[1] At the close of the first half of 2004 the Company decided it will no longer include 1.3 million inactive prepaid SIM cards in its reported customer base. For reporting purposes, this adjustment has been made from April 1^st 2004 and all the operating metrics corresponding to the second quarter of 2004 and the first half of 2004 have been calculated taking this adjustment into account.

Including the customers from BellSouth's Latin American operators^[2], whose acquisition was agreed in March, Telefónica Móviles' would have over 68 million managed customers, 47.5 million of which corresponding to Latin America.

^[2] Figures for BellSouth's Latin American operators at the end of the second quarter of 2004, ended on May 04.

Key aspects of the first half of 2004 results are as follows:

• Y-o-y growth of 14.1% in operating revenues to 5,287.9 million euros in the first half of 2004. Assuming constant exchange rates and excluding the impact of TCO's contribution to the consolidated results during the first four months of 2004 and changes in the consolidation perimeter, revenues would have grown 14.7% y-o-y.

• Increase of 6.8% in consolidated EBITDA vs. the first half of 2003 to 2,270.8 million euros. Excluding the impact of exchange rates, TCO's contribution to the consolidated results during the first four months of 2004 and changes in the Group's consolidation perimeter, consolidated EBITDA would have grown 4.6% vs. the first half of 2003.

• As for consolidated CapEx, it amounted to 483.8 million euros in the first half of 2004, a 4% y-o-y increase, fuelled by the rollout of Telefónica Móviles España's UMTS network and the GSM network in Argentina. CapEx committed at the end of June was 1,119 million euros, reflecting the CapEx related to GSM network rollout in Mexico and higher CapEx in Brazil to increase the capacity of VIVO's networks.

Regarding the evolution of the Mobile Business of Telefónica Group (including Telefónica Móvil Chile), the operating revenues totalled 5,458.1 million euros as of June 2004, a y-o-y increase of 14.1% compared to the same period last year. On the other hand, EBITDA reached 2,309.2 million euros, a y-o-y increase of 6.2%.

Within an increasingly mature market and more aggressive commercial efforts by competitors, especially in number portability actions, the Company has focused its efforts on the segments with higher value.

Given the growing trend of second lines and of shared lines which become inactive, in spite of the different actions taken by Telefónica Móviles España to stimulate their usage, and in order to more accurately monitor the fundamental business ratios and the real contribution of clients to revenue generation, the Company decided at the close of the first half of 2004 it would no longer include 1.3 million inactive prepaid SIM cards in its reported customer base, or in the calculation of its business metrics. For reporting purposes, this adjustment has been made from April 1^st 2004 and all the operating metrics corresponding to the second quarter of 2004 and the first half of 2004 have been calculated taking this adjustment into account. As a result, at the close of June 2004, the reported customer base of Telefónica Móviles España was over 18.6 million. It should be pointed out that this decision has no impact on the economic results of the Company.

It should be noted that in order to determine the relative positions of the operators in the market, their market share should be analyzed in terms of revenues. As the Spanish telecommunications regulator (CMT) has noted in its recent report, based on information provided by the companies, Telefónica Móviles España is the only operator whose market share in terms of service revenue^[3] is clearly larger than its market share in terms of lines. This gives an idea of the greater relative quality of the customer base of Telefónica Móviles España.

^[3]Service revenues: Subscription and monthly fees, outgoing traffic, SMS, Roaming-Out and data revenues. Source: CMT.

As for commercial activity in the first half of 2004, there was an increase of 13% in total volume (including additions, migrations and handset upgrades) vs. the first half of 2003.

Reflecting the company's focus on customers' value, we would highlight the rapid pace of prepaid to contract migration, still one of the main growth drivers of Telefónica Móviles España's MOU and ARPU. In the second quarter of 2004, there were close to 256,000 migrations, taking the total for the first half of 2004 to over 563,000 (+11% vs. the first half of 2003).

The migration process has contributed to the 8.5 percentage points increase in the weight of the contract segment within Telefónica Móviles España's total customer base to 46.2% at the end of the second quarter of 2004 vs. the second quarter of 2003.

In a context of strong and increasingly aggressive competition in number portability actions, where related high commercial costs can only be justified in the high-value segments, the Company has decided not to carry out proactive initiatives in the prepaid segment, concentrating its efforts on residential contract customers and the corporate segment. This commercial strategy has produced a small net loss in the prepaid segment in the first half of 2004, although Telefónica Móviles España continues to have a positive net balance in the higher value segments.

