Telefonica Reaches an Agreement to Acquire BellSouth's Latin American Cellular Operations

Telefonica Reaches an Agreement to Acquire BellSouth's Latin American Cellular
Operations
Telefonica, the World's Sixth Largest Telecoms Company, Reinforces Its
Leadership in Latin America with the addition of 10.5 million New Customers


MADRID, Spain,March 8  /PRNewswire-FirstCall/ -- Telefonica, the world's sixth
largest telecommunications company, has reached an agreement with BellSouth to
acquire all its cellular assets in Latin America, which have a total of more
than 10.5 million customers.

With the transaction, still subject to due diligence and the pertinent
regulatory and governmental approvals, Telefonica will strengthen its leadership
in Latin America, where it manages 21.6 million fixed lines and nearly 41
million wireless customers.

Telefonica's executive chairman Cesar Alierta expressed his satisfaction over
the agreement, saying, "it is in line with the Company's policy of

profitable growth, it creates shareholder value and adds a new potential market
of nearly 90 million customers for the Group."

Price and financing of the transaction

Under the signed agreement, the transaction values 100% of the companies
acquired (firm value) at 5.850 million US dollars and will be financed from cash
generated by Telefonica Moviles and debt. Telefonica and its mobile subsidiary
shall both maintain solid credit ratios. Telefonica Moviles will assume the
companies' net debt and it will acquire the shareholdings of BellSouth, offering
minority shareholders the possibility of selling theirstakes for an identical
price. The acquisition in each country is subject to the respective regulatory
approvals.

This agreement will bring Telefonica's customer base to well over 100 million
customers worldwide, with an active presence in 14 countries in Latin America,
making it the leader in both fixed and mobile telephony, with a 40% share of the
Spanish- and Portuguese-speaking and 35% of the Latin American cellular
markets.

Meanwhile, Telefonica Moviles' total customer base will increase to 62.5 million
-- 41 million in Latin America -- cementing its leadership position in the
Spanish- and Portuguese-speaking market and making it the fourth largest
wireless operator in the world.

For Antonio Viana-Baptista, chairman of Telefonica Moviles: "The operation not
only reinforces our position in key markets, it also generates opex and capex
synergies with an estimated present value of 1,000 million US dollars and will
bring compelling benefits for customers and shareholders."

Assets with growthpotential

Telefonica Moviles will acquire 100% of BellSouth's stakes in its operators in
Argentina, Chile, Peru, Venezuela, Colombia, Ecuador, Uruguay, Guatemala,
Nicaragua and Panama, making it the only cellular operator in all the key Latin
Americanmarkets (population over 421 million) and leaving it an excellent
position to capture the region's strong growth potential.

Telefonica is acquiring companies with combined revenues in excess of 2,500
million US dollars, EBITDA of 867 million and an EBITDA margin of 35% in 2003.
With this, Telefonica Moviles would have posted total aggregate revenues in 2003
of 5,401 million US dollars and EBITDA of 1,521 million US dollars in Latin
America.

The purchase of these companies leaves scope for synergieswith Telefonica
Moviles' undisputed leadership in management, product and service offering and
the development of cutting-edge technologies deriving from its track record in
operations' integration (as it has demonstrated in markets like Brazil and
Mexico). These synergies should be reflected in areas such as handset purchases,
advertising, network maintenance and rationalisation, the transfer of portfolio
products and services and integrated management in some areas.

In all, the acquisition will benet earnings and cash flow per share accretive
for Telefonica Moviles from day one. As for the policies of shareholder
compensation in the form of dividends, Telefonica and Telefonica Moviles
estimate that it will not be necessary to make modificationsto the policies
already announced to the market.

Regarding the calendar, the regulatory authorities of several of the countries
in which these companies operate must approve, if it is the case, some of these
acquisitions, so that it is not possible todetermine precisely the effective
date of the acquisition.

As of today, it is not possible to quantify the amount of goodwill which would
be generated as the dates of the acquisition of each one of the assets will be
different according to the authorizations requested.

At the same time, this transaction does not suppose for Telefonica Moviles any
change in the dividend payment announced against 2003 results.

Clients. Leadership in Latin America

Telefonica Moviles has a strong positioning in the two largest markets in Latin
America, Brazil and Mexico.

  -- In Brazil, the Vivo subsidiary is by far the market leader. The company
     ended 2003 with more than 20.6 million customers, capturing more than
     2.2 million in the year's fourth quarter. This gives it an estimated
     56% share of the markets in which it operates.

  -- In Mexico, Telefonica Moviles ranks second, with more than 3.5 million
     customers. It is strongly positioned to capture a large part of the
     Mexican market'spotential growth, with a GSM network covering 96
     cities and a distribution network comprising 6,200 points of sale.



At the same time, it strengthens Telefonica Moviles' leadership in other rapidly
growing Latin American markets in which it already had operations.

  -- Argentina. Telefonica Moviles ended 2003 with more than 1.8 million
     customers in Argentina. The acquisition of Movicom makes it the
     country's largest cellular operator, with more than 3.3 million
     customers in a market with 37 million inhabitants. Moreover, it has a
     leading market share in the Metropolitan Area of Buenos Aires.

  -- Chile. Telefonica Movil, a subsidiary of CTC Chile and managed by
     Telefonica Moviles, ended last year with more than 2.27 million
     customers. After this operation, the Telefonica Group will become the
     Chilean market leader, with more than 3.57 million customers in a
     market of 15.4 million inhabitants.

  -- Peru. Telefonica Moviles Peru was already leader in the Peruvian market
     (with more than 1.5 million customers at end-2003), but will be even
     more so thanks to this transaction. Together with the operator it is
     acquiring, it has a total of more than 2.14 million customers in a
     marketwith a total population of 27.3 million.



The company acquires a strong footprint in key markets in the region in which it
was not present before.

  -- Venezuela. Telefonica Moviles will become the leader of the Venezuelan
     market, with more than 3.3 million customers in a market with a total
     of 24 million inhabitants.

  -- Colombia. It acquires Colombia's number two operator, with nearly
     2 million customers, giving it a 32% share of a market with a
     population of 40.3 million.

  -- Ecuador. It acquires Ecuador's second largest wireless operator, with
     816,000 customers and a 35% share of a market with a total of
     13.2 million inhabitants.

  -- Uruguay. It becomes Uruguay's number two operator, with 146,000
     customers, giving it a 30% share of a market with a total of
     2.1 million inhabitants.



Lastly, it gives the company a critical mass in the Central America market,
which will be following an integrated management model.

  -- Panama. It acquires the Panamanian market leader, with 420,000
     customers in a market with 2.8 million inhabitants.

  -- Nicaragua. It becomes leader of the Nicaraguan market by acquiring an
     operator with 229,000 customers in a market with a total of 2.9 million
     inhabitants.

  -- Guatemala. Telefonica Moviles was already present in Guatemala, through
     a subsidiary with 157,000 customers. Now it will have 409,000 in a
     market with a total of 11.5 million inhabitants.

  -- El Salvador. Telefonica Moviles ended 2003 with 248,000 customers in El
     Salvador, ranking second in a market with a total of 6.6 million
     inhabitants.


DATASOURCE: Telefonica



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