Telefonica IaRC

Annual Corporate
Responsibility
Report
2005
Telefónica S.A.
Annual Corporate
Responsibility
Report
2005
Telefónica S.A.
Contents
Annual Corporate Responsibility Report 2005
Telefónica For all
Letter from the Chairman 4 04 Customers 104

Customer relationship 106
Customer relationship cycle 106
Customer satisfaction 108
Telefónica, the power 6 Dialogue with customer associates
Critical processes for customers
110
112
behind progress for all Marketing
Service provision
112
118
Operation 120
Billing 124
00 Telefónica in 2006 8 Customer attention
Technical service
126
130
World Leader in the Telecommunications Sector 10
Accelerating to strenthen our leaderships 11 Excellence in service 132
International Presence 12 Service improvement initiatives 132
Organisational Profile 14 Quality certificates 134
Driving Progres 15 Responsibility in the service offered 136
Highlights 2005 16 Telecommunications secrecy 136
Protection against Internet abuse 136
Data protection and privacy 142
01 Corporate Governance 20 Protection of infancy
Terminal theft
145
148
Ownership 22
Corporate Governance in the Telefónica Group 23 Responsible use of telecommunications 149
Transparency of the Information to shareholders 28 Markets where Telefónica operates 150
Risk Control Systems 29 Competitive situation and market evolution 150
Regulatory situation and free competition 154
02 Identity 32
Corporate Responsibility 34
Milestones and challenges in Corporate Responsibility 48 05 Shareholders 168
Values 50 Profitability 170
Code of Ethics 52 Transparency 172
Corporate Responsibility 56 General Shareholders’ Meeting 174
Brand 58
Sponsorships 62
Driving progress
03 Driving progress 66
Driving economic development 68
Impact of Telefónica’s activity 68
Distribution of income 72
Evolution of rates 74
Impact on productivity 76
Driving technological progress 78
The Information Society 78
Innovation 82
Telefónica I+D (Research and Development) 90
Collaboration with the University Sector 92
Information Systems 96
“Information Society” Report 97
Institutional Collaboration 98
Driving social development 100
06 Employees 178 08 The Enviroment 252
Telefónica employees 180 Environmental commitment 254
Description of the workforce 180 Environmental management 256
Generation of employment 182 Monitoring and follow-up of environmental aspects 260
Workplace environment 184 Electromagnetic emissions 261
Internal communication 186 Impact of installations 265
Involvement of employees in strategy 187 Control and management of waste 268
Compensation policies 188 Energy consumption 271
Compensation 188 Emissions into the atmosphere 277
Health plans 190 Paper consumption 280
Pension plans 191 Water consumption 284
Other benefits 192 Consumption of poles 285
Professional development 194 Environmental impact of Telefónica’s services 286
Training 194
Tele-training 196
Management by skills 197
Professional career 198 09 Suppliers 292
Professionals and persons 200 Purchasing volume 294
Human rights 200 Purchase model 296
Freedom of association and collective bargaining 202 Supplier satisfaction 298
Work-life balance 206 Promotion of ethical standards 300
Abolition of child labour 208
Equality of opportunities 209
Health and safety 211
Employment demands 219 10 Media 304
Employee solidarity 220 Information and Transparency 306
Telefónica volunteering 220 Investment in publicity 307
ATAM 221
District C 222
11 Annex 1 310
About the report
07 Society 226 Dialogue with stakeholders 312
Commitment to countries 228 Reporting principles 316
Digital inclusion 230 Consolidation boundary of the information included 320
Universal Service 231 Consolidation process of the information 322
Geographic divide 232 United Nations Global Compact 324
Economic divide 234 Independent verification
Inclusion through training 236
Social and cultural activity 238
EducaRed 240
Proniño 242 12 Annex 2 310
Cooperation 244 Independent verification report 312
Art and Culture 245
Telefónica Accessible 246
Letter from the Chairman
Dear Friend,
Telefónica would like to present you, for the fourth consecutive year, its Annual Corporate
Responsibility Report, one of the keystones of the Group’s corporate responsibility strategy.
The report we present for FY 2005 is a further step towards Telefónica’s strategic goal of being a
committed and responsible Group. Committed, in that we are involved in the progress and
development of the countries where we operate, through the transformation of our innovations
into global communications solutions. And responsible in that we are focused on permanently
improving the way in which we carry out our operations. At Telefónica we understand that as far
as we are capable of generating a positive impact on society, we will also be capable of
generating profitable and sustainable growth for everyone, thereby guaranteeing the
sustainability of our company.
This annual Report introduces improvements with regard to the reports for previous years, in an
effort to remain at the forefront of the corporate responsibility movement that has been
growing throughout Europe and Latin America for some years now.
The first improvement in this Report has been its ability to consolidate a comprehensive
corporate responsibility reporting system at Telefónica. This system has already borne results,
such as the CR Reports for Argentina, Brazil, Chile and Peru. These “country reports” are a natural
consequence of our commitment to initiatives promoted by the UN such as the Global Compact
and the Millennium Goals, as well as the result of our “multidomestic” character. On the one
hand, we are global, because of our size, presence and services. In 2005 we have further
reinforced our internationality with the acquisitions of Çesky Telecom and O2 in Europe and our
strategic alliance with China Netcom. On the other hand, we are also local, because, beyond
sharing the same language, especially in Latin America, it is our desire to contribute to the
communities we belong to through understanding and addressing their needs.
The second improvement in this Report has been its ability to transform internal management
processes and systems on a worldwide scale. In 2005, special progress was made with the
environmental management systems and the implementation of specific policies to extend best
corporate responsibility practices from Europe to Latin America, and vice versa. To this aim, the
2005 report includes a detailed account of goals and challenges for 2006.
Thirdly, the 2005 Report includes many of the lines for improvement and progress suggested to
us by our stakeholders following a detailed analysis of the reports for previous years. The fact is
that, as was expressed in a series of dialogue panels held during the financial year, there is great
interest in Telefónica's behaviour towards its customers, suppliers, employees of Telefónica
Group, etc.
Fourthly, the report on corporate responsibility strives to present what we internally refer to as
“the other Telefónica”, that is, the Telefónica that lies behind its financial results. For many of our
stakeholders, Telefónica is much more than a telecommunications services provider. Many
already perceive us as a driving force behind the social, technological and economic development
of the societies in which we operate. Our activity generates an important wealth in social,
employment, digital inclusion and education terms, as well as in product and service innovation,
business opportunities for suppliers… The benefits that information and communication
technologies can bring to sustainable development provide a great opportunity for our business
and for the societies in which we are present.
Lastly, the 2005 Report has taken us a step further in our search for rigour, transparency and
relevance of information. Thus, the 2005 Report has been externally verified by Ernst&Young, in
accordance with the Standard AA1000/AS, as regards the consolidation boundary in Spain. The
aim has been to offer a balanced and reasonable presentation of the economic, environmental
and social performance of our organisation. In addition, once again, the Report has been
prepared in accordance with the 2002 Global Reporting Initiative Guidelines for all the
consolidation boundary of the Group. We are proud that our commitment to transparency has
been acknowledged with the inclusion of Telefónica in the main indices of companies who invest
responsibly and with the many awards and special mentions received in 2005.
To conclude, I would like to reaffirm our commitment to permanent improvement in this

corporate responsibility report. This improvement would be possible without the understanding
and support from our stakeholders. That is why I wish to express our sincere gratitude to all
those who, through their opinions and suggestions, have allowed us to make progress.
Best regards,
César Alierta
Executive Chairman, Telefónica, S.A.
00 Telefónica in 2006
Telefónica, the power behind progress for all
Customers Shareholders Employees

Quality and fulfilment Profitability and Clarity and professional
transparency development
Customer satisfaction Investment Employment

Economic 84% fixed Spain >1.5 million shareholders 207,000 employees
73% fixed Argentina 60,405 Spain
Progress 55% fixed Brazil Profitability 14,326 Europe
66% fixed Chile +76% accumulated 131,968 LATAM
63% fixed Peru profitability 2003-2005
>70% mobile LATAM 0.5 € dividend per share Compensation
5.045 billion euros
Price evolution Results 2005 147,000 employee with
Fall of 12% in mobile +40% results variable salaries
telephony in Spain in 2005 +24% income
5.1% a year fall in fixed +17 free cash flow Pension Plans
telephony in Spain generation 94 million € contributed by
(since 1998) Telefónica to private plans
>12% profitability (fonditel)
Productivity
increases
Innovation Shareholder Training

Technological 2,9 billion € on and investor website 9.3 million hours
Progress innovation in 2005 1,182,000 visits 48 training hours
533 million € on R&D 963,000 downloads per employee
>130 new products 20% online training
Shareholder helpline >43,000 training plans
Operation >88,000 queries
2.18% faults in Spain Telework
4.17% faults in Latam >1,000 teleworkers
95% minimum network
efficiency GSM CDMA Professional career
350 published vacancies
Digital household
150 cities with digital Competencies
television coverage in Spain >78,000 jobs evaluated
in December 2005
(3 in Dec. 2004)
Digital inclusion Responsible Working practices

Social 5.5 million low income lines investment 142,000 employees in
in Latin America 48.1 million euros invested collective agreements
Progress >300,000 social subscribers by Fonditel in responsible
in Spain funds (1.01% of total) Work auditing
26 companies audited in 2004
Telefónica Accessible 4 companies audited in 2005
>30 services for the disabled
Integration
Service 1,079 disabled employees
responsibility 49.3% women
21.8% female managers
Contracting
85.4% payroll with permanent
or indefinite contract
Telefónica, S.A. | Corporate Responsibility Report 2005 6

Society Suppliers Environment Media

Contribution and Equal opportunities Respect and protection Information and
proximity and mutual benefit transparency
Economic impact Purchases Investments Advertising

(% TEF income on GDP) >13 billion € District C: largest rooftop investment
2.2% Spain >18,000 awarded suppliers solar power producing park 47% television
1.3% Argentina >42,000 suppliers in catalogue in Europe (21.5 million €) 19% press
1.1% Brazil (16,600 solar panels) 18% exterior
1.8% Chile Local suppliers 10% radio
2.1% Peru 90% awarded suppliers Support to
1.6% Venezuela 85% volume adjudicated environmental
organisations
Public Supplier satisfaction 10 NGOs receive support
Administrations 67.5% overall satisfaction from Telefónica
8.511 billion € paid
in 2005
Digital inclusion Online purchasing Environmental Online press room

ADSL coverage >8 billion € adjudicated impact of ICT 176,000 sessions in 2005
97.3% Spain, >20,000 online purchasing 12 studies in 2005 (82,000 in 2004)
89.5% Argentina, 96.8% Brazil, processes
96.5% Chile, 97.0% Peru Internal training Product
Online auctions 3,348 employees trained information
Mobile coverage 685 million € adjudicated in 2005 42% press notes
99% Spain, 948 purchasing processes on products
92% Argentina, 95% Chile Infrastructure
76% Ecuador, 69% Mexico Joint innovation development
62% Peru, 93% Venezuela 5,000 people collaborate Agreement with the
with Telefónica Federation of Municipalities
Public services for the development of the
≈700,000 boxes Information Society
Social action Ethical standards Global environmental Transparency

>54 million € invested in the supply chain management Telefónica, the company
90% of suppliers support 13 countries share the with the best information
Fundación Telefónica them (survey) regulation of minimum in social action*
763 projects environmental 1º Telefónica: 746 points
31,000 participating entities Compliance with requirements 2º Classified: 496 points
41 million participants payment times 3º Classified: 465 points
98% invoices Training in society
Internet training 96% amount Social training on
>5,000 schools (data for Spain) electromagnetic emissions
connected in Chile
Telefónica Accessible *Fundación Empresa