As regards other loyalty activities, the Company continues to record high handset upgrade rates through the MoviStar Plus points programme and the Estrena programme designed exclusively for prepaid customers. In all, there were more than 1,739,000 handset upgrades through loyalty initiatives in the first half of 2004.

Meanwhile, and in line with the Company strategy of capturing the strong growth potential offered by specific segments, various commercial offers and services, targeted at such segments, have been launched.

As for the main traffic and customer usage ratios, traffic carried on Telefónica Móviles España's networks totaled 10,600 million minutes in the second quarter of 2004 (+13.6% vs. the second quarter of 2003) and nearly 20,500 million in the first half of 2004 (+15.2% vs. the first half of 2003), driven by growth in outgoing traffic (+15.6% vs. the first half of 2003). MOU for the first half of 2004 was 120 minutes, with a 7.4% y-o-y increase. Including the impact of the SIM cards not considered in the reported customer base^[4] MOU would have reached 124 minutes in the first half of 2004 (132 in the second quarter of 2004).

^[4] At the close of 1H04 the Company decided it will no longer include 1.3MM inactive prepaid SIM cards in its reported customer base. For reporting purposes, this adjustment has been made from 1 April 2004 and all the operating metrics corresponding to 2Q04 and 1H04 have been calculated taking this adjustment into account.

With respect to data services, we would underline the increasing number of users of GPRS technology services, which now number more than 2.5 million. Telefónica Móviles España now has some 780,000 users of its multimedia messaging (MMS) and 450,000 users of its i-mode service.

At the end of May, Telefónica Móviles España began marketing its first UMTS video-telephone services in Spain, while extending the possibilities of the "Oficin@ MoviStar UMTS/GPRS" mobile connectivity service to its residential customers.

Also, reflecting progress in the FreeMove alliance, it is worth noting the launch of the new Single European Tariff for calls to Western Europe between networks of the alliance operators. This makes the price structure much more transparent to customers using their mobile phones outside Spain by presenting a single price of 0.75 euros per minute, regardless of where or when the call is made.

Highlights of Telefónica Móviles España's financial results in the period are as follows:

• Operating revenues rose 8.3% y-o-y in the second quarter of 2004 (to 2,021 million euros) and 12.5% in the first half of 2004.

• EBITDA in the second quarter of 2004 was 1,056 million euros, an increase of 6.5% vs. the second quarter of 2003. EBITDA in the first half of 2004 was 2,058.7 million euros (+9.7% vs. the first half of 2003).

• CapEx in the first half of 2004 totalled 268 million euros, 23.3% more than in the first half of 2003, mostly due to the rollout of the new UMTS network. CapEx committed up to June reached 517 million euros.

Médi Telecom ended June with 2.1 million customers (+21.9% vs. June 2003). Net adds in the second quarter amounted to nearly 110 thousand customers, recovering the growth trend after the slight contraction seen in the previous quarter.

Operating revenues continued to advance, reaching 77 million euros in the second quarter of 2004, driven by both customer and traffic growth. In the first half of 2004 operating revenues reached 149 million euros (+17.7% vs. the first half of 2003).

More noteworthy was the performance of EBITDA, which nearly doubled the figure for the second quarter of 2003. Although the Company increased its commercial activity, the EBITDA margin of 45% in the second quarter of 2004 was even higher than that of the first quarter of 2004. EBITDA in the first half of 2004 amounted to 65 million euros, 78.1% more than in the first half of 2003, reaching a 44% EBITDA margin (29.0% in the first half of 2003).

Thanks to another positive operating results performance and to scaling back CapEx, operating cash flow reached 50 million euros, outstripping the total for 2003.

In the second quarter of 2004 the growth of the Brazilian cellular market continued to accelerate, driven by the Mother's Day and Valentine's Day commercial campaigns.

Despite a tough competitive environment, Vivo continued to lead the growth of the Brazilian market. In the second quarter of 2004, Vivo achieved net adds of over 1.6 million customers, vs. 1.2 million in the first quarter of 2004 and 0.55 million in the second quarter of 2003 (0.6 million including TCO from April 2003), ending the second quarter of 2004 with more than 23.5 million customers, 34.2% more than in the second quarter of 2003 and 7.5% more than in the first quarter of 2004. This gives it an estimated market share of 44% for Brazil as a whole and an average of 55% in its areas of operation, practically the same as in previous quarters.

