
cash flow (OIBDA-CapEx) of 261 million euros.

--Telefonica Moviles Argentina--

By the end of June 2008, estimated penetration of the wireless
market in Argentina reached 103%, up 14 percentage points from June
2007. Telefonica reached over 14.1 million wireless customers in
Argentina at the end of June 2008, an increase of 14.9% year-on-year.
GSM customers accounted for 89.2% of the total customer base (up 7.7
percentage points from June 2007).

Revenue growth in the second quarter of 2008 accelerated by over
10 percentage points vs. the first quarter, with first-half revenues
growing by 25.5% in local currency to 711 million euros. Operating
income before depreciation and amortisation (OIBDA) rose 51.4% in
local currency in the second quarter and totalled 198 million euros in
the half year, up 31.5% vs. January-June 2007 in local currency, with
operating expense growth lagging behind revenue growth.

First-half CapEx amounted to 36 million euros, leaving operating
cash flow (OIBDA-CapEx) of 162 million euros.

--Telefonica de Argentina--

The wireline business activity of Telefonica in Argentina picked
up in the second quarter of 2008, achieving a total of 5.9 million
accesses at the end of June 2008. This represents an increase of 1.1%
vs. June 2007 compared with growth of 0.8% in March 2008, driven by a
surge in broadband accesses. Telefonica Argentina now manages a total
of 966,404 broadband accesses, 46.7% more than in June 2007. An
acceleration was noted in the second quarter, with net adds of 81,119
new accesses, up 23% on the first quarter of 2008 and 14.5% higher
than in the second quarter of 2007, with 147,085 new accesses reported
in the half year. This improvement is largely due to Telefonica's
focus on bundled services. A total of 439,843 customers had Duo
bundles at the end of June, representing 46% of total broadband
accesses compared with 22% in June 2007. Meanwhile, wireline telephony
accesses remained at 4.7 million.

Revenue growth in the second quarter accelerated to 12.3% in local
currency, driving an 11.3% rise in first-half revenues in local
currency to 472 million euros. Telefonica de Argentina's operating
income before depreciation and amortisation (OIBDA) rose 10.4% in the
second quarter, totalling 189 million euros in the first half.

CapEx during the first half was primarily earmarked for enhancing
existing products and developing new broadband products, reaching 89
million euros in all. First half operating cash flow (OIBDA-CapEx)
amounted to 100 million euros.

CHILE

At the end of June 2008 Telefonica Latinoamerica managed a total
of 9.7 million accesses in Chile, year-on-year growth of 8.9%. This
rise was underpinned by the growth in mobile (+11.5% year-on-year to
6.6 million), broadband (+18.4% to 679,774 customers) and pay TV
(+40.5% to 240,801) accesses. The company further cemented its
leadership position in the Chilean telecommunications market.

Telefonica Latinoamerica's first half revenues in Chile totalled
989 million euros, a year-on-year increase of 15.2% in local currency
(+13.5% in local currency in the second quarter of 2008). Operating
income before depreciation and amortisation (OIBDA) rose 12.6% in
local currency in the first half to 368 million euros (+12%
year-on-year in the second quarter), underpinned by the growth of the
wireless business.

Telefonica Latinoamerica continued to invest heavily in the
country. First-half CapEx amounted to 188 million euros, which was
largely devoted to the fastest growing business areas (mobile
telephony, ADSL and pay TV). Operating cash flow (OIBDA-CapEx) to June
amounted to 180 million euros.

--Telefonica Moviles Chile--

In the first six months of 2008, the Chilean wireless market
maintained the strong growth seen in 2007, achieving an estimated
penetration in June 2008 of 93% (+7 percentage points from June 2007).
Telefonica Moviles Chile remained market leader with 6.6 million
customers at the end of June 2008, up 11.5% on June 2007, having
reported net adds of 179,320 lines in the second quarter (+11.6%
year-on-year) and 328,593 accesses in the half year (+32.9% compared
with the same period in 2007).

Revenues grew 20.7% year-on-year in local currency in the quarter,
with first-half revenues totalling 532 million euros (+24.3%
year-on-year in local currency). Operating income before depreciation
and amortisation (OIBDA) rose 28.9% year-on-year in the second
quarter, taking half-year OIBDA to 196 million euros (+32.7%
year-on-year) thanks to efficiency gains and despite increased
commercial initiatives.