Manual of accessible y Sociedad
communication in
collaboration with CERMI

Telefónica is a world
leader in the
telecommunications
sector, with over 154
million accesses and
presence in 19 countries
Telefónica, S.A. | Corporate Responsibility Report 2005

Letter from the chairman
Contents 4
Telefónica, motor de progreso for all 6
00 Telefónica in 2006 8
World leader in the telecommunications sector 10
Accelerating to strengthen our leaderships 11
International Presence 12
Organisational Profile 14
Driving Progress 15
2005 Highlights 16
01 Corporate Governance 20
02 Identity 32
04 Customers 104
05 Shareholders 168
06 Employees 178
07 Society 226
08 The Enviroment 252
09 Providers 292
10 Media 304
11 ANNEX I 310

World leader in the telecommunications sector

Accelerating to strengthen our leadership
Telefónica in International Presence

2006 Organisational Profile
Driving Progress
2005 Highlights
Telefónica is the world

leader in the telecommunications sector
Almost 154 million accesses Accesses Financial Results
As at the end of FY 2005, Telefónica Group Telefónica Group’s income increased by
had a total of 153.5 million accesses. 25.1% with respect to 2004, reaching
Including customers of O2, whose 37,882.1 million euros.
4th company in the world acquisition materialised in 2006, Telefónica
in terms of number of Group’s customer base rises to 180.9 Telefónica Group’s OIBDA amounted to
customers million. 15,276.4 million euros, with an increase of
25.0% compared to 2004.
The mobile telephony customer base grew
to 99.1 million, and fixed telephony reached Telefónica Group’s net income rose to
Almost 2,900 million euros the figure of 40.9 million customers. 4,445.8 million euros, a 40.0% increase
invested in technological compared to 2004, thanks to the good
Including O2 customers, Telefónica was performance of operations as a whole, and
innovation fourth largest company in the world in terms to the positive contribution of the
of number of customers as of FY 2005. acquisitions made.
More than 207,000 Investment Employees

employees During the last two years, Telefónica has Telefonica’s direct staff as a consolidated
considerably expanded with the acquisition Group includes over 207,000 employees, of
of BellSouth’s assets in Latin America in which 37% correspond to Europe and 63%
2004, the acquisition of Cesky Telecom and correspond to Latin America.
Included in the Dow Jones the purchase of 5% of the share capital of
Global 50 Titans China Netcom in 2005 and the acquisition Shareholders
of the European assets of operator O2 in Telefónica is an entirely private company,
2006. with over 1.5 million direct shareholders,
listed in the main national and foreign
Telefónica has relevant operations in 19 stock exchanges.
countries, and is the leading private
investor in Latin America. Telefónica is part of the Dow Jones Global
50 Titans index, which includes the 50
In the course of 2005, Telefónica assigned most important companies in the world.
almost 2,900 million euros to technological
innovation activities.

Transformation of the Telefónica Group

Countries (Units) 19
Accesses (millions)
181
14
123
62
15 26
1
Before 1990 1995 1999 2004 20051

¡
Including O2 customers
Accelerating to strengthen our leadership
The desire to become the best combination Over the last 20 years, Telefónica has
in the telecommunications sector in terms experienced an important process of
of growth and profitability is based on a transformation, which has allowed it to
programme of transformation, which, acquire a new dimension, and to
under the motto “Accelerating to strengthen its competitive positioning
strengthen our leadership”, is built on five through the scale of the company:
cornerstones: customer orientation,
innovation, operational excellence, •From operating only in Spain to offering
commitment, leadership in people and a its services in nineteen countries,
common Group identity. representing a potential market of 670
million people.
In 2005, Telefónica continued in its
transformation programme, focused on •From offering basic communication
becoming an integrated Group that services to offering a wide range of
satisfies its customers’ overall communication solutions tailored to the
communication needs, extending needs of each client.
innovation from the technological field to
different processes in the value chain. The •Telefónica has increased the value of its
assets by seven, has multiplied its
aim is to have the best customer
revenue by twenty-one, and has
satisfaction levels in its sector, and to be a
increased its market capitalisation by
company which employees are proud to be
thirty-nine times.
a part of. It aims to be one company, with a
set of values and a common identity shared
by all the businesses that comprise the •Telefónica has increased the number of
its employees by three times, and its
Telefónica Group.
number of clients has increased by
twenty times.

Geographic Distribution of Revenue1

Percentages
2004
2005
60.3
51.9
41.5
34.8
6.6
4.9
Europe and others Latin America Spain

1
Revenue contributed by each region to Telefónica Group’s consolidated results
International Presence
Global presence, local focus As from April 2006, Telefónica is a strategic

Growth of Telefónica partner of the State operator Colombia
Telefónica operates in many countries, each
2003-2005: one of them with very different challenges Telecom. In addition, Telefónica owns 5% of
and opportunities. The value of a business the share capital of the Chinese
Accesses x2 is not only focused on the penetration into telecommunications company China
new markets, but rather in the day-to-day Netcom, which has allowed Telefónica to
start creating a strategic framework for
Countries +10 management of the companies, thinking
cooperation in fields such as joint
globally while keeping the local focus on
our operations. acquisition of technology and
Employees x1.5 infrastructures, technology transfers and
Telefónica will only become a genuinely other fields related to management.
global company if it acts and manages its
affairs as a local company. To this aim, the Integrated Operator: business
common focus of Telefónica Group lies in diversification
its customers, and the importance of The financial results for 2005 have been
customers for Telefónica Group is what strengthened by the diversification brought
makes Telefónica different from other by being an integrated operator. In this
operators. context, the mobile telephone business is
the main contributor to the Group’s
Dimension and scale revenue (+38.1%/year) while the fixed
The year 2005 has meant an important telephony business is the most profitable
step ahead in terms of the Group’s line, having grown by 19.9% in Spain and
dimension and scale. The integration of the 14.6% in Latin America with regard to 2004.
operations of BellSouth and Cesky Telecom,
together with the acquisition of O2, have By geographic regions, Spain represents
accelerated its growth profile, increasing its 51.9% of the Group’s consolidated revenue,
differential factor with regard to its while Latin America represents 41.5%. The
European competitors. acquisition of Cesky Telecom, in July 2005,
has brought increased geographic
These operations are proof that one of diversification, with the Czech Republic
Telefónica’s strategic aims is the obtention representing 2.7% of the consolidated
of synergies. More specifically, and as a result revenue.
of the integration of BellSouth mobile
operators Latin America, Telefónica Group
has already met over 50% of its own synergy
previsions. In the case of the integration of
O2 in Telefónica Group, previsions point to
the synergies generated reaching 3,300
million euros in the first year.

Telefónica: Market size (2005)

Figures in thousands
Mexico Guatemala El Salvador Nicaragua Venezuela Germany Czech Republic

Mobile Accesses Mobile Accesses Mobile Accesses Mobile Accesses Mobile Accesses United Kingdom Mobile Accesses
6,368 1,041 538 372 6,160 Ireland 4,676
Data and Internet Fixed Telephony Fixed Telephony O2 Fixed Telephony
accesses 3 accesses accesses accesses
44 69 2,961
Data and Internet Data and Internet Data and Internet
accesses accesses21 accesses
1 661
Pay-TV customers
14
Spain
Mobile Accesses
19,890
Fixed Telephony accesses
16,136
Data and Internet
accesses
5,586
Pay-TV customers
207
Panama
Accesos Celulares
849
Colombia
Mobile Accesses
6,033
Data and Internet
accesses
3
Ecuador
Mobile Accesses
1,885
Peru
Mobile Accesses
3,455
Chile Argentina Uruguay Brazil Morocco China
Fixed Telephony Mobile Accesses Mobile Accesses Mobile Accesses Mobile Accesses Mobile Accesses China Netcom
accesses 5,276 8,335 419 29,805 4,023 5% share capital
2,348
Fixed Telephony Fixed Telephony Fixed Telephony
Data and Internet accesses accesses accesses
accesses 2,429 4,532 12,340
403
Data and Internet Data and Internet Data and Internet
Pay-TV customers accesses accesses accesses
462 484 902 3,329

Telefónica
Telefónica Telefónica O2 Telefónica

de España Internacional Móviles
Atento
T-Gestiona
Telefónica I+D
Telefónica Contenidos
Fundación Telefónica
Organisational Profile
Throughout recent years, Telefónica has O2

concentrated its telecommunications At the start of 2006 Telefónica concluded a
business, strengthening its presence in tender offer to buy the operator O2, with
fixed and mobile telephony markets, and significant operations in Germany, Ireland
focusing its business model on satisfying and the United Kingdom.
all its customers’ communication needs. As a result of the reorganisation carried out
by Telefónica in December 2005, Cesky
Telefónica de España Telecom and Telefónica Deutschland are
Its main activity is providing fixed also integrated within this Business Unit.
telephony and broadband services in Spain.
Telefónica Empresas, Telefónica Soluciones Atento
and Terra in Spain are also integrated in Provides customer assistance service
this business unit, offering value-added through contact centres or multi-channel
services to its customers. platforms (telephone, fax, Internet...).
Telefónica Internacional Telefónica I+D

Telefónica’s investments in the fixed Oriented towards the creation of services,
telephony sector in Latin America are the management of networks, services and
managed through Telefónica Internacional businesses, with special attention to
(also known as Telefónica Latinoamérica). technological innovation of a strategic
Its activities are carried out mainly in nature or new to the market.
Argentina (TASA), Brazil (Telesp), Chile (CTC),
Peru (TdP). Telefónica Empresas América, T-Gestiona
Terra Latinoamérica and Telefónica Administrative support for the Group
International Wholesale Services are also related to non-strategic activities common
integrated in this business unit. to the different business units.
Telefónica Móviles Fundación Telefónica

Channels all the non-profit social and
Telefónica Móviles leads the Spanish- and
cultural activities.
Portuguese-speaking markets. As at
December 2005 Telefónica Móviles offered
its services to over 94 million clients,
Centro Corporativo
Responsible for the definition of global
being present in all key markets in Latin
strategy and corporate policies, for the
America, and achieving a leading position
management of common activities and the
in the region.
coordination of the activities of the
business units.

Driving Progress
Telefónica is an important driving force for Driving Social Development

economic, social and technological
51,000 million euros
Telefónica wishes to be perceived as a
development in the countries where it is group that is responsible and committed
redistributed among
present. towards its stakeholders. stakeholder groups
Driving Economic Telefónica is increasingly customer- Revenue / GDP = 1.7% for
Development oriented, and committed to excellency in main countries
In 2005 Telefónica distributed over 51,000 quality and services. As a result of this
million euros among its stakeholder groups, effort, in 2005, Telefónica has reached a
of which over 4,000 million euros were used customer satisfaction level in Spain of 83%. Over 18,000 suppliers
for employee remuneration; almost 5,000
million euros were distributed among During 2005, Fundación Telefónica carried 533 million euros on R&D
shareholders and over 19,000 million euros out a strategic revision of all its projects,
went to suppliers. It is important to note the focusing its efforts on two areas of activity:
collecting role of Telefónica which, through Education (Educared) and the integration
83% customer
fees, licenses, consumer taxes and indirect of children into society (Proniño). It is satisfaction in Spain
taxes, has channelled over 8,500 million important to note the commitment of
euros for the Public Administrations. employees to volunteer activities, and their 5.5 million accesses for
commitment towards disabled people
through ATAM.
low income households in
Telefónica’s revenue represents an average
of 1.7% of the Gross Domestic Product of
Latin America
the economies of the main countries where The digital inclusion of people with low
it is present. economic resources (over 5 million prepaid Over 54 million euros on
and controlled lines in Latin America) or social and cultural action
Over 18,000 suppliers collaborate with people with disabilities (via the project
Telefónica worldwide, with a high Telefónica Accesible) are initiatives which
percentage of contracts being awarded to show Telefónica’s commitment to social
local suppliers (an average of 85% in 2005). inclusion.
Implementation of Telefónica Group’s Code

Driving Technological
of Ethics.
Development
During 2005, Telefónica earmarked almost Publication of annual reports on Corporate
2,900 million euros for technological Responsibility in Argentina, Brazil, Chile and
innovation activities. Peru.
Telefónica further increased its investment Presence of Telefónica in the main

in R&D activities in 2005, reaching a total sustainability indices: DJSI and FTSE4good,
of 530 million euros, which amounts to among others.
1.4% of Telefónica Group’s total revenue.