As for customer usage, total MOU in the second quarter of 2004 was 90 minutes (-2% vs. the first quarter of 2004), while total ARPU was 33 reais (-4% vs. the first quarter of 2004). The quarterly decline in ARPU was due to the sharp growth in the customer base mostly in the lower ARPU prepaid segment, and to strong traffic promotions both during this quarter and previous one. At the end of June 2004, the prepaid segment accounted for 79.3% of Vivo's total customers vs. 77.9% in March 2004 and 73.3% in the second quarter of 2003. Assuming the same customer mix as in the first quarter of 2004, ARPU in the second quarter of 2004 would remain flat.

We would underline the growth of outgoing traffic (+10% vs. the first quarter of 2004), which more than compensated for lower incoming traffic growth.

It must be remembered that figures for the second quarter of 2004 are not comparable with the second quarter of 2003 due to the incorporation of TCO in May 2003 and the impact of the migration to SMP.

Meanwhile, the usage of data services continued to grow. These now represent more than 4% of Vivo's total service revenues, doubling the weight of the first half of 2003.

As regards Vivo's results, operating revenues in the first half of 2004 were 731.9 million euros, a y-o-y increase of 27.9% in local currency, thanks mainly to the increased commercial activity and higher service revenues. Excluding TCO's contribution during the first four months of 2004, operating revenues would have grown 12.5% vs. the first half of 2003 in local currency.

EBITDA for the second quarter was 14.9% lower vs. the first quarter of 2004 in reais on the back of the strong commercial activity in the quarter, which saw two of the year's main campaigns, leading to a 35% increase in net adds vs. the first quarter of 2004.

EBITDA for the first half of 2004, in local currency, increased 23.7% y-o-y. Excluding TCO's contribution during the first four months of 2004 EBITDA would have grown 5.6% vs. the first half of 2003.

The EBITDA margin after management fees was 31.7% in the second quarter of 2004 and 35.8% in the first half of 2004, reflecting the impact of higher commercial costs.

With respect to CapEx, Vivo operators invested 71 million euros in the first half of 2004, an increase of 69% vs. the first half of 2003. The growth was mainly the result of TCO's consolidation and larger CapEx to expand coverage of Vivo's 1XRTT networks and boost the capacity of the operators' networks in order to meet the growth of the customer base. Committed CapEx in the first half of 2004 amounts to 182 million euros.

Telefónica Móviles México (TMM) has continued to strengthen its position in the country, especially in the growing GSM market. In the second quarter of 2004, TMM's commercial activity increased 14% vs. the first quarter of 2004, with net adds in the period of 308 thousand customers, nearly tripling the figure of the second quarter of 2003.

TMM's total customer base at the end of June 2004 was 4.1 million (+60.7% vs. the second quarter of 2003; +8% vs. the first quarter of 2004), driven by GSM customer acquisition. At that date, GSM customers accounted for nearly 50% of TMM's total customers (vs. 38% at the end of March 2004).

Note also the positive results in gross adds from the first approaches to the corporate business segment, based on the product range already being offered to companies in Spain.

As for the GSM network rollout, coverage was extended in the second quarter of 2004 to 70% of the national GDP, while the distribution network was expanded to over 8,500 points of sale.

On the other hand, early in July TMM announced the rollout of EDGE technology on its GSM network, providing the most advanced broadband service in Mexico.

In line with the growth of the customer base, total traffic in the second quarter of 2004 grew 8% vs. the first quarter of 2004, with MOU in the second quarter of 2004 of 62 minutes (+1.0% vs. the first quarter of 2004) and ARPU of 171 Mexican pesos (-1.4% vs. the first quarter of 2004).

As regards financial results, we would underline the improvement in service revenues, which in the second quarter of 2004 showed growth of 8% vs. the first quarter of 2004 in local currency, in line with the growth of the customer base. The decrease in total operating revenues of 5% in local currency vs. the first quarter of 2004 is due to the decline in handset sales, as the distribution channel was supplied at the end of the previous quarter with handsets for the Mother's Day campaign.

Meanwhile, EBITDA losses were 31.7 million euros in the second quarter of 2004, -33% vs. the first quarter of 2004, despite the more intense commercial activity. In the first half of 2004, TMM posted an EBITDA loss of -78.9 million euros.

Total CapEx in the first six months of the year was 49 million euros, with CapEx committed at the end of June of 286 million euros.

The increase growth of the Argentine cellular market, driven since the previous quarter by the GSM network rollout and high levels of commercial activity, continued to accelerate in the second quarter of 2004, reaching an estimated penetration rate of 25% (vs. 18% in the first half of 2003).