First half CapEx amounted to 107 million euros, leaving operating
cash flow (OIBDA-CapEx) of 89 million euros.

--Telefonica Chile--

Telefonica Chile managed 3.1 million accesses at the end of June
2008, up 3.7% year-on-year. Fixed telephony accesses totalled 2.1
million, and broadband accesses at the end of June 2008 stood at
679,774, a 18.4% more than a year earlier. The company had 240,801 pay
TV customers at the end of June, up 40.5% year-on-year, and added
20,885 accesses from December 2007.

Revenues grew 6% year-on-year in the second quarter in local
currency and totalled 502 million euros in the first half (+6.4% in
local currency). The performance of the operating income before
depreciation and amortisation in the second quarter (-3.7%
year-on-year in local currency) eased the fall over the first six
months of 2008 to 4.2% (-4.6% in March 2008), totalling 173 million
euros.

CapEx in the half year amounted to 81 million euros. The sharp
growth in satellite TV services (DTH) and broadband along with
initiatives designed to enhance network quality remain the main
drivers of this increased investment activity. Telefonica Chile's
operating cash flow (OIBDA-CapEx) in the period stood at 92 million
euros.

PERU

Total accesses managed by Telefonica in Peru at the end of the
first half of 2008 were 33.4% higher year-on-year at 13.5 million. The
strong pace of access growth over the last six months was driven by
wireless customer net adds with total accesses increasing by close to
1.3 million to 9.3 million (+48.1 year-on-year), the increase in
wireline accesses (+8.1% year-on-year) and the growth in the broadband
customer base (+18.8% year-on-year) to 626,805 accesses.

Having reported 4.9% year-on-year growth in local currency in the
second quarter, Telefonica's revenues in Peru amounted to 757 million
euros to June, an increase of 5.1% in local currency. Operating income
before depreciation and amortisation (OIBDA) in the half year stood at
277 million euros, virtually unchanged from the same period in 2007 in
local currency.

First half CapEx amounted to 66 million euros, mostly devoted to
the development of the wireless network and the broadband services,
leaving operating cash flow (OIBDA-CapEx) of 210 million euros.

--Telefonica Moviles Peru--

The penetration rate of wireless telephony in Peru maintains an
exceptional pace of growth in the first months of 2008 jumping 17
percentage points year-on-year to 55% at the end of June 2008. Total
wireless accesses at the end of June 2008 topped the 9.3 million mark,
up 48.1% year-on-year.

Revenues grew 26% year-on-year in local currency in the second
quarter and by 27.5% in local currency in the half year to 342 million
euros. OIBDA grew 93.1% year-on-year in local currency in the second
quarter and totalled 105 million euros at the end of June representing
an increase of 58.2% from June 2007.

First half CapEx amounted to 32 million euros, leaving operating
cash flow (OIBDA-CapEx) of 74 million euros to June.

--Telefonica del Peru--

Telefonica del Peru managed a total of 4.2 million accesses at the
end of June, up 9.4% year-on-year. This growth was underpinned by the
increase in wireline telephony accesses, which rose 8.1% vs. June 2007
pushed up by the expansion of fixed-wireless accesses, totalling
217,352 net adds over the last twelve months.

Also noteworthy is the growth in broadband accesses, with net adds
in the quarter of 32,577 accesses and 54,717 in the first half. As a
result, the customer base grew by 18.8% year-on-year to 626.805
accesses. In addition, Pay TV base stood at 653,249 accesses up 8.9%
from June 2007 thanks to the sharp growth in satellite and cable
subscribers.

In this context, first half revenues stood at 471 million euros.
Operating income before depreciation and amortisation (OIBDA) for the
first half totalled 171 million euros.

First half CapEx amounted to 34 million euros, leaving operating
cash flow (OIBDA-CapEx) of 136 million euros.

COLOMBIA

Total accesses managed by Telefonica in Colombia exceeded 12.1
million at the end of June 2008, up a solid 20% year-on-year,
underpinned by the increase in broadband (+135.2% year-on-year) and
pay TV accesses (almost a four-fold increase from June 2007) and the
sharp growth in wireless customers (+22.9% year-on-year).