2005 Highlights
Profitable Growth*
Results
4,445.8 Million Euros
+40%
Revenue OIBDA Cash flow generation
Millions of Euros Millions of Euros Millions of Euros
37,882.1
30,280.9 15,276.4
12,222.0 9,917.7
8,454.9
2004 2005 2004 2005 2004 2005

+25.1% +25.0% +17.3%
Clients
+24% 154 million accesses (not incl. O2)
ADSL Lines Mobiles Imagenio
Thousands of clients Millions of clients Clients
5,880
3,916 99
74.4 206,600
6,024
2004 2005 2004 2005 4Q´04 4Q´05

+50.2% +33.2% +200.6%
Growth
5 corporate acquisitions in 2 years
Growth due to acquisition 2004-2005
2004 2005 2006
*For a broken down, detailed analysis of Telefónica Group’s Bellsouth Çesky China O2 Colombia
consolidated financial statements, please refer to the Telecom
Telecom Netcom
audited information in the annual statement of accounts

Driving Progress Divestiture Shareholders

Financial 4,119 4,822
Econonic progress Suppliers
Other
905 Employees
3,075 4,213
18,000 suppliers Investment
10,524
1.7% Contribution of
income to National GDP
154 Million accesses (not incl. O2) Total Income

Public
Administrations
8,511
1.5 Million shareholders
207,000 Employees Total Payments
Suppliers
Commercial
Customers 19,087
43,482 CapEx
4,423
Tecnological Progress
2,900 million euros on innovation +21%
Innovation R&D Who innovates?
Millions of Euros Millions of Euros In percentages
2,900 Telefónica
Others Latinoamérica
2,398 533 6
461 Telefónica
15 Móviles
7
15
Telefónica
de España
53 52
25
27
2004 2005 2004 2005
+20.9% +16.6%
Social progress
54 million euros in social action
+16%
Social action Digital inclusion Employee
Millions of Euros Thousands of lines in low Trainning
income homes LATAM Thousands of hours
54.1 5.541 9,349
46.5 8,910
4.720
2004 2005 2004 2005 2004 2005

+16.6% +17.4% +5%
Credits
Departments that collaborated in the preparation of the report
Capitulo Areas implicadas
01 Corporate Governance Secretariat General / Internal Auditing Department
02 Identity Communication (Brand, Reputation and CSR) /

Human Resources Office / Sponsorship /
Internal Auditing Department
03 Driving Force for Progress Finance (Consolidation, Management Control),

Tax, Regulatory Affairs, Innovation, Telefónica I+D,
Institutional Relations, Information Systems,
Investor Relations
04 Customers Corporate Marketing Development /

Quality, marketing and customer service departments
of the main business lines (Telefónica de España,
Telefónica Móviles, Telefónica Latinoamérica) /
Secretariat General / Communication / Security
05 Shareholders Shareholders’ Office / Investor Relations /

Secretariat General
06 Employees Corporate Human Resources / Human Resources

Departments of the main lines of business
(Telefónica de España, Telefónica Móviles, Telefónica
Latinoamérica, TPI, Terra, Atento, T-Gestiona) /
Communication / Health and Safety /
Fundación Telefónica / ATAM / Fonditel
07 Society Main lines of business (Telefónica de España, Telefónica

Latinoamérica, Telefónica Móviles) / Institutional
Relations / Management Control / Regulatory Affairs /
Reputation and Corporate Social Responsibility /
Fundación Telefónica / ATAM / Sponsorship
08 Environment Internal Auditing / Reputation and Corporate Social

Responsibility / Environmental Departments of the
main lines of business (Telefónica de España,
Telefónica Móviles, Telefónica Latinoamérica)
09 Suppliers Purchasing / Internal Auditing /

Reputation and Corporate Responsibility
10 Media Communication
Annex 1: About the Report Reputation and Corporate Responsibility

Annex 2: Verification Report Ernst&Young. Report
Coordination Reputation, Brand and Corporate Social Responsibility

(G.D. of Communication)


Corporate
01 Governance
Telefónica complies
with the main national
and international
guidelines and
requirements for
Corporate Governance

Contents 4
Telefónica, motor de progreso for all 6
Ownership 22
Corporate Governance in Telefónica 23
Transparency of the Information to Shareholders 28
Risk Control Systems 29
02 Identity 32
04 Customers 104
05 Shareholders 168
06 Employees 178
07 Society 226
09 Providers 292
10 Media 304
11 ANNEX I 310

01 Corporate Governance
Ownership
Corporate Corporate Governance in Telefónica

Governance Transparency of the Information to Shareholders
Risk Control Systems
Ownership
Telefónica’s fully subscribed and paid-up Shareholders with significant stakes

share capital amounts to 4,921,130,397
Name or % total share
euros, and is divided into 4,921,130,397 corporate name capital
ordinary shares, of a single class and series,
“La Caixa” 5.09%
with a nominal value of (1) one euro each,
BBVA 6.63%
represented by book entries.
Information as at Decenber, 31, 2005
In accordance with the information

available in the Company, there is currently
no natural or legal person that exercises, or
may exercise control, directly or indirectly,
individually or jointly, over Telefónica. There
are, however, two shareholders with
significant shareholdings, directly and
indirectly, as is shown in the following
table: Caja de Ahorros y Pensiones de
Barcelona (La Caixa), and Banco Bilbao
Vizcaya Argentaria, S.A. (BBVA), with 5.09%
and 6.632% of the share capital,
respectively.

This chapter presents a summarised version of the Annual

Report on Corporate Governance of Telefónica S.A. for FY 2005.
This report, which addresses the requirements established in
the Circular 1/2004, of March 17, of the Comisión Nacional del
Mercado de Valores (Spanish Stock Exchange Commission), is
published on an annual basis, and can be accessed through the
Company’s website for shareholders and investors.
(www.telefonica.es/investors).
Corporate Governance in Telefónica
Principles of Corporate With respect to corporate interest. The

Governance Board of Directors executes its functions in The information regarding the
accordance with corporate interest,
The basic corporate governance regulations General Shareholders’
understood as the Company's interest,
of Telefónica are set out in the Company Meeting is detailed in the
and, in this respect, acts to guarantee the
By-laws, in the Regulations of the General
Shareholders Meeting and in the
long term viability of the Company and Shareholders chapter in this
maximise its value, whilst taking into
Regulations of the Board of Directors. report
account the plurality of legitimate public
or private interests that converge in the
The Regulations of the General
execution of all business activities.
Shareholders’ Meeting establishes the
principles of organisation and its operation,
With respect to its shareholders. The Board
offering shareholders a framework that
of Directors, as the liaison between the
guarantees and enables the exercise of
shareholders and management, is
their rights with regard to the General
responsible for setting up the necessary
Shareholder’s Meeting, as the governing
channels to be aware of the suggestions
body of the Company.
put forward by shareholders with respect
to the corporate management. The Board
Likewise, the Regulations of the Board of
of Directors also undertakes to
Directors, as the founding rules of
guarantee equal treatment in its relations
corporate governance for the Company,
with shareholders.
determine the principles guiding the
actions of the Board of Directors, regulate
With respect to the market. The Board
its organisation and operation and
undertakes to execute the acts and take
establish the rules of conduct for its
the necessary measures to ensure the
members.
Company's transparency in financial
markets, and to promote correct formation
In accordance with the foregoing, and as
of the Company's
the basis of the governance structure of
share prices, particularly avoiding
Telefónica, the Regulations of the Board of
manipulation and abuse of privileged
Directors of the Company determine the
information.
fundamental principles that guide the
actions of the Board of Directors:

Composition of the Board of Directors
6
Executives
8
Independent
directors directors
4
Proprietary
directors
The Board of Directors The Board of Directors

The Regulations of the Board of Directors Executive Committee
establish it as a basically supervisory body Subject to the legislation in force, the
controlling the Company’s activity, while Board of Directors has expressly delegated
entrusting the day-to-day management of all of its powers and attributes, save those
the business to the executive bodies and that may not be legally or statutorily
the management team. Moreover, and in delegated, to an Executive Committee with
keeping with the provisions of these general decision-making powers.
Regulations, those powers that are legally
or statutorily reserved for the Board of The relationship between the Board of
Directors may not be delegated, nor may Directors and its Executive Committee is
any others necessary for the responsible based on the principle of transparency,
performance of its basic supervisory and such that the Board is always fully aware of
control duties. the decisions adopted by the Committee.
Accordingly, and within the scope of its Thus, the Board of Directors is informed at
duties of supervision and control, the Board each of its sessions of all the resolutions
of Directors (i) determines the strategies adopted by the Executive Committee,
and guidelines for the Company distributing a summary of the minutes of
management, (ii) establishes the basis for the Committee sessions for this purpose to
corporate organisation to ensure its all the Board members. The Board then
maximum efficiency, (iii) implements and proceeds to ratify these resolutions.
oversees the suitable information Moreover, the election of the members of
procedures to report Company information the Board of Directors to the Executive
to shareholders and the markets in general, Committee must have the backing of, at
(iv) makes decisions regarding business least, two thirds of the Board of Directors.
and financial transactions of particular
importance to the Company and (v)
approves the bases of its own organisation
and operation to ensure the optimal
fulfilment of these duties.
The Company By-Laws of Telefónica

establish that the Board of Directors must
comprise a minimum of five and a
maximum of twenty Board Members. In
April 2006, the Board of Directors of
Telefónica was comprised of 18 Directors, of
which 6 are Executive Directors, 4 are
Proprietary Directors and 8 are
Independent Directors.

Telefónica’s Board of Directors’ Committees

Board of Directors’ Committee Non-executive board members Executive board members No. of sessions 2005
Executive Committee 4 4 19
Audit and Control 4 0 12
Nominating, Compensation and Corporate Governance 4 0 10
Regulation 3 1 9
Human Resources and Corporate Reputation 4 0 5
Service Quality and Customer Service 3 1 4
International Affairs 5 0 6
The Board of Directors’ The Nominating, Compensation and

Corporate Governance Committee,
Consultative or Control
regulated by the Board Regulations, has
Committees the following competencies: (i) to inform
The Board of Directors of Telefónica has with regard to proposals for the
constituted several consultative or control appointment of Directors and other high-
Committees –precisely six- which it ranking officers of the Company and its
entrusts with the continual study and subsidiaries, (ii), to approve the
monitoring of areas of particular relevance remuneration bands for the high-ranking
for the Company’s good governance, or for officers of the Company, (iii) to approve the
the monographic analysis of certain standard contracts for the high-ranking
significant aspects or issues where such officers, (iv) to determine the
study is appropriate. These Committees are remuneration scheme for the Chairman,
not corporate bodies, but rather are (v) to inform and propose to the Board of
structured as instruments to serve the Directors the retribution schemes for
Board of Directors, which receives the Directors and to revise them periodically,
conclusions reached in the matters and (vi) to inform of the incentive plans, (vii) to
issues the Committees are instructed to perform an annual analysis of the
study. remuneration policy for Directors and
high-ranking officers, (viii) to inform with
Among the consultative or control regard to proposals for the appointment of
Committees constituted by the Board of members to the Board Committees, (ix), to
Directors of Telefónica, are those that have prepare and keep a register of the status of
been specifically recommended: the Directors and high-ranking officers of
the Company, (x) to prepare the Annual
Audit and Control Committee, established Report on Corporate Governance and (xi)
in 1997, is regulated by the Company By- to exercise those competencies assigned
Laws and the Board Regulations. It verifies to this Committee by the Board of
both the financial information and the Directors.
annual accounts of the Company, ensuring
that all the financial information is In addition, the Board of Directors deemed
prepared in accordance with the same it convenient to constitute four additional
professional principles and practices. Its consultative Committees: the Human
responsibilities are mainly (i) to know the Resources and Corporate Reputation
financial information process and evaluate Committee, the Regulation Committee, the
the accounting verification system, (ii) to Service Quality and Customer Service
safeguard the independence of the Committee and the International Affairs
external auditor, supervising their work Committee.
and serving as a liaison between the Board
of Directors and the external auditor; (iii)
to supervise the internal auditing services
and (iv) to supervise compliance and
integrity of the internal control systems for
financial information.