At the end of June 2004, Unifón had 2.2 million customers, 36.1% more than the year before and 11% more than in March 2004. In the second quarter of 2004, the faster development of the GSM network, alongside the increase in the number of points of sale and the specific campaigns carried out in the quarter, underpinned further growth in net adds, which totaled more than 219 thousand in the second quarter of 2004 (61 thousand in the second quarter of 2003) and far exceeding those of the first quarter of 2004 (+50%).

By the end of the quarter, four months after the commercial launch of the service, GSM customers accounted for 5% of Unifón's total customer base.

We would highlight that the growth in the customer base was accompanied by an improvement in customer usage ratios. MOU showed y-o-y growth of 24% vs. the second quarter of 2003 and 6% vs. the first quarter of 2004 on the back of a recovery in consumption and campaigns aimed at boosting the usage of services. The increase in traffic led to an 18% increase in ARPU in local currency vs. the second quarter of 2003 and 3% vs. the first quarter of 2004.

In terms of results, Unifón recorded a y-o-y increase in operating revenues in the first half of 2004 of 50.2% in pesos, underpinned by higher traffic and increased handset sales on the back of the growth in gross adds.

The greater commercial activity and higher costs associated with the launch of GSM undermined EBITDA in the second quarter of 2004, which saw a decline of 29.4% in the first half of 2004 in local currency, leaving an EBITDA margin of 14.6% in the first half of 2004 and 7.2% in the second quarter of 2004.

As for CapEx, the company continued to roll out the GSM network, having extended coverage in the second quarter to Córdoba, Rosario, Tucumán, Salta, Bahía Blanca, Neuquén, San Luis, Comodoro Rivadavia and San Juan, reaching coverage of 66% of the national GDP.

Total CapEx for Unifón as of June 2004 was 60 million euros, with CapEx committed of 83 million euros.

The Peruvian cellular market continues to show strong growth, ending the second quarter of 2004 with an estimated 3.4 million users, with penetration of 12.4%, 3.2 percentage points, higher than at the end of second quarter of 2003.

In this context, TM Perú continues to lead market growth, with net adds of over 161 thousand customers in the second quarter of 2004, 2.5 times higher than the figure recorded in the second quarter of 2003 and 25.4% higher than first quarter of 2004.

Efforts in customer acquisition led to increased y-o-y growth in the customer base in both segments (contract 10% vs. +7% in the first quarter of 2004 and prepaid +46% vs. +39% in the first quarter of 2004). The company ended the second quarter of 2004 with a customer base of 1.8 million, +37.7% vs. the end of the second quarter of 2003.

It is also worth noting that at the close of the second quarter of 2004, 25% of the customer base had a handset with CDMA 2000 1xRTT technology, vs. 15% in the previous quarter.

As regards financial results, TM Perú's operating revenues in local currency grew 8.3% in the first half of 2004 vs. the first half of 2003. This was due largely to the increase in the customer base and growth in prepaid outgoing traffic, which were partly offset by the lower interconnection revenues due to the decline in traffic from fixed networks.

As a result of the increase in operating expenses deriving from the intense commercial activity, EBITDA in local currency declined by 23.3% in the first half of 2004, leaving an EBITDA margin of 25.9% vs. 36.6% in the first half of 2003. The EBITDA margin in the second quarter of 2004 remains stable with respect to the first quarter of 2004 despite the strong commercial activity thanks to cost control.

Telefónica Móvil - company acquired by Telefónica Móviles - ended the second quarter of 2004 with 2.7 million customers, with y-o-y growth of 40.8%. The company has once again led growth in the market, with 238 thousand net adds in the second quarter of 2004 (vs. 61 thousand in the second quarter of 2003), thanks to the positive performance of GSM net adds.

In little more than a year after its launch (April 2003), the company has a GSM customer base of 923 thousand, 34% of the total customer base.

As for financial results in the first half of 2004, the strong increase in the customer base, together with higher outgoing traffic, continue boosting operating revenues' advance. Meanwhile, the EBITDA margin reduction from the first quarter of 2004 (20.8% in the second quarter of 2004 and 24.3% in the first quarter of 2004) is due to the higher commercial activity as well as the impact from the reduction in mobile interconnection tariffs from February 2004. Thus, EBITDA margin for the first half of 2004 stood at 22.6%.

The total customer base managed by Telefónica Móviles' operators in Guatemala and El Salvador at the end of June 2004 stood at 531 thousand customers (238 thousand in Guatemala and 293 thousand in El Salvador), a y-o-y increase of 48%.