Telefonica's revenues in Colombia grew 0.2% year-on-year in the
second quarter in local currency, leading the first half year revenues
to 759 million euros with a growth of 1.5% in local currency from June
2007. Operating income before depreciation and amortisation (OIBDA)
grew 3.1% year-on-year in the second quarter and 8.1% in the first
half in local currency to 238 million euros.

First half CapEx mainly devoted to expansive services (mobile,
broadband, pay TV) amounted to 147 million euros leaving operating
cash flow (OIBDA-CapEx) of 91 million euros.

--Telefonica Moviles Colombia--

The Colombian wireless market hit the 35-million-line mark in June
2008, with an estimated penetration rate of 81% (+14 percentage points
vs. June 2007). In light of this backdrop, Telefonica's total accesses
in Colombia grew 22.9% from June 2007 to 9.4 million, with growth
accelerating compared to the first quarter (+16% in March).

As a result, revenues slightly fell 0.5% in the second quarter in
local currency, resulting in first half revenues of 423 million euros
(+1% vs. the first half of 2007 in local currency). OIBDA totalled 92
million euros in the first half of 2008, with 38.3% year-on-year
growth in local currency in the second quarter and 59.1% growth in the
first half.

First half CapEx amounted to 66 million euros, leaving operating
cash flow (OIBDA-CapEx) of 26 million euros.

--Telefonica Telecom--

Telefonica Telecom total accesses base stood at 2.8 million
accesses at the end of June 2008 (+11% year-on-year), underpinned by a
strong growth in broadband accesses (+135.2% vs. June 2007), the focus
throughout the region of Telefonica to advance in the transformation
process of its wireline business as it evidences the significant
investment made since the second half of 2007. It should be
highlighted the positive evolution recorded by broadband net adds.
Telefonica Telecom reported 55,626 broadband net adds in the second
quarter (+81.1% vs. the second quarter of 2007, +46.1% vs. first
quarter of 2008), bringing net adds in the first half to 93,693
accesses (+64.4% vs. first half of 2007). The company now manages a
total of 293,964 broadband accesses. Year-on-year pay TV accesses
growth remained strong (almost four times as many customers as in June
2007), with 112,615 accesses at the end of June 2008 after 39,685 new
customers were added in the first half.

Revenues to June 2008 stood at 353 million euros, showing a
quarterly and cumulative increase of 1.2% year-on-year in local
currency. Consequently operating income before depreciation and
amortisation (OIBDA) fell in local currency 12.3% in the second
quarter of 2008 and 10.1% in the first six months to 146 million
euros.

Fist-half CapEx amounted to 81 million euros, leaving operating
cash flow (OIBDA-CapEx) of 65 million euros.

MEXICO

The penetration rate of the Mexican market reached an estimated
68% at the end of June 2008 (+10 percentage points vs. June 2007),
with growth increasing slightly from the first quarter. Telefonica
Moviles Mexico's customer base stood at 14.1 million at the end of
June 2008 (of which 825,370 were contract customers), an increase of
38% from June 2007. This growth was underpinned by a competitive and
flexible commercial offering in the prepay segment.

Revenues in the second quarter rose 29.7% year-on-year in local
currency and by 34.1% in the first six months to 784 million euros.
OIBDA totalled 175 million euros to June 2008, over three times the
amount for the same period a year earlier.

CapEx amounted to 137 million euros to June 2008, resulting in
operating cash flow (OIBDA-CapEx) of 38 million euros, a significant
improvement on the same period in 2007 (-3 million euros).

VENEZUELA

Penetration of the Venezuelan wireless market stood at an
estimated 93% in the first half of 2008, up 15 percentage points from
June 2007. Telefonica Moviles Venezuela had a total of 11.1 million
accesses at the end of June 2008 (+13.7% vs. June 2007), underpinned
by its wireless customer base (+11.6%) and the sharp growth in fixed
wireless (+34.1%).

Second-quarter revenues grew 18.1% year-on-year in local currency,
with first-half revenues advancing 21.5% to 1,186 million euros.
Operating income before depreciation and amortisation (OIBDA) grew
31.9% in the second quarter in local currency, with first-half OIBDA
totalling 533 million euros (+30.7% in local currency vs. the first
half of 2007).

Fist-half CapEx amounted to 60 million euros, leaving operating
cash flow (OIBDA-CapEx) of 473 million euros.