Directors In accordance with the Regulations of the

Board of Directors, the latter performs an
Appointment annual evaluation of its performance and
In accordance with the provisions of the quality of its work on the occasion of the
Ley de Sociedades Anónimas (Spanish approval of the Annual Report on Corporate
Corporations Act), the appointment of Governance.
Directors is submitted for decision and
approval by the General Shareholders’ Remuneration Policy
Meeting. In addition, and in accordance As regards the remuneration policy for
with the Regulations of the Board of Directors, this policy is proposed, evaluated
Directors of the Company, the proposals for and reviewed by the Nominating,
appointment are preceded by the relevant Compensation and Corporate Governance
favourable report from the Nominating, Committee, always in keeping with criteria
Compensation and Corporate Governance of moderation. Currently there is no
Committee. remuneration system linked to the market
price of the company shares or that
Rights and Obligations involves handing over shares or stock
The Regulations of the Board of Directors options to Board Directors.
specifically devote title V, comprised of nine
articles, to the detailed description of the On an annual basis, the Company provides
rights and obligations of Directors. This information regarding the remuneration
title sets out the duties arising from the received by the Members of the Board of
obligations of diligence, fidelity and loyalty Directors, both in its Annual Report and in
of Directors and, in particular, envisages the Report on Corporate Governance, in
situations of conflict of interest, the duty of accordance with the criteria established for
confidentiality, the exploitation of business each of these documents. .
opportunities and the use of corporate
assets.
Furthermore, the Regulations of the Board

of Directors also includes the right of
Directors to obtain the information and
counsel necessary to perform their duties,
as well as the establishment of the suitable
channels for the exercise of such rights. In
this respect, the Company has adopted the
measures required to ensure that Directors
are furnished in a timely manner with
sufficient information specially drawn up
to this effect, geared to preparing for the
sessions of the Board and its Committees.

Composition of the Board of

Directors of Telefónica S.A. and its Committees
Nominating Human Service
Compensation, Resources Quality and
Type of Executive Audit and and Corporate and Corporate Customer International
Director Committee Control Governance Reputation Regulation Service Affairs
César Alierta Izuel ( Chairman)
Isidro Fainé Casas (Vice Chairman)
Gregorio Villalabeitia Galarraga (Vicepresidente)
Fernando de Almansa Moreno-Barreda
David Arculus
Maximino Carpio García
Carlos Colomer Casellas
Peter Erskine
Alfonso Ferrari Herrero
Gonzalo Hinojosa Fernández de Angulo
Pablo Isla Álvarez de Tejera
Luis Lada Díaz
Julio Linares López
Antonio Massanell Lavilla
Vitalino Manuel Nafría Aznar
Enrique Used Aznar
Mario Eduardo Vázquez
Antonio Viana-Baptista
Non member Secretary
Ramiro Sánchez de Lerín García-Ovies
Executive Chairman
Proprietary Director
Independent

CASE STUDY Transparency of the Information for

Handbook of Internal Control Shareholders
for Financial Information
Reporting Regulations for Reporting to Independence of the External
Markets Auditor
The Sarbanes-Oxley Act affects companies In 2003, The Board of Directors of Among the main competencies of the
listed on US financial markets and Telefónica approved the “Regulations on Audit and Control Committee is to propose
establishes, among their obligations, the Communication of Information to the to the Board of Directors, for submittal to
need for senior managers of companies to Markets”, which includes the legal the General Shareholders’ Meeting, the
evaluate the internal control systems requirements that affect Telefónica derived appointment of the Accounts Auditor, as
regarding financial information reporting both from the Spanish law and from well as the terms and conditions of
as a necessary condition for ensuring international laws applicable to the contract, the scope of the auditor’s
reliability. Company due to its shares being listed on professional mandate and the renewal or
other stock markets. In accordance with not of their appointment.
Telefónica has considered this legal these Regulations, the Company
requirement as an opportunity for disseminates immediately and The External Auditor has direct access to
improvement and, far from merely simultaneously to the markets where it is the Audit and Control Committee, and
complying with the law, it has fully present all the information that could be regularly takes part in its meetings,
developed its internal control structures, considered relevant, and therefore must be without the presence of the administrator
control mechanisms and applied communicated to the market. when necessary.
evaluation procedures.
Likewise, these communications are In line with the legal requirements
As a result of this experience, the “Manual published on the Company’s website. established by American regulations, the
de Control Interno para el Reporte de la contracting of any service from the
Información Financiera” (Handbook of External Auditor of the Company must
Internal Control for Financial Information always be previously approved by the Audit
Reporting) has been published, with three and Control Committee. In addition,
main goals: contracting services other than account
auditing must be done in strict compliance
To share the knowledge acquired with the Spanish Auditing Act and the
To transmit to the markets Telefónica’s Sarbanes-Oxley Act published in the United
commitment to the development of States, and its regulations. In this sense, the
good corporate governance practices amount corresponding to work other than
auditing with regard to the total amount
To provide an easier understanding of
invoiced by the auditing firm was 11% in FY
the model developed, with a practical
2005.
handbook for all its users or users of
information reported by Telefónica with
reference to its Internal Control Model
for Financial Reporting (SEC, rating
agencies...)

Risk Control Systems
Telefónica carries out constant monitoring •Business process risks: (operational risks,
of the most significant risks that could integrity risks, management and human
affect the main companies that form part resources risks, technological risks and
of its Group. To this aim it has a Corporate financial risks).
Model that is applied periodically and
homogenously in the Companies of the
•Information risks: (operational, financial
and strategic)
Group, allowing the evaluation of both the
importance of each of the risks that could •Contextual risks: (competition;
affect the companies, and the degree of shareholder relations; availability of
control over each of the risks. resources; political and economic
environment; legal and fiscal; regulations
Thus, the Group has a risk map that allows and changes in the sector).
it to identify those risks that require
specific control and monitoring, prioritised
in accordance with their importance. In
addition, the model has a matrix that
includes all the operational processes
where each of the risks considered are
managed, in order to allow the evaluation
of the established controls and be able to
have reasonable certainty that they will not
materialise.
The identification of these risks and

processes is carried out by the Internal
Auditing Office, which is responsible for the
internal control of the Group. Its results are
informed periodically to Telefónica’s Audit
and Control Committee.
The 50 risks considered in the model are

classified in the following categories:

Créditos del informe


Investor Relations


Secretariat General

07 Society Main lines of business (Telefónica de España,

Telefónica






Identity
02
Telefónica wishes to be
perceived as an
integrated
telecommunications
group, recognised for its
commitment and
responsibility towards
its stakeholders

Contents 4
Telefónica, driving progress for all 6
02 Identity 32
Corporate Responsability 34
Milestones and Challenges in Corporate Responsibility 48
Values 50
Code of ethics 52
Corporate Reputation 56
Brand 58
Sponsorships 62
04 Customers 104
05 Shareholders 168
06 Employees 178
07 Society 226
09 Providers 292
10 Media 304
11 ANNEX I 310

02 Identity
A Strategic Goal
CR Organisation at Telefónica
Corporate
Responsibility Management Model
Telefónica in the debate on CR
Awards and Recognition
To Be a Responsible Company:
A Strategic Goal
Telefónica has included in its Strategic Map Telefónica Group has defined two
CASE STUDY (approved in 2005) the goal of being monitoring indicators to periodically
perceived as a committed and responsible measure the degree of fulfilment of this
Difference Between the leader by society in general and its strategic goal.
Concepts of Corporate stakeholders in particular.
•Firstly, the Group carries out a follow-up
Responsibility and Social of the evaluations made by analysts and
In order to achieve this aim, various observers of corporate responsibility. This
Action initiatives and projects have been collective is considered to be expert in
Social Action launched, channelled through the Strategic corporate social responsibility, and the
Altruistic and in principle philanthropic Axis of Corporate Identity and criticisms they express with regard to
funding of activities, within or without the Communication. This is one of the five responsible performance are deemed to
company’s sector of activity. elements of the transformation constitute a faithful indicator of the
programme “Forging ahead to gain issues the company must tackle.
Corporate Responsibility leadership”
It involves, besides strict compliance with •Secondly, public surveys are carried out
Both the Strategic Map and the Axes of with regard to society’s perception of
legal obligations, the voluntary integration
Transformation have been communicated Telefónica. These surveys have been
of stakeholders’ concerns in the
to over 90% of the managers that form carried out on a quarterly basis since
management. This implies that the
part of Telefónica Group, who are in turn June 2005 in Argentina, Brazil, Chile,
companies recognise and manage the
responsible for informing their teams Spain, Mexico and Peru. The survey
impact of their actions through specific
about these goals. responders give their opinion of the
business management processes.
Company on the basis of seven
dimensions and 21 characteristics, in
accordance with the RepTrack© model
drafted by the Reputation Institute in
collaboration with the Corporate
Reputation Forum.

02 Identity
Telefónica understands corporate responsibility as a way of

managing its business in relation to all its stakeholders. As far as
the Telefónica Group is capable of generating a positive impact
through its activity, it will be capable of guaranteeing its own
sustainability and that of its relations with stakeholders.
For Telefónica, it is as important to achieve its goals and financial

results as is the way in which we these results are achieved
Organisation of Corporate
Responsibility in Telefónica
Organisational structure and •Definition and development of the
reporting line management tools and models, and of
Corporate Responsibility management at the plans of action adapted to the
Telefónica is the competency of the expectations of the stakeholders, and
Subdirectorate General of Corporate follow-up. The execution of the plans of
Reputation, Brand and Social Responsibility. action normally lies with the
It is dependent, functionally and departments, to which the corporate unit
hierarchically, of the Directorate General of lends its support before and during the
Corporate Communication. processes.
For the supervision of corporate social

•Establishment of indicators,
consolidation of the information related
responsibility issues, Telefónica S.A.’s Board to the previous points, communication
of Directors has a Committee made up by and comparison of said information with
four non-executive board members: the stakeholder feedback.
Human Resources and Corporate
Reputation Committee, a supervisory and To this aim, the unit has direct
control body that is informed every two collaborators in:
months of the most relevant aspects
related to corporate reputation and its •The main business lines of Telefónica
evolution, corporate responsibility and the Group (Telefónica de España, Telefónica
behaviour of Telefónica with regard to the Internacional, Telefónica Móviles,
demands of its stakeholders. Telefónica I+D, t-gestiona, Atento,
Telefónica Soluciones...)
In addition, the top management of the
Telefónica Group is informed about the
•The countries where it publishes
Corporate Responsibility Reports
degree of development and fulfilment of (Argentina, Brazil, Chile, Spain and Peru)
the goals of the Corporate Responsibility
projects through the Committees of •The management departments most
directly related to issues of corporate
Coordination of Strategic Axes.
responsibility (Institutional Relations,
Human Resources, Auditing, Investor
Roles and competencies Relations, Shareholders’ Office,
The Corporate Responsibility Unit has a
Secretariat General, Fundación
general coordination role similar to that of
Telefónica, Innovation, Security,
other units of the Corporate Centre, related
Communication, Sales Development,
to:
Environment, Quality, Finance...).
•Studies and analyses of expectations,
interests and demands of the internal
(employees) and external (clients,
shareholders, society, suppliers…)
stakeholders.