The sharp increase in customers compared to the previous quarter reflects the larger net adds (over 71 thousand customers in the second quarter of 2004 vs. 55 thousand in the first quarter of 2004), as a result of the commercial effort made in the Mother's Day campaign.

As regards financial results, we would highlight the 16.9% y-o-y increase in operating revenues from both operations vs. the first half of 2003 in constant euros, fuelled by the growth of the customer base. EBITDA performance reflects the larger commercial effort made. The EBITDA margin was 13.2% in the first half of 2004 vs. 12.2% in the second quarter of 2004.

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DIRECTORIES BUSINESS

During the first half of 2004 the TPI Group's operating revenues increased by 12.7% to 215.7 million euros, despite the negative performance of local currencies against the euro in Latin America, in particular the Peruvian sol. The Group's EBITDA amounted to 59.3 million euros, 39.4% higher than the figure for the same period of 2003. These results are explained by:

• The progress made, within TPI España, by both the advertising revenues, which rose by 11.1% to 140.7 million euros, and the telephony traffic business line, whose revenues soared by more than three times fold those of the previous year, reaching 20.6 million euros.
• The good performance of advertising revenues at the Chilean subsidiary (Publiguias), which in local currency rose by 7.5%.
• The increase in total revenues at TPI Peru of 5.8% in local currency, helped by the publication of the Lima book, and the significant improvement in EBITDA, which rose by 35.1% in local currency, due to the efforts deployed in reducing bad debt provisions.
• The decrease in total revenues of TPI Brazil of 19.5% in local currency, due to a more restrictive contract policy aiming at improving bad debt levels.

Once again it is important to remember that the seasonal nature of revenues, due to accounting criteria in place once each guide was actually published, make it so that the quarterly results are not comparable or standardized, nor can they be extrapolated to year end. Likewise, the positive evolution of the company allows to maintain the initial forecasts of its main financial aggregates up to year-end announced during the first quarter, of growth at constant exchange rates in revenues (3-5%) and EBITDA (9-11%).

TPI España, that includes the revenues of Goodman Business Press, contributed 79% of the Group's revenues, and made a positive contribution to the Group's EBITDA of 54.8 million euros (92.4% of total). TPI España revenues rose by 19.7% to 170.4 million euros, triggered mainly by four main factors:

• The organic growth, like for like, of 4.3% and 7.9% experienced by the Yellow Pages directories and the White Pages directories, respectively.
• The publication of an additional Yellow Pages directory in comparison with the same period in the previous year (41 directories vs. 40 directories in H103) vs. no changes in White Pages (26 directories in both periods).
• The variations in the publication calendar of guides.
• And the strong performance, within TPI Spain, achieved by the telephony service 11888, whose revenues climbed to 20.6 million euros vs. 6.6 million euros in the same period of 2003 (+214.1%).

Latin America contributed the remaining 21% of revenues and 8% of EBITDA, with TPI Peru being the biggest Latin American contributor to both revenues and EBITDA thanks to the publication of the Lima directory in January 2004. During this period, TPI Peru obtained revenues of 26.3 million euros and contributed 10.5 million euros to the Group's consolidated EBITDA.

In turn, the directories business of the Telefónica Group, which includes the Argentinean company Telinver, recorded during the first half of 2004 an increase in total revenues of 12.5% up to 220,2 million euros compared with the first half of 2003, due primarily to an improvement in the economic situation in Argentina. EBITDA amounted 59.9 million euros, representing a year on year increase of 39.9%.

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TERRA LYCOS GROUP

In the first half of 2004, the operating revenues obtained by Terra Lycos amounted 273.9 million euros, representing an increase of 8.3% over the same period of the previous year. The strategic Alliance with Telefónica has continued to progress during the second quarter, reaching an accumulated figure of 59.2 million euros in June compared with 43.5 million euros obtained in the same period of 2003.

The revenues breakdown by business line until June, which remained stable compared with the first quarter, was as follows: 42.5% Access revenues (+11.9% y-o-y), 25.0% Advertising and Online revenues (+14.6% y-o-y), 22.4% Communication Services revenues (-1.0% y-o-y) and the remaining 10.1% Corporate Services revenues (+2.4% y-o-y).

Regarding the geographical revenues breakdown, Spain, Brazil and USA subsidiaries weighted 89% of total revenues, with a significant contribution from the strategic Alliance with Telefónica both in Spain and Brazil.