CENTROAMERICA

Penetration levels grew sharply in the Central American market and
stood at 75% in June 2008 (+20 percentage points vs. June 2007).
Telefonica had almost 6 million customers in Central America at the
end of June 2008, posting year-on-year growth of 29.7% after adding
273,567 new wireless customers in the quarter and 520,377 in the first
half of the year.

Second-quarter revenues advanced 3.9% in constant terms vs. the
same period in 2007 and by 6.1% in the first half of 2008 to 272
million euros. Despite the increase in commercial activity in the
region, operating income before depreciation and amortisation (OIBDA)
in the April-June 2008 period grew 4.4% vs. the same period in 2007 in
constant terms and 11.4% in the year to date to top 95 million euros.

First half Capex amounted to 25 million euros, leaving operating
cash flow (OIBDA-CapEx) of 70 million euros.

ECUADOR

The wireless market in Ecuador continued to grow at a strong pace,
with penetration estimated at 76% at the end of June 2008 (+9
percentage points vs. March 2007). Telefonica Moviles Ecuador reported
net wireless adds of 186,357 accesses in the second quarter of 2008
and 281,106 net adds in the first half. It managed a total of 2.9
million wireless customers in June 2008, year-on-year growth of 8.3%.

Revenues advanced 25% year-on-year in local currency in the second
quarter, significantly outpacing the growth in the customer base, and
by 21.8% in the first half in local currency to 146 million euros.
Operating income before depreciation and amortisation (OIBDA) grew by
32.4% year-on-year in local currency in the second quarter, with
first-half revenues up 23.5% at 36 million euros.

First half CapEx amounted to 16 million euros, leaving operating
cash flow (OIBDA-CapEx) of 20 million euros.

TELEFONICA INTERNATIONAL WHOLESALE SERVICES

TIWS maintained strong growth across all its business lines in the
first half of 2008. Revenues in the period totalled 154 million euros,
up 23.5% year-on-year in constant euros, in line with the growth
reported in the first quarter. Revenue growth underpinned an
improvement in operating income before depreciation and amortisation
(OIBDA), which stood at 48 million euros (+13.2% in constant euros),
leaving an OIBDA margin of 31%.

RESULTS BY REGIONAL BUSINESS UNITS

TELEFONICA EUROPE

Telefonica Europe maintained its momentum in the second quarter of
2008, adding 0.8 million mobile customers (+44% year-on-year) and 1.3
million in the first half (+13.5% year-on-year). As a result,
Telefonica Europe grew its total mobile customer base (+8.8%
year-on-year) by over 3 million compared to June 2007, driven by the
solid performance in the contract segment (+14.9% year-on-year). At
the end of June 2008, Telefonica Europe's total customer base reached
43.8 million (+9.8% year-on-year).

Revenues for the second quarter were flat year-on-year, while for
the first half they showed a year-on-year decline of 0.9% to reach
7,006 million euros. Excluding the impact of foreign exchange rates
and the exit of Airwave in April 2007, the strong operational
performance in the quarter led to continued solid revenue growth, with
a year-on-year increase of 6.1% in the second quarter (stable over the
previous quarter) and a 6.2% for the first half.

Operating income before depreciation and amortization (OIBDA) in
the first half of 2008 was 2,033 million euros, a year-on-year decline
of 34.4%. On a like for like basis(18), OIBDA would have grown by 4%
year-on-year for the first half, mainly as a result of the higher
commercial activity in wireless and DSL as compared with last year.

CapEx for the first half was 856 million euros. Operating cash
flow (OIBDA-CapEx) for the first half totalled 1,177 million euros, an
increase of 11.5% year-on-year on like for like(1) basis.

--Telefonica O2 Reino Unido--

With a continued focus on capturing profitable growth, Telefonica
O2 UK achieved very strong net mobile customer additions of 274,571 in
the second quarter (over 8 times the second quarter of 2007 figure),
taking the total mobile base to 18.7 million (excluding Tesco Mobile)
representing growth of 5% year-on-year. Net mobile adds in the first
half reached 295,723 (+95.2% year-on-year). Telefonica O2 UK's DSL
broadband service registered 62,800 net additions in the quarter, and
123,510 in the first half, leaving the total broadband customer base
at 194,220 at the end of June.