02 Identity
Corporate Responsibility management should answer to a

process of continuous improvement, by virtue of which a
prior diagnosis is made both of the risks related to corporate
responsibility and the expectations of the stakeholders.
On this basis, the company establishes policies and actions

for improvement that adapt to the specifics of each line
of business and country.
When evaluating the degree of fulfilment of aims and

communicating it to the stakeholders, a new cycle
is initiated in such a way that the entire process is
repeated periodically over time.
Management Model: The Corporate

Responsibility Cycle in the Telefónica Group
The management of Corporate For Telefónica, corporate responsibility
Responsibility at Telefónica is based on five management has the following
principles structured in phases that, characteristics:
together, make up a management cycle
geared to continuous improvement. This •Multistakeholder Approach: as it takes
into account the needs of all its
management model seeks a balance
stakeholders.
between the economic growth of the
business and meeting the expectations of •Linked to the business: the main
all its stakeholders. responsibility of a company is to “do well
what it has to do”, that is, develop its
business activity as well as possible.
•Responsibility for the impact of

sustainable development: It is not about
contributing resources to social causes
(philanthropy), but about optimising the
way in which operations are carried out,
seeking lasting relationships with
stakeholders.
+
Internal Diagnosis: identification of
areas for improvement.
1
“Principle of Proactive Risk Management”
+
Evaluation of
fulfilment of aims and
communication of
+
5 2 External Diagnosis:
dialogue with stakeholders to
gauge expectations and opinions.
performance. “Principle of Dialogue with
“Principle of Information Stakeholders”
Transparency”
4 3
+ +
Implementation in business Development and Launch
lines and countries. of initiatives and projects:
“Principle of Flexibility and Adaptability” “Principle of Value Generation for all
Stakeholder Groups”
02 Identity
Internal
+ Diagnosis
1 +
Evaluation of
Fulfilment
+
5 2 External
Diagnosis
4 3
Implementation
+ +Development
and Launch
Phase 1 work health and safety; corporate image + Internal

Diagnosis
Internal Diagnosis: and reputation; fraud; human resources;
political and economic environment.
Identification of areas for
improvement •Specific Analysis of Reputational 1 +
“Principle of Proactive Risk Management”
+has
Risk Factors: in 2005, Telefónica
Evaluation of
carried out a new diagnosis of the ten
main aspects thatFulfilment
could compromise its
5 2 External
Diagnosis
Telefónica carries out systematic studies corporate reputation. These aspects have
been prioritised according to their
3
that allow it to identify the risks associated
to corporate responsibility and corporate
social responsibility. Periodically, it carries
out:
impact on the reputation of the
company and their potential impact on
the financial results. This study has taken
4
into account the opinion of stakeholders,
Implementation
+ +Development
•Analysis of Risks and comparative CSR studies by country and
and Launch
Opportunities with regard to sector, analyses carried out by external
positioning before all stakeholder groups, analysts, investors and observers, trends
in the main countries with operation, To of bodies that promote CSR, monitoring
do this, an analysis is carried out of the of the media and results of corporate
situation of corporate responsibility in reputation studies carried out in six
the country, paying special attention to countries.
customers, employees, society, suppliers
and the environment. Among the main potential risks
identified are: lack of involvement in local
The aim of these analyses is to launch development; health risks of
local corporate responsibility projects; as infrastructures; failing to address
well to provide information for the stakeholders’ demands; failing to
regional programmes of positioning as a guarantee equal opportunities; relations
“committed and responsible leader”; and between the company and its
lastly, to act as a guide for the employees; potential abuse of
publication of the Country Corporate dominating position; contents not
Responsibility Reports. desired by the customers, incoherence
•Corporate Risk Analysis: in a between actions and messages; lack of
transparency; or bureaucracy in the
systematic manner, the Auditing
Department carries out an analysis of 50 relations with the stakeholders.
corporate risks, in each of the companies This type of analysis helps to identify
of Telefónica Group; classified according adequate plans of action and common
to degree of importance and degree of management policies that prevent these
control by the operations. Among the 50 risks from materialising and allow the
different risks that make up the company to offer a homogeneous and
Corporate Map, there are aspects related responsible behaviour before its
to corporate responsibility, such as: stakeholders.
customer satisfaction; possible failure to
fulfil commitments; environmental risks;

Implementation
+ +Development Implementation
+
and Launch
02 Identity
+ Internal
Diagnosis + Internal
Diagnos
1 + 1
Evaluation of
Fulfilment
+
5 2 External
Diagnosis
Evaluation of
Fulfilment
+
5
4 3 4 3
Implementation
+
and Launch
Interna
+ Diagno
Phase 2 During 2005, a specific methodology for
External Diagnosis: contrast the dialogue with stakeholders has been
with stakeholders and

gathering of expectations
established, geared towards achieving
alliances and collaboration relations with
+
1
“Principle of Dialogue with Stakeholders”
stakeholders.
Evaluation of
One of Fulfilment
5
the main sources of information
and knowledge for the implementation of
When it comes to defining projects within a methodology of dialogue was its
the framework of Corporate Responsibility,
Telefónica seeks to know which are the
interests and expectations of the
Practice Guide for Relations with 4
participation in the drafting of the “Good
Stakeholders”, developed by AccountAbility

3
stakeholders that interact with the +
and Stakeholders Research Associated, with
Implementation
Company. To this aim, before implementing the collaboration of the United Nations
the projects, Telefónica makes an active Environment Programme. This is a tool for
effort to listen and compare the daily use by Corporate Social Responsibility
expectations of its stakeholders through professionals, both in companies and in
several methodologies: questionnaires, civil society. In addition, the Guide was
studies, surveys, focus groups... This way, presented in Spanish, with the subtitle “De
the Company aims to achieve a double las palabras a la acción” (From words to
aim: action), adapted to the Spanish and Latin
•That the customers, employees, citizens, American context, with the collaboration of
the Nóos Institute.
shareholders, suppliers can influence the
development of the business aims and
During 2005, Telefónica set up four pilot
projects undertaken by Telefónica,
dialogue projects with different
expressing their needs to the company,
stakeholder groups. In addition, with the
as well as their perception of
aim of extending this methodology to
management aspects of the Company
other areas of the company and of
that affect them directly.
generating new dialogue processes, an
•That the actions and projects put into internal workshop was organised, with 40
practice by Telefónica are in line with the employees from different lines of business
expectations of their stakeholders, are and management departments, in which
well guided, and generate value. the four processes mentioned above were
presented, and attendants were shown
how to apply these tools in practice.
In 2006, Telefónica will take this

methodology to Latin America, through
public presentations of the methodology,
development of pilot dialogue processes
and employee training.

02 Identity
Pilot Projects for Dialogue with Stakeholders

During 2005, Telefónica put into practice the methodology for dialogue with stakeholder groups through four pilot dialogue projects.
These processes were geared towards listening and understanding the needs of the following four groups:
CASE STUDY
Former Telefónica de España Employees
This is a collective made up of almost 50,000 people and integrated mainly by people
in retirement or early retirement.
The dialogue process was channelled through the two majority trade unions (UGT and CCOO)
and the Association for Telefónica’s Elderly. In-depth interviews and focus groups were
carried out in order to find out their expectations with regard to the Company upon conclusion
of their employment relationship with Telefónica.
A plan of action was designed involving setting up an online platform, mainly regarding: access to information
related to the Company; access to commercial offers similar to those offered to current employees;
social activities, the programme Voluntarios Telefónica (Telefónica Volunteers); tracing old colleagues; etc.
The dialogue process was carried out in collaboration with the Human Resources Department.
Plan of Action 2006 : Club Telefónica Senior as a goal for 2006.
Public Administrations as Customers

In this case it is an internal dialogue process, aimed at understanding the needs of the
Pubic Administration as a customer.
A qualitative and quantitative analysis was carried out, and the internal information
on customer satisfaction was analysed.
The proposed plan of action was especially focused on strengthening information and communication
for Regional Managers, and on a plan of public presence of the Company.
The dialogue process was carried out in collaboration with the Corporate Relations Department.
Plan of action 2006: Company profiles by autonomous community
Associations and Opinion Leaders

A group of professional associations, federations, professional colleges and societies
that make up a very specific type of customer.
In-depth interviews were carried out, as well as sessions with the directors of some
of the associations and a study of satisfaction surveys.
The proposed plan of action focused mainly on information related to Telefónica Group’s Social
Responsibility, which can be of use to some groups of SMEs that show concern and interest
in the subject but that often have no work methodology at their disposal.
The dialogue process was carried out in collaboration with the Department of Associations and Opinion Leaders.
Plan of action 2006: training initiatives in corporate responsibility for SMES.
Non-profit Organisations that act as observers of companies

with regard to corporate responsibility
This is a group of civil society bodies that carry out report on and watch companies
and their behaviour. One of the main lines of action is the study of information transparency
with regard to corporate social responsibility.
Several in-depth interviews were carried out, plus a specific session for joint analysis of
the Corporate Responsibility Report 2004.
The proposed plan of action was to systematise the comparison
of information in a format of dialogue panels.
The dialogue process was carried out from the Department of Corporate Responsibility.
Plan of action 2006: Dialogue panels with stakeholders on CR Reports

02 Identity
+ Internal
Diagnosis
1 +
Evaluation of
Fulfilment
+
5 2 External
Diagnosis
4 3
Implementation
+ +Development
and Launch
+ Internal
Diagnosis
Phase 3 •Digital Inclusion: elimination of
Development and launch of geographic, economic and educational
barriers in order to take
1 initiatives and projects

+
telecommunications services to
+
5
everyone. Telefónica’s vision is to
“Principle of Value Generation for all
Evaluation of
Fulfilment 2
Stakeholders” External
Diagnosis
After analysing the risks, comparing the
contribute through technology to an
improved and higher social inclusion of
people. Telefónica believes that this can
be its best contribution to the
opinion of the stakeholders and identifying
4 3
the aims and goals, the plans of action that
make up the social responsibility strategy
are defined and launched; these projects
achievement of the United Nations
“Millennium Development Goals”.
•Responsibility at the service of the

+
Implementation
+
should be aligned with the strategic aim of
Development customer: including aspects such as
being a and
committed
Launchand responsible leader, adult content management or the
and are developed in collaboration with establishment of policies regarding the
different departments or managers acceptable use of Internet services.
+ Internal
At the same time, projects related to
Diagnosis
•Minimum Environmental Requirements
for the Telefónica Group, applicable in all
improved customer attention, professional
lines of business and countries.
development of Telefónica employees,
+
1 innovation and excellence are promoted
from their respective strategic
+
•Responsible Purchasing: establishment of
CSR requirements for Telefónica
Evaluation of
Fulfilment
5 2
transformation axes. Within the framework
External
of corporate responsibility, in 2005,
Diagnosis
suppliers, in collaboration with the
Purchasing Department.
progress has been made on the
coordination of teams that manage
•Supplier Satisfaction: first supplier
satisfaction survey of Telefónica Group.
4 3
projects oriented to society in general,
customers, suppliers and the environment.
• Telefónica Accesible: Telefónica’s answer

•Analysis of the Impact of
Telecommunications on Sustainable
Development.
+ +
to people with disabilities. It is an
Implementation Development
integral plan to support equal
and Launch
•Positioning of Telefónica as a driving
opportunities and full social integration force behind economic, technological
of people with disabilities. All the lines of and social development of the countries
business and management areas of the and regions where it operates.
Telefónica Group participate in Telefónica
Accesible.