During this semester, Spain experienced a year over year revenues growth of 28.9% to 115.5 million euros, representing 42.0% of total revenues (up from 35.3% of total revenues in the same period of 2003), mainly due to the growth registered in both access (+16.9%) and CSP/Portal (+47.0%) revenues. Particular mention should be made for the new product launched in June "Pack Terra Disney" that includes broadband internet access (ADSL) plus a package of exclusive broadband Disney contents within a fully secure environment.

Brazil revenues stood at 70.2 million revenues, a decrease of 2.4% over the first half of 2003, representing 25.5% of total revenues (down 2.8 percentage points y-o-y). Terra Brazil, with almost 2.8 million clients, remains the biggest paying access provider in the country with 1.2 million subscribers, highlighting its leadership in the broadband market, with 538,889 connections. Moreover, important companies such as VISA, Johnson & Johnson, Nike and Dell are among the main advertisers within Terra Brazil's client portfolio.

USA revenues, including those of One Travel, amounted 58.1 million euros (+1.5% y-o-y), representing 21.1% of total revenues (1.4 p.p less than in the same period of 2003). Most of the revenues obtained this semester came from advertising revenues.

The remaining countries and businesses weight 11% of total group's revenues, highlighting the contribution of Mexico and Chile, which both account for 10%.

EBITDA for this first half of 2004 stood at 2.4 million euros, representing an EBITDA margin of 0.9% (vs. -14,5% in June 2003), compared with the negative 36.6 million euros reached in the first quarter of 2003. The Alliance with Telefónica registered coverage of the value committed for the whole year (78.5 million euros) of 43%.

Regarding its client base, Terra Lycos reached this first half of 2004 5.7 million paying subscribers (+58.6% over the same period of 2003). Access clients account 1.8 million at the end of June 2004, of which 841,651 are broadband clients (+76.3% y-o-y).

It should be mentioned that 68.0% of the company's total paying customers had signed up for OBP products, consisting of either communication or portal products (CSPs or OBPs). These clients have increased 86.5% in the last twelve months, largely due to the new Alliance with Telefónica.

At the end of the first half of 2004, Terra Lycos had a cash position of 1,615 million euros.

Moreover, during the Ordinary General Meeting of Shareholders held on 22^th June 2004, were approved, among other matters, the reduction of the stock capital by amortization of own shares and the payment of a dividend against the paid in capital reserve.

The share capital will be reduced by an amount of 53,052,804 euros, aiming at amortizing 26,526,402 treasury stock of two euros of nominal value each share. These 26,526,402 shares amortized were acquired by Citibank and maintained in the treasury stock in order to give coverage to the stock-options plan of Lycos Inc.

As a consequence of this share capital reduction, the share capital of the company will be 1,150 million euros (574.9 million shares with a nominal value of two euros each), at present fully subscribed and paid.

The dividend will be paid on July the 30th of 2004, in cash, for a fixed amount of two euros per each of the shares in circulation, with a total maximum amount of 1,136 million euros.

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ATENTO GROUP

In the second quarter of 2004, the positive trend shown during the first quarter continued, characterized by Atento Group's increase in commercial activity and services consolidation in its main clients. It is important to highlight the agreements reached with VIVO and Unibanco Brazil and the signature of new contracts (e.g. Prefetura de Sao Paolo). In Spain and Mexico, the agreement with BBVA continued to progress satisfactorily. Likewise, in Mexico, new clients such as Amex, Scotiabank Inverlat, Nafin and Infonavit were captured and new services launched with BBVA and Nokia. Atento Puerto Rico consolidated the contracts signed during the first quarter with AT&T Wireless, ACE Insurance and Banco Santander. Atento Chile was able to get new clients outside the Telefónica Group, such as Correos de Chile, Vespucio Norte Express, Americatel and new services with BBVA. In Venezuela, a new contract was signed with Empresas Polar. In Atento Colombia, an agreement with DHL has been closed.

From a financial point of view, Atento Group operating revenues for the first half of 2004 amounted to 279,4 million euros, 15.5% more than in the same period of the previous year. This evolution is explained by the greater contribution of Atento Spain, which revenues grew year on year by 20,8%, and of Atento Brazil, which revenues grew year on year by 17.2% due to commercial achievements over the period. Excluding the negative exchange rate effect, revenues would have increased by 19.6%. It is important to highlight that, during the second quarter of 2004, y-o-y revenues growth rate accelerated versus the first quarter of the year (+21.7% vs. 9.4%).