Revenues in the second quarter grew by 11.1% year-on-year in local
currency, a strong performance relative to the market. Operating
income before depreciation and amortization (OIBDA) for the quarter
rose 14.1% year-on-year in local currency, impacted by restructuring
charges taken in the second quarter 2007. Excluding these charges,
growth was 10.6% in local currency, with lower mobile acquisition
costs offset by increased retention spend, along with additional DSL
and mobile broadband launching-related costs. For the first half,
OIBDA totalled 881 million euros, a growth of 13.7% year-on-year in
local currency (+11.8% excluding restructuring charges).

CapEx for the first half amounted to 362 million euros, with
operating cash flow (OIBDA-CapEx) amounting to 519 million euros.

--Telefonica O2 Alemania--

The business traded strongly in the quarter, with mobile net
additions of 568,374 customers, a 52% increase on the same quarter
last year and a 6% rise over the previous quarter. In the first half,
the mobile customer base grew by 1.1 million (2.1 times vs. the same
period last year), taking the total mobile customer base to 13.6
million (+17.5% vs. June 2007). The Tchibo Mobile brand added 35,456
customers in the second quarter, while the Fonic brand added 96,097
customers to end June with a base of 416,436. O2 DSL acquired 40,658
customers during the second quarter to add 90,689 customers in the
first half of the year, reaching a total customer base of 165,389.
Telefonica Deutschland reported 1.1 million ULL lines in total at the
end of June (338,801 lines in June 2007).

Despite the ongoing pricing pressure in the German telco market,
revenue growth accelerated in the second quarter vs. the first quarter
to 3.8% year-on-year. For the first half, revenues totalled 1,749
million euros, growth of 2.7% year-on-year. OIBDA for the first half
totalled 341 million euros, growth of 31.6% year-on-year; while on a
like for like basis(3) OIBDA declined by 4.1%.

CapEx amounted to 357 million euros for the first half.

--Telefonica O2 Irlanda--

Telefonica O2 Ireland recorded net additions of 24,620 in the
second quarter (-1,082 in the second quarter 2007 and +16,805 in the
first quarter of 2008). With 41,425 net additions throughout the first
half of the year, the total customer base was 1.7 million customers at
the end of June, 3.4% higher than a year ago with the number of mobile
broadband customers at 47,814.

Revenues for the first half declined 2.9% year-on-year to reach
448 million euros. For the first half OIBDA was 150 million euros,
8.6% lower than the same period last year.

CapEx for the first half totalled 30 million euros. operating cash
flow (OIBDA-CapEx) for the first half it amounted to 120 million
euros.

--Telefonica O2 Republica Checa--

At the end of June, the total fixed and mobile accesses of
Telefonica O2 Czech Republic, including Slovakia, stood at 8.5
million, an increase of 0.5% year-on-year. The total number of
customers currently subscribing to a bundled product in the Czech
Republic amounted to 142,565 at the end of June 2008. Fixed telephony
accesses amounted to 1.9 million at the end of June and The total
number of retail Internet broadband accesses reached 540,372 (+16.6%
year-on-year) with 12,928 net customers added in the quarter and
30,983 in the first half. The total number of TV customers increased
by 10,745 in the second quarter and by 24,753 in the first half to
reach 97,918.

Revenues for Telefonica O2 Czech Republic in the second quarter
were 0.6% higher year-on-year than in the same period of 2007 in local
currency, leading to a 1.1% year-on-year increase in the first half to
reach 1,236 million euros. For the first half OIBDA totalled 580
million euros, an increase of 3.2% in local currency year-on-year.

Capex amounted to 96 million euros in the first half resulting in
an operating cash flow (OIBDA-CapEx) for the first half of 484 million
euros.

RESULTS BY BUSINESS UNITS

OTHERS COMPANIES

ATENTO GROUP

Revenues totalled 629 million euros at the end of the first half
of 2008, an increase of 11.4% on the same period a year earlier, after
growing by 10.9% year-on-year in the second quarter. Operating income
before depreciation and amortisation (OIBDA) grew 16.4% year-on-year
in the second quarter and 8.1% in the first half to 79 million euros.

First-half CapEx totalled 17 million euros and was mainly
earmarked for the construction of new platforms (Chile, Morocco and
Peru), centre refurbishment and equipment purchasing (Brazil and
Mexico). The Atento Group's operating cash flow (OIBDA-CapEx) in the
first six months of 2008 period stood at 62 million euros.