+
tation
+Development Implementation
+ +Development
and Launch and Launch
02 Identity
+ Internal
Diagnosis + Internal
Diagnosis
1 + 1 +
+
5 2 External
Diagnosis
Evaluation of
Fulfilment
+
5 2 External
Diagnosis
4 3 4 3
ation
+ +Development
and Launch and Launch
Internal
+ Diagnosis
Phase 4 In order to guarantee this principle, the
Implementation in lines of internal regulations and policies have a
business and countries

period of time for their implementation by
the lines of business. It is not about
+
1 +
“Principle of Flexibility and Adaptability”
5
suddenly changing the way of carrying out
Evaluation of
activities, but rather of taking advantage of
their redesigns Fulfilment
and plans to gradually and 2 External
Diagnosis
Telefónica carries out its activities in two
softly introduce the principles and criteria
continents (Europe and Latin America). The
3
established by the corporate responsibility
degrees of development of environmental,
employment or product and service
development regulations are very different
policies in the business processes.
Follow-up of the degree of implementation

4
in the two regions. Telefónica avoids the
of the different actions +
is a key element
Implementation
+Development
adoption of double standards in both
when it comes to ensuring compliance, and Launch
regions by means of adopting Group
thereby establishing a process of
corporate policies.
continuous improvement. To this aim, from
2006, actions will be carried out in
The corporate responsibility policies are
collaboration with the Internal Auditing
presented, from their concept, as Group
Department and with External Auditors,
policies. The aim in this sense is to achieve
geared towards verifying the degree of
a better cohesion and a stronger internal
compliance with the established goals. This
Group culture. However, the principle of
will allow the Group to define the
flexibility and adaptability, seeks to respect
corresponding actions for improvement, as
the social, political and economic
well as provide strategic follow-up
environment in each country where the
indicators for Telefónica.
Telefónica Group operates, as well as the
specific nature of each business unit.
Among the policies to be implemented, is
the approval of the Code of Ethics in the
Flexibility and adaptability is also reflected
operations of Telefónica Group. In July 2005
in the order of priorities when it comes to
the Board of Directors of Telefónica S.A.
implementing one or other plan of action,
approved the extension of the Grupo
which can sometimes be altered by the
Telefónica Móviles Code of Ethics to all
social needs of a country, the risk maps of a
companies of the Group. During 2006, one
line of business or the demands of
of the key goals is to consolidate the
stakeholders in each country.
implementation of this Code of Ethics.

4
Implementation
+ +Development
02 Identity
and Launch
Internal
+ Diagnosis
+
1 +
Evaluation of
Fulfilment
5 2 External
Diagnosis
4 3
Implementation
+ +Development
and Launch
Phase 5 rigour and transparency, becoming a key

Evaluation of fulfilment of tool for the detection of deficiencies in the
management systems and policies, which
goals and communication of will be improved in subsequent years.
performance
From an external point of view, the best
“Principle of Information Transparency” and most widespread use lies in making
available to stakeholders information that
The annual report is undoubtedly the best they tend to demand from the Company:
presentation of the different Corporate aspects related to human resources
Responsibility actions carried out by indicators, health risks of the antennae,
Telefónica and brings to light all the value handling of personal details, environmental
of the company for its stakeholders. It is impact, innovation, etc... It is on the basis of
one of the most important communication this information that the demands of
channels with stakeholders and, therefore, socially responsible investors are answered.
should reflect their needs and expectations Lastly, the CR Reports are useful in the
and the way in which the company is debate and dialogue with the stakeholder
answering them. For this reason, the groups about the issues that most concern
different lines of business and countries them.
where Telefónica operates publish specific
CSR reports, oriented to their respective Since December 2002, Telefónica has a
stakeholder groups. section on its website devoted to corporate
responsibility, which follows the same
The chapter “About the 2005 Corporate structure as the annual report, but allows
Responsibility Report” explains the way in updating of the information.
which Telefónica responds to its
commitment of continuous improvement, The corporate responsibility management
sounds out the opinion of the stakeholders model of Telefónica has generated a great
and the degree of acceptance of the number of queries and requests for
Report; and presents and answers the information. It is the policy of the
suggestions, comments and even Department to answer, whenever possible,
clarifications on the information included all the requests for information, queries or
therein. interviews. These are mainly related to:
Socially Responsible Investment
From an internal point of view, the reports questionnaires, students, thesis and
are a tool for knowledge management, and dissertation research, research projects,
for improvement of company performance presentations at CSR forums and
in CSR, as they help to follow-up on the conferences
established goals, communicate
achievements and management goals for
future financial years. In addition, the
verification of the reports gives credibility,

02 Identity
Corporate Responsibility Reports published by Telefónica

1997 1998 1999 2000 2001 2002 2003 2004 2005
By line of business
Telefónica SA
Telefónica de España
Telefónica Móviles
Telefónica Móviles España
Telefónica I+D
TPI
By Country
Brazil
Argentina
Chile
Peru
Environmental Report Sustainability Report CR: Corporate Responsibility Report
Note: The reports referring to 2005 may be in progress at the time of publication of this report
CASS STUDY
Telefónica’s Company Social

Reports from the 80s. Contents
1. Employees
Telefónica’s archives include the company
2. Customers
social reports (“Balance Social”) from the
80s with a structure and content very 3. Shareholders
similar to that of current best reporting 4. The Telecommunications
practices. This model has been an Sector (suppliers, distributors,
inspiration for the Telefónica Reports in the other operators…)
2000s, and twenty years later, the structure 5. The Community
of the report based on stakeholder groups, 6. The Environment
is still used.
7. Financial Statements

02 Identity
One of Telefónica’s approaches to corporate responsibility is to actively

participate in initiatives, forums, work groups and institutions that generate
opinions regarding the activity of companies in this field.
With its participation in the debate on corporate responsibility, Telefónica seeks

to meet various aims:
•To make public practices with other social interlocutors.
•To gain knowledge and learn about social responsibility methodology of other
companies and organisations.
•To identify opportunities for collaboration.
•To generate points of convergence and dialogue with bodies representing the
stakeholder groups.
Telefónica in the debate

on Corporate Responsibility
United Nations (UN) educational programme of academic
The company of Telefónica signed the bodies.
Global Compact in March 2002, which has
generated most of the lines of work in
•Participation in the consulting process of
businesses and human rights with the
collaboration with the UN and other
Special Representative named to this
organisations within the UN. In 2005, the
effect by the United Nations.
following collaborations are worthy of
mention:
Global Reporting Initiative (GRI)
• Participation in the Non-Discrimination
•Member of the GRI Stakeholder Council.
in Employment Work Group, within the
framework of the Spanish Global •Organizational Stakeholder since
Compact Association (ASEPAM). December, 2004.
•Presentation by Telefónica at the •Participation in the organisation of the

Learning Seminars of the Audit on Sneak Peaks for the debate of the G3
Human Rights carried out at Telefónica drafts in Madrid, Barcelona, Sao Paulo, Rio
(ASEPAM). de Janeiro, Santiago de Chile, Lima and
Buenos Aires.
•3rd Meeting of Local Networks,
Barcelona, September 2005.
International Chamber
•Collaboration in the drafting of the of Commerce (ICC)
Telefónica takes part in the Social
Practical Handbook for Progress Reports.
Responsibility and Anti-Corruption study
•Participation in Seminar on Progress groups since 2002. Follow-up of the
Reports, Geneva, June 2005.
activities of the International
•Conclusion and presentation of Manual Standardization Organization (ISO),
de Compromiso con los Stakeholders regarding international standardization of
(Handbook of Commitment to social responsibility.
Stakeholders), linked to the UN
Environment Programme and in Global e-Sustainability
collaboration with AccountAbility Initiative (GeSI)
(London, October 2005); An initiative that, promoted by the UNEP
•Conclusion and presentation of results of (United Nations Environment Programme)

and the ITU (International
the Global Responsibility Initiative
Project managed by the European Telecommunications Union), groups
Foundation for Management manufacturers and operators of the
Development (EFMD). Launch of its information technologies sector with the
second phase, with the aim of aim of promoting sustainable
incorporating the business models of development.
social responsibility and ethics in the

02 Identity
Some of the lines of work for 2005 were: Standardisation and Certification
(AENOR) and the International CASE STUDY
•The development of standards and tools Standardization Organization (ISO) with
for collaboration in issues related to the
regard to social responsibility issues.
Other participations in
supply chain. initiatives in Latin America:
•Development of dialogue panels with •Under the coordination of the CEOE, Argentina
Telefónica takes an active part in the
stakeholders regarding sustainability Argentine Institute of Corporate Social
creation of a collaboration project
reporting In the ICT sector. Responsibility (IARSE)
between the ILO and the Spanish
Government, which seeks to promote Brazil
European Telecommunication
employment for the young in Latin Instituto ETHOS de Empresas e
Network Operators (ETNO)
America. Responsabilidade Social
ETNO groups telecommunications
operators in Europe. Telefónica is present Fundação ABRINQ para os Direitos da Criança
since 2002 in its Environment, Health and
International Organisation of GIFE– Grupo de Institutos, Fundações e
Employers (IOE) Empresas
Safety groups.
Telefónica is a member of the IOE’s CSR Instituto Akatu pelo Consumo Consciente
In 2005 Telefónica:
Work Group. In 2005, the following CEATS- Centro de Empreendedorismo e
•Collaborated in drafting the Regional collaborations were carried out: Administração do Terceiro Setor da Fundação
Environmental Report 2005
•International Symposium for Employers’ Instituto de Administração da Universidade
•Participated in the work team on energy Organisations– The Evolving Corporate de São Paulo (FIA-USP)
and optimisation of consumption. Social Responsibility Debate: Issues for Colombia
•Collaborated in a report with WWF Employers and their Organisations.
Geneva, October. 2005.
Colombian Business Council for
Sustainable Development (CECODES),
regarding the contribution of ICTs to
sustainable development. •Consulting Process of companies with Colombian chapter of WBCSD
Colombian Centre for Corporate
John Ruggie, Special Representative of
Hispanic-American Association of the United Nations Secretary General for Responsibility (CRE)
Research Centers & Business and Human Rights. Geneva, Guatemala
Telecommunication Companies September 2005. CentraRSE; representative of WBCSD in
(AHCIET)
Telefónica collaborates with AHCIET in the •Special Session of the Council: How Guatemala
companies and employer organisations Mexico
promotion of good practices in corporate
see their role in society. Geneva, June Mexican Centre for Philanthropy (CEMEFI),
responsibility issues in the Latin American
2005. whose Decalogue for Socially Responsible
telecommunications sector. In 2005 the
department of Corporate Social •Seminar on Management of Corporate Companies was signed by Telefónica
Móviles México, obtaining the distinction
Responsibility takes up the Presidency of Social Responsibility for members of the
the Commission of the Information Society. IOE, Telefónica Headquarters, September “Socially Responsible Company”.
2005. Nicaragua
Spanish Confederation of Business Nicaraguan Union of Corporate Social
Organisations (CEOE) Spanish Association of Accounting Responsibility (UniRSE)
Telefónica is a member of the CEOE’s and Business Administration (AECA)
Commission for Social Reponsibility. In Telefónica takes part in its Study
Panama
IntegraRSE
2005, the most significant collaborations Commission of Corporate Social
Corporate Ethics Agreement of Panama
were: Responsibility.
Peru
•The participation and monitoring of the Peru 2021
activities of the Spanish Association for
02 Identity
Awards and Recognition for Telefónica’s

Corporate Responsibility
Responsible Investment Corporate Responsibility Reports
Telefónica was included in the European European Environment Award in the
and worldwide Dow Jones Sustainability category of Communication for Sustainable
Index (DJSI), which lists companies that Development: Awarded by the “Fundación
lead their sector in terms of sustainability. Entorno”, in collaboration with the Spanish
Telefónica also ratified its presence in the Ministry of Industry and the Ministry of
FTSE4good index. The presence of Environmental Affairs, it prizes companies
Telefónica in those indices is recognition that show a firm commitment to
to its conviction that corporate sustainable development. The prize was
responsibility should be regarded as handed out by the Prince and Princess of
a basic axis in a telecommunications Asturias.
operator’s business strategy.
Telefónica leads the social responsibility
Telefónica Móviles was included in the study in the annual reports of the Ibex 35
FTSE4good index and the SAM evaluation companies, carried out by the CSR
passed the minimum criteria for being Observatory. However, the qualification
included in the DJSI. However, the company obtained by Telefónica (1.90 in a scale of 4
was not included in the indices due to its points) shows the company must continue
low free-float. in its efforts to improve its information
transparency in the future.
Lastly, it is of interest to note that O2, a
company acquired in 2006 by Telefónica, Telefónica’s website provides the best
was awarded the distinction “Best in class” quality information. Telefónica’s website
for the mobile telephony sector. has obtained the most points, according to
the report "Social action in websites of
large companies and savings banks "
drafted by Empresa y Sociedad on the basis
of a comparative analysis of 65 large
companies and 10 savings banks. In the
comparative analysis, Telefónica obtained
746 points, significantly above the second
and third in the classification, with 495 and
465 points respectively. The analysis has six
sections: general framework, products and
services, human capital, employment,
financing and advanced resources.

02 Identity
Recognition for corporate Recognition for Corporate

responsibility projects in Spain Responsibility projects in Latin America
Empresa y Sociedad Award to the Best Telefónica de Argentina was awarded
International Social Action: During the the award to most significant social work
awards ceremony, presided by the Prince and 2005, awarded annually by the Spanish
Princess of Asturias, the jury pointed out that Chamber of Commerce of the Republic
Telefónica’s social action gives priority to of Argentina for its corporate social
education as a social integration tool, in responsibility activities. In the choice of
projects in Latin America, Morocco and Spain. the jury, attention was drawn to the work
and commitment toward society, through
Telefónica, the best performer in terms educational projects and especially the
of social action, according to experts who Corporate Volunteer programme, which
took part in a survey carried out by the groups over seven hundred members
Empresa y Sociedad Foundation. The survey of the Group’s companies.
included 275 experts from companies,
savings banks, social organisations, In Peru, Aulas Hospitalarias, received three
universities, business schools, public awards, in recognition to the uniqueness
administrations and media. Telefónica of the project in terms of corporate
maintains its position as leader as in 2004 responsibility (Creatividad Empresarial,
and is once again the only body present in Perú 2021 and Premio Anda).
the first ten positions in the four types
of programmes (products and services, in In Chile, the Government recognises the
collaboration with employees, commitment of Fundación Telefónica
employment, sponsorship and financing). to people with disabilities. On the occasion
of the launch of the publication
PRnoticias users choose Telefónica as the "Discapacidad en Chile, pasos hacia un
company with the best CSR project. modelo integral del funcionamiento
humano" (Disability in Chile, steps toward a
The theme portal on spinal cord injury global model of human performance) of
of the National Paraplegics Hospital, the National Fund for Disabilities (Fonadis).
www.infomedula.org, sponsored by
Fundación Telefónica, has been awarded Fundación Codespa Award to Corporate
the “Infanta Cristina Comunicación 2004” Solidarity, for educational projects
IMSERSO Prize "for its accessible design and developed in Latin America by Telefónica
ambitious structure that makes it possible and Fundación Telefónica.
to develop and provide services to its
users”, according to the jury. The Proniño programme carried out by
Telefónica Móviles and Fundación Telefónica
The Spanish Committee of Representatives received many recognitions and awards in
of People with Disabilities (CERMI) has Argentina, Guatemala and Ecuador.
awarded the Special Award CERMI.es 2004
to the publication "Solidaridad
Latinoamericana" (Latin American
Solidarity) of Fundación Telefónica’s
International Solidarity Network.

02 Identity
Milestones and
Challenges in
Corporate
Responsibility
Corporate Responsibility
Code of Ethics
Corporate Reputation
Brand Customers
Inclusion of the aim to be a Coordinate the CR strategy with O2 Consistent customer satisfaction Establishment of consistent
“committed and responsible leader” measurement systems for TdE, TISA customer satisfaction
in Telefónica’s Strategic Map and Telefónica Móviles España measurement systems for
Telefónica Móviles LATAM
Publication of Reports on Country Auditing of CR Report in accordance Projects for the improvement of Customer Defence Service in Spain
Corporate Responsibility with norm AA1000/AS in the assistance by solving the customer’s
(Argentina, Brazil, Chile, Peru) countries problem in the first contact
Pilot projects for dialogue with Pilot projects for dialogue with Advances in ISO 9001 Advances in ISO 9001
stakeholders in Spain stakeholders LATAM 2006 certification certification
Studies regarding the impact of Policy of Acceptable Use of Internet Implement Policy of Acceptable
telecommunications on sustainable Service Use of Internet Service
development
Approval of Code of Ethics for the Implementation of the Code of Adult Content Management Implement Adult Content
Telefónica Group Ethics in Telefónica Group Regulations Management Regulations
Implementation of the Code of Alignment with O2’s Business Customer handbook explaining the Customer Handbook explaining the
Ethics in Telefónica Móviles Principles basics of mobile telephony basics of mobile telephony for
LATAM 2006 customers
Start up of RepTrack as a Improve perception of Telefónica in Regulations for Management of

measurement tool the weakest dimensions by 5% in Games as contents
Latin American countries
Identification of reputational risk Implementation of Corporate

factors Model of reputation risk
management
Establishment of the Telefónica Alignment of Telefónica and O2

Brand Model Brand Models
Global launch of movistar, brand of Launch of a commercial brand for

Mobile Telephony the digital home
Milestone Challenge 2006

02 Identity
Society
Environment
Employees Supliers
Increase employee satisfaction by Increase employee satisfaction by Strategic review of the working areas Promotion of the Corporate
over 5% over 5% of Fundación Telefónica (educared, Volunteer Projects
proniño, forum, volunteers)
Worldwide publication of vacancies in Personalised development plan for Telefónica Accesible Project (Spain Telefónica Accesible Project (2
Intranet in order to encourage all employees 2005) countries in LATAM in 2006)
professional development and internal
rotation
Regulation for control of occupational 3rd and last phase of the labour Promotion of “Digital Inclusion”
risks in the contracting of works and audit of the Telefónica Group Project in LATAM
services (as a preventive measure
following the 2004 audit)
Homogenisation of management Implementation of Norm “Minimum Implementation of the Norm
procedures for Health and Safety in Environmental Requirements” “Minimum Environmental
the Group Requirements”. A step in each
company
Over 75% of employees Development of model of Corporate Improvement of waste
evaluated by competencies University management systems in LATAM
Homogenisation of the social Programmes of paper consumption Internal Regulations for

benefits for the Group’s efficiency environmental management and
Management control
New ways of working: dynamic office, Creation of Environment

mobile work; Policy for the Committees per country
Reconciliation between private and
professional life.
Corporate Policy for the Integration of Publication of an Environmental
People with Disabilities in accordance Policy for Telefónica Group
with the LISMI Law (Law for the Social
Integration of People with Disabilities)
Launch of Internal Launch of Internal Communication Supplier satisfaction survey Responsible purchasing policy of
Communication Plan Spain 2005 Plan LATAM 2006 the Telefónica Group
Increase of online contracting Purchasing policy for social

suppliers
Participation in the Supply Chain Participation in the Supply Chain

Group of the GeSI Group of the GeSI

02 Identity
Values
Telefónica’s goal is for its customers, employees, suppliers,

shareholders and companies in the countries where it operates
to place their trust in its ability to fulfil the commitments it
makes.
Telefónica’s values are the basis on which to build a committed

and responsible company.
Telefónica knows that trust cannot simply Shareholders and investors

be expected, but is rather earned on a daily Transparency: Telefónica makes readily
basis, by making the right commitments accessible to shareholders and investors all
and fulfilling them, demonstrating that it the information regarding the company
is capable of delivering the goals it sets which is of relevance to their interests.
itself. Telefónica seeks to achieve this
through an attitude of understanding Profitability: Telefónica has a solid and
toward the needs of its stakeholders; future-oriented model that can generate
through constantly improving everything it profit in a sustained manner.
does; accepting the responsibilities that
come with leadership, and through being
Employees
committed to behaving with transparency,
Clarity: Telefónica makes accessible to its
integrity and ethics. That is our aim. These
employees any relevant information, both
are our values:
related to the evolution of the business and
to aspects affecting them more directly.
Customers
Quality: Telefónica’s products and services Professional development: Telefónica
(aptitude) and its relationship with provides its employees with opportunities
customers (attitude) fulfil and, whenever to make progress in their professional
possible, exceed customers’ expectations in career, and makes every effort for them to
terms of experience and performance. be able to fully develop their potential, in
accordance with their interests as well as
Fulfilment: we commit to fulfilling the those of the company.
aims we set ourselves and the promises we
make to our customers.

02 Identity
The values of the Telefonica Group
Employees Shareholders
Clarity and Profitability
professional and
development transparency
Suppliers Customers
Equal Quality and
opportunities Trust Fulfilment
and mutual
benefit
Environment Media
Respect and Information
protection and
transparency
Society
Contribution
and proximity
Society Suppliers
Contribution: Telefónica has developed a Equal opportunities: Telefónica guarantees
relationship based on trust both by a transparent and equal selection process
generating richness through developing for suppliers, based on objective grounds.
the business and directly, by investing in
social commitment. Mutual benefit: Telefónica has defined a
constant improvement process in the
Proximity: Telefónica is a global and multi- supply chain and carries out a large volume
domestic company: it is multi-country and of local purchases which translate into
multi-business, and is understanding and mutual profit for Telefónica, suppliers and
aware of the needs and specific the societies in which it operates.
characteristics of the societies in which it
operates. Media
Information: Telefónica is aware of society’s
Environment interest in the activities it carries out, and
Respect: Telefónica is committed to commits to providing information on these
respecting the environment in all the activities.
activities it carries out.
Transparency: Telefónica proactively
Protection: the company collaborates in provides the media with full, exact and true
the protection of the environment through information regarding the aspects which
the extension to all members of society of are relevant at any given time.
services that are beneficial for the
environment.

02 Identity
Ethical Principles
Code of Ethics Our Behaviour
Anti-corruption
Ethical Principles
Towards our shareholders Towards society

To keep, protect and efficiently use the To contribute to the social and economic
company’s assets and to develop a development of the countries in which the
professional management geared to company operates.
ensuring the creation of value for our
shareholders. To act in accordance with applicable
national and international laws and
Provide full, true, precise and clear regulations. Under no circumstance, resort
information, guaranteeing that the to or tolerate bribes of third parties to the
investors’ interests are satisfied and that Company or its employees, or vice versa.
the requirements of the market authorities
in which the group or any of companies is To respect the regulations that guarantee the
listed are complied with. free market, to compete legally in every market
and to not sign agreements with other
Towards our customers companies in order to reduce competition.
Make available to our customers quality
products and services that are innovative, To respect human rights and public freedoms
safe, and meet with the advertised recognised in the Universal Declaration of
description. Human Rights, to not exercise any form of
discrimination and to not tolerate underage
Respect the privacy of communications and working or any type of work abuse, making
protect our customers’ data against any use this commitment apply to all our suppliers
which is not authorised by the law in force. and collaborating companies.
To not carry out illegal or misleading To identify the environmental issues

promotions or advertising in the marketing related to the development of the activity
of our products and services. of the Company, with the aim of reducing
their impact as much as possible.
Towards our employees
Establish work conditions that guarantee To promote the development of services
safety and protect the health of employees, that encourage social inclusion and
in an environment free from any kind of make it possible for people with disability
threat or abuse. to have an improved quality of life.
Provide fair remuneration to our To guarantee the safety of our installations

employees. and minimise their impact on their
surroundings, within the technological
Guarantee equal opportunities and limitations and safeguarding the needs of the
encourage the integral development of service.To favour the integration of local
employees, both on a professional level and suppliers in our activities, providing all of
on a personal level. them with equal opportunities.
02 Identity
In July, 2005 the Board of Directors of Telefónica S.A. approved a

Code of Ethics that must be observed by the employees of the
Telefónica Group in their daily activities.
Telefónica Móviles already had a Code of Ethics, on the same

terms as that of the Code approved for the Group.
During 2006 one of the key aims of the Group is to consolidate

the implementation of this code across the entire Telefónica
Group, as well as to align O2’s “Business Principles” and
Telefónica’s Code of Ethics.
Our Behaviour
Obligations of employees Obligations of the company

Comply with regulations in force, and respect Respect its employees. Act unequivocally
the internal policy and regulations of their against any form of discrimination, be it for
companies. reasons of gender, race, age, nationality,
disability, ideology or religion.
Act with integrity towards customers, always
providing clear and truthful information. Help employees who have family or social
problems. Provide help for employees with
Act with integrity, not taking advantage of the
relatives under their care with disabilities or
position or contacts obtained as a result of
serious illnesses, as well as those with
the company’s activities, for personal benefit.
problems with alcohol or drug addiction.
Use the company’s facilities, equipment or
Safeguard confidential information of the
services exclusively for the functions which
employees.
they have been assigned with.
Establish fair and objective mechanisms of
Respect colleagues and safeguard the
salary remuneration.
harmony in the work environment.
Ensure that the internal contracting and
Reject and not offer bribes, including gifts
promotion policies are founded upon the
which, due to their value, could result in
criteria of professional skills and abilities.
subsequent obligations.
Offer training and make available to
Safeguard the company’s physical and
employees the necessary tools to carry out
intellectual property.
their work.
Protect and avoid the dissemination of
Comply with all regulations in force regarding
information under their responsibility. All the
health and safety at work. The company will
strategic information of the Telefónica Group
have a programme for preventive
as well as any data regarding stakeholders
management of occupational risks as a
must be considered confidential and
general policy.
therefore treated as such.
Respect freedom of association.
Use only IT equipment assigned for carrying
out their functions. It is forbidden to transmit Respect the right to participate in any non-
pornographic images, generate or transmit professional activity.
viruses, illegally copy software or distribute
Establish the mechanisms for monitoring and
emails with political or commercial aims.
control of the Code of Ethics. The Office of the
Inform the company of any conflict of Code of Ethics has been created for this
interest derived from other professional purpose.
activities or economic or family ties with
competitors and suppliers.
Show respect for the workplace by dressing
appropriately and not being under the
influence of alcohol or drugs.
02 Identity
Anti-corruption
Telefónica has expressed institutionally, in The Group also has reporting channels that
its Code of Ethics approved by the Board of guarantee the confidentiality of the
Directors, communicated to its employees reporter and has established rules for
and published for the knowledge of its his/her protection. In addition, the Group’s
different stakeholder groups, its firm internal regulations establishes controls for
commitment to “act in accordance with the processes that link decision-making
applicable national and international laws and fund releasing that provide reasonable
and regulations and, under no certainty that no manager or employee
circumstance, resort to or tolerate bribes of may, unilaterally, make undue payments or,
third parties to the Company or its should payments of this sort be made, that
employees, or vice versa. Likewise, the Code they will be detected in time.
includes the obligation of its employees to Among these controls are the following:
“reject and not offer bribes, including gifts
which, due to their value, could result in
•Restrictions to decision-making
capacities of line managers who have
subsequent obligations”.
power of attorney, access profiles to the
computer systems and the signature
Likewise, in the same text it restates the
structure, especially those that are sent
validity and commitment to the UN Global
to banks for verification purposes.
Compact, signed by Telefónica in March
2002 and which, in its Principle 10, indicates •Control of the existence of prior and
that “companies should work against sufficient budget assignment for the
corruption in all its forms, including purchase of any goods or services.
extortion and bribery”.
•Separation of functions between the
person who makes the decision and
From an organisational point of view, orders the purchase of good and services
Telefónica is implementing the Office of and the person who assigns the
the Code of Ethics for the study of queries, purchase.
complaints or reports, dissemination and
evaluation of compliance with the Code of •Intervention units that verify financial
Ethics; a subdirectorate general of transactions and, for payment of
Corporate Reputation and a Corporate invoices, ensure that the details
Inspection Unit which acts for the correspond with the previously agreed
preventively and reactively, verifying terms.
specific acts and situations. •Separation of functions of Treasury and
Intervention and double signature for
payment documents (the control
signature verifies amount, currency and
recipient).

02 Identity
CASE STUDY
Implementation of the Code of Ethics in Telefónica Móviles
Telefónica Móviles was Telefónica Group’s The issues related to compliance, including
first company to approve its Code of Ethics. possible irregular contract awards, incorrect
2005 was the first anniversary of the sale assignment and undue handling of
creation of its Ethics Committees. Including goods, accounted for 6% of the cases,
both the activities of the operators’ which is proof of the contribution of the
Corporate Committee and Ethics Channel of Ethics in detecting possible
Committees, the total number of cases fraud or infractions regarding procedures.
dealt with during 2005 was 306. In these cases, the Ethics Committees
informed the auditing departments, who
Although the classification of the cases can were then put in charge of the relevant
sometimes be subjective, the cases related investigations.
to behaviour, regarding the attitude of
bosses or relationships between In addition, five issues resulted in the
colleagues, favouritism and harassment review of the company’s internal processes.
were the most common issues dealt with In no case did any of the communications
by the Committees, representing 44.5% of point to an infringement of the Code of
the total. Ethics, but rather to the existence of badly
defined processes which were causing
Work related issues such as the review of conflict and uncomfortable situations. This
sanctioning processes, selection processes kind of issue has also proven that the
and work conditions in general represented activity of the Committees, together with
It should be noted that there are no
24.7% and were the second most common the cooperation of employees, can also
conclusions in the Inspection reports
category. In terms of work sanctions contribute to an improved management of
prepared by the Group that suggests the
derived from these issues, it should be the company.
existence of payments to political parties,
noted that the Committees have
bribes or payments to people or companies
supervised the reasons for 12 layoffs, To summarise, last year served to
that could act as intermediaries to provide
ensuring complete transparency in strengthen the mechanism which
funds to political parties or candidates.
decisions related to these cases. Telefónica Móviles put into practice to
make explicit its commitment to company
Telefónica, together with other companies
It is important to note that the responsibility, creating a line of
and bodies, has informed the examining
communication related to these two types communication for employees with the
members of the OECD, at the request of
of issues, treatment of employees and work company, at the highest level, which is
the Spanish Ministry of Industry, of the
issues, have referred to situations caused by proving to be useful, not only for
means at its disposal for compliance with
personal behaviour and specific situations. channelling claims, but also as a discussion
the Convention signed by our country for
There have been no corporate policies forum where employees can express their
Combating Bribery of Foreign Public
or procedures that have been deemed to views regarding the organisation and the
Officials in International Business
be in breach of the Code of Ethics. procedures established, in order to find the
Transactions.
Conflicts of interest account for 19.24% of best way of complying with all the
the issues dealt with. It is important to commitments established. The challenge
Specifically, our company informed the
note that 89.2% of the issues were queries for FY 2006 is to put into action this
OECD of the regulatory frameworks in
made by workers who were informing the methodology across the Telefónica Group.
place at the Telefónica Group (Code of
company of a family link with suppliers or
Ethics, Company By-Laws, Internal
other companies that carried out activities
Regulations, Auditing Committees, Internal
for our companies. Only in one case was it
Controls, specialised units, etc. and
necessary to negotiate severance due to
explained how any act of this type was
conflict of interests.
contrary to these regulatory frameworks
and thus not permissible and sanctionable
This kind of issue has also been essential
for unifying criteria regarding conflicts of
interests arising from accepting gifts or
attention, or hiring relatives.

02 Identity
Telefónica considers corporate reputation, understood as the

perception of a company by its stakeholders, is a key asset to
guarantee the sustainability of its business.
Corporate
Reputation
CASE STUDY Corporate Monitoring Indicator

MERCO: Spanish Monitor for Reputation Model
Corporate Reputation 2005
In December 2001, Telefónica put into action The main difficulty in applying these steps
the project of Corporate Reputation for the lies in the follow-up of corporate
In accordance with the results of the last Telefónica Group, and from the beginning, it reputation that companies have in society.
edition of the Spanish Monitor for was established that in order to guarantee For this reason, Telefónica has taken part in
Corporate Reputation, presented in the first good reputation, it is necessary for the project of the Corporate Reputation
quarter of 2006, Telefónica occupies the companies to have a balance between the Forum and the Reputation Institute, geared
second position among the 100 most way they behave (what they do) and their towards establishing a Corporate
reputable companies in Spain. With regard messages (what they communicate). Reputation Model which can be monitored
to the company leaders, the Chairman of Telefónica was the first Spanish company to periodically.
Telefónica, César Alierta is in the fourth have a Board of Directors Committee in
position in the list of the 100 most charge of supervising the management of The result of this is RepTrack, an indicator
reputable Spanish leaders. reputation at Telefónica. with 7 dimensions and 21 attributes, used
to ask survey respondents about each of
In order to have a good reputation, it is the companies included in the study. The
necessary (though not sufficient) to develop main advantage brought by RepTrack is
business activities in a responsible manner. that it is capable of isolating the quality of
This is why, at Telefónica, reputation and a company’s reputation, therefore
corporate responsibility issues are managed achieving a better measurement of
from the same department: the Directorate society’s qualitative perception of a
General of Corporate Communication. company.
The corporate reputation management The model shows that the “offer”
model shares the same five stages dimension is the most significant for the
described in the chapter on corporate perception of corporate reputation in every
responsibility: country. The dimensions of Leadership,
Work and Citizenship have equal
•Internal Diagnosis and identification of significance; followed by the dimensions of
areas for improvement
Governance and Innovation. The financial
•External Diagnosis: dialogue with dimension of companies is that with the
stakeholders to gauge expectations and least importance regarding corporate
opinions. reputation in society.
•Development and Launch of initiatives Since June 2005, the Telefónica Group has
and projects
monitored its reputation, with quarterly
•Implementation in business lines and surveys in Spain, Argentina, Brazil, Chile,
countries Mexico and Peru. In each of these countries,
•Evaluation of Fulfilment of aims and over 3,300 people have been surveyed (the
figure rises to 4,800 in Spain and
communication of performance
Argentina). Some of the different attributes
measured with RepTrack are used by
managers in different company activities.

02 Identity
Corporate Reputation Management Model
Lo que What is What is

os
+ comunicamos done?
+ comunicated?
s de Nosotros Otros • Business processes • By the company
y soporte • Suport processes • By others
Perception
is reality
Corporate
Clientes • Empleados • Sociedad reputation Clients • Employess • Society
Accionistas • Proveedores Shareholders• Suppliers
ios • Reguladores • Líderes de opinión Media • Regulators • Opinion leaders
Alliances
Despite Telefónica having a good Alliances for understanding how to

reputation among professionals and manage Corporate Reputation
country managers (2nd position in the
Spanish Monitor of Corporate Reputation Corporate Reputation Forum
– MERCO 2005), the RepTrack results show Founded