In terms of revenues structure, the contribution of clients outside the Telefónica Group continues its upward trend, reaching 41% of revenues as of June 2004 compared with 38% in December 2003, as a result of the aforementioned commercial progress. Regarding the evolution by countries, Spain and Brazil continue to be the highest contributors of revenues (73.0% of the total), 2.1 percentage points more than their contribution at the end of june 2003. Spain's contribution increased 1.7 percentage points due to higher services given to BBVA, while Brazil's contribution rose 0.4 percentage points. Regarding the rest of the countries, Mexico increased its contribution to 6.5% (4.9% a year ago), as well as Argentina (2.5% vs. 1.7%) and Puerto Rico (2.7% vs. 1.8%).

Operating expenses totaled 240.1 million euros for the period January-June 2004, 10.1% higher than the first six months of 2003 (+14.1% in constant euros). This variation can be explained by the year on year increase in personnel expenses (+12.6%) related to a higher activity.

As a result of this evolution of revenues and expenses, EBITDA for the first half of the year stood at 40.9 million euros, 61.3% higher than the figure for the same period of the previous year (71.6% excluding the forex effect). During the second quarter, the year on year increase of EBITDA reached 83.8%. EBITDA margin rose to 14.6%, 4.2 percentage points above that registered twelve months ago. During the period April-June 2004, EBITDA margin stood at 14,8% (+5.0 percentage points vs. 2Q03). This margin places the Company among the most profitable companies in the "Contact Center" sector.

The operating profit for the first half amounted to 21.4 million euros with a significant improvement compared with the 2.1 million euros loss registered during the same period in 2003, mainly due to the increase in EBITDA and the 29.4% y-o-y decrease in depreciation as a result of the degree of maturity achieved in operations.

Net income for the first half amounted to 2.2 million euros, as compared with a net loss of 14.9 million euros in the first six months of 2003. It is important to note this is the first semester the Company has recorded a positive net result.

At operating level, Atento Group had 27,580 positions in place in June 2004, compared with 25,700 positions in December 2003 and 24,640 positions in June 2003. The average number of occupied positions for the semester was 20.745, representing a level of occupation of 81%, an increase of 5 percentage points from the same period of the previous year.

Accumulated CapEx in June amounted to 8.2 million euros, 25.8% more than in the first half of 2003, mainly due to the investments made by Atento Brazil to attend new services and clients and the implementation of the new call center in Chile (Vicuña) and Mexico (Puebla).

Finally, operating free cash flow (EBITDA-CapEx) reached 32.7 million euros compared with the 18.8 million euros generated in January-June 2003.

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CONTENT AND MEDIA BUSINESS

The Content and Media business obtained operating revenues of 571,1 million euros at the end of the first half of 2004 compared with the 781,7 million euros registered during the same period of the previous year, mainly due to the consolidation by the global integration method of the results of Antena 3, Onda Cero, its subsidiary, and Euroleague during the first half of 2003. These companies being subsequently removed from the consolidation perimeter of the Telefónica Group. Without taking into account these changes in the consolidation perimeter, consolidated revenues would grow more than 12% vs. the first half of 2003, mainly due to the positive performance of Endemol in its English speaking markets, and of ATCO, in a context of recovery of the advertising market in Argentina.

The consolidated EBITDA of the business during the first half of the year amounted to 87,1 million euros, as compared with the 127,2 million euros obtained during the same period of 2003. Excluding the contribution made to consolidated EBITDA by Antena 3, Onda Cero and Euroleague during the first six months of 2003, the EBITDA growth would be 5.8%.

The Endemol Group generated revenues of 488,3 million euros during the first half of 2004, which was 22,4% more than in the same period of the previous year. In EBITDA terms, Endemol registered 83,4 million euros, 14,9% more than in the first half of 2003. This positive performance was mainly achieved in its English speaking markets (the United States and the United Kingdom), where the most profitable formats for the company are produced, highlighting among them "Fear Factor" in the United States.

The advertising market in Argentina during the first half of 2004 grew by approximately 54% with respect to the same period of the previous year. In this positive context, Telefé reaffirmed its position as leader of the free-to-air television market, with an increase of 3 percentage points in audience, reaching 35,7% of the total audience, and maintaining a strong difference of 7,9 percentage points with its main competitor.

During the first half of 2004, ATCO's (Telefé and Radio Continental) operating revenues rose to 141,6 million pesos, 40,0% higher than the figure obtained during the first half of 2003 and EBITDA climbed to 34,6 million pesos, as compared with the 8,8 million pesos recorded in the same period of the previous year.