(1) The 2007 base figures exclude Airwave and Endemol and include
three months of consolidation of TVA in 2007. T. Espana's revenue are
adjusted for the new services model for the public use telephony
service. Hence, the Group's revenue has been adjusted in accordance
with this new model. . The 2008 figures include TVA, Deltax, and
Telemig (from April 2008). . Telefonica's CapEx excludes the Real
Estate Efficiency Plan. The growth rates announced for the 2008
targets were based on constant 2007 exchange rates. . For the
calculation of targets, OIBDA and OI do not include exceptional income
and expenses that could not have been foreseen in 2007.

(2) Assuming constant exchange rates and including the
consolidation of TVA in January-June 2007 and Telemig in April-June
2007. Excluding the consolidation of Airwave in January-March 2007 and
Endemol in January-June 2007. In revenues, the impact in Telefonica
Espana of the new model for the public use telephone service (-67.9
million euros) is included. In OIBDA and OI, the impact of sales of
assets (Airwave and Sogecable) in both periods is excluded.

(3) Assuming constant exchange rates and including the
consolidation of TVA in January-June 2007 and Telemig in April-June
2007. Excluding the consolidation of Airwave in January-March 2007 and
Endemol in January-June 2007.

(4) Assuming constant exchange rates and including the
consolidation of TVA in January-June 2007 and Telemig in April-June
2007. Excluding the consolidation of Airwave in January-March 2007 and
Endemol in January-June 2007. In revenues, the impact in Telefonica
Espana of the new model for the public use telephone service (-67.9
million euros) is included. In OIBDA and OI, the impact of sales of
assets (Airwave and Sogecable) in both periods is excluded.

(5) Calculated based on June 2008 OIBDA, excluding results on the
sale of fixed assets and annualized.

(6) Assuming constant exchange rates and including the
consolidation of TVA in January-June 2007 and Telemig in April-June
2007. Excluding the consolidation of Airwave in January-March 2007 and
Endemol in January-June 2007. In revenues, the impact in Telefonica
Espana of the new model for the public use telephone service (-67.9
million euros) is included. In OIBDA and OI, the impact of sales of
assets (Airwave and Sogecable) in both periods is excluded.

(7) Including the impact at T. Espana due to the new model for the
public use telephony service (-67.9 million euros in January-June
2007).

(8) Bad debt recovery amounting to 25 million euros accounted for
in the first quarter of 2008, the 152 million euros fine imposed by
the European Union during second quarter 2007, the January-June 2007
provision of 94 million euros associated with the redundancy
programme, and Real Estate capital gains amounting to 68 million euros
in January-June 2008 (8 million euros in same period 2007).

(9) Including the impact at T. Espana due to the new model for the
public use telephony service (-67.9 million euros in January-June 2007
in revenues and -89.7 million euros in voice service revenues).

(10) 94 million euros provision accounted for in the second
quarter 2007 related to the Redundancy programme (zero in same period
2008), the 152 million euros European Union fine booked in the second
quarter of 2007, and Real Estate capital gains of 1.3 million euros in
the second quarter 2008 and 5.2 million euros in the second quarter
2007.

(11) The Telemig customers incorporated to the Group in April
(3,986,439 customers) are not considered as net adds.

(12) Including Telemig accesses in June 2007.

(13) Assuming constant Exchange rates and the consolidation of TVA
in January-June 2007 and Telemig in April-June 2007.

(14) Assuming constant Exchange rates and the consolidation of TVA
in January-June 2007 and Telemig in April-June 2007.

(15) Including Telemig in June 2007.

(16) Including TVA in April-June 2007.

(17) Including TVA in January-June 2007.

(18) Assuming constant exchange rates and excluding the
consolidation of Airwave in the first quarter of 2007. Capital gain
from the sale of Airwave is also excluded, as well as gains related to
the real estate sale in the Czech Republic, restructuring and similar
charges and the result of the application of provisions made in
respect of potential contingencies deriving from the past disposal of
shareholdings, once these risks had dissipated or had not
materialized.

Telefonica
Direccion de Comunicacion Corporativa
Press Office
Tel: +34 91 4823800
Fax: +34 91 7271498
e-mail: prensa@telefonica.es
http://www.telefonica.es/saladeprensa

Copyright Business Wire 2008