RESULTS BY BUSINESS LINES

Other businesses

TELEFÓNICA DEUTSCHLAND GROUP

Telefónica Deutschland Group obtained revenues of 172.8 million euros in the first six months of 2004, a decrease of 12.6% year on year, due primarily to the reduction in revenues from narrowband services which has not yet been offset by the increase in broadband business, which nearly accounted for 12% of the total revenues.

With respect to the broadband business, it is important to highlight the addition of 278,000 new ADSL users in the second quarter within Telefónica Deutschland wholesale (T-ZISP) offer in the German market. As a result, the total number of the company's ADSL users exceeded the figure of 597,000 (both in the German and UK markets), providing services to 4 out of the 5 top main ISPs in Germany.

EBITDA reached a total of 5.4 million euros in the first six months of 2004, with an EBITDA margin of 3.1%, which compares with the 4.5 million euros registered in the same period of the previous year.

ADDENDA

Companies included in each Financial Statement

Based on what was indicated at the start of this report, the results breakdown of Telefónica Group are detailed according to the business in which the Group has a presence. The main differences between this view and the one that would apply attending to the legal structure, are the following:

• Telefónica, S.A. directly participates in the share capital of Endemol Entertainment Holding, N.V., which has been included in Telefónica de Contenidos Group. Furthermore, in the fiscal year 2003 the results from the participation, and following divestiture, in Antena 3 de Televisión, S.A., were integrated within the Telefónica de Contenidos Group results, although it had been participated directly by Telefónica S.A. through a part of the year. The results from the Sogecable stake have been also assigned to Telefónica de Contenidos Group, even though a part of the investment is legally dependent upon Telefónica, S.A.
• Telefónica Holding Argentina, S.A. holds 26.82% of Atlántida de Comunicaciones, S.A. (ATCO) and 26.82% of AC Inversora, S.A. which, for those purposes, are considered to be part of Telefónica de Contenidos Group, consolidating 100% share capital of both companies.
• In the case of Compañía de Telecomunicaciones de Chile, S.A. (CTC), participated by Telefónica Latinoamérica, the activities of the mobile telephony business in Chile have already been assigned to the mobile business.
• The participation of Telefónica Group in IPSE 2000 SpA is assigned to the cellular business, also including the investment legally dependent upon Telefónica DataCorp, S.A.
• In the case of Telefónica de Argentina (TASA), participated by Telefónica Latinoamérica Group, Telinver has been assigned to the directories business, in line with our vision for the total Telefónica's directories business.
• Telefónica Data Group, legally dependent upon Telefónica S.A., has been segregated and subsequentally integrated into the fixed line activities both in Spain and Latin America for presentation porposes, and according to geographic criterias. The stakes not included in neither of the previous geographic areas will be consolidated directly by Telefónica S.A.
• Emergia Group, directly participated by Telefónica S.A., has been consolidated within the Telefónica Latinoamérica Group.

ADDENDA

Key Holdings of the Telefónica Group and its Subsidiaries detailed by business lines

ADDENDA

Significant Events

• On July 6, 2004, Telefónica Móviles México announced the rollout of EDGE technology on its GSM network. The Company will offer to its customers five-times faster web browsing speeds than traditional fixed-line connections, along with video streaming, Multimedia Messaging, high speed data transmission capabilities, etc.
• On June 25, 2004, Telefónica's treasury stock position was 131,075,320 shares representing 2.645% of its current share capital.
• On June 16, 2004, Telefónica Móviles S.A. paid a dividend of 0.1838 euros per share against 2003 fiscal year results. The dividend represents around 50% of 2003 Company's net income.

ADDENDA

Changes to the Perimeter and Accounting Criteria of Consolidation

In the first half of 2004, the following changes have occurred in the consolidation perimeter:

DISCLAIMER

This document contains statements that constitute forward looking statements in its general meaning and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to the Company. The forward-looking statements in this document can be identified, in some instances, by the use of words such as "expects", "anticipates", "intends", "believes", and similar language or the negative thereof or by forward-looking nature of discussions of strategy, plans or intentions.

Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and actual results may differ materially from those in the forward looking statements as a result of various factors.

Analysts and investors are cautioned not to place undue reliance on those forward looking statements which speak only as of the date of this presentation. Telefónica undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefónica's business or acquisition strategy or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged to consult the Company's Annual Report as well as periodic filings filed with the relevant Securities Markets Regulators, and in particular with the Spanish Market Regulator

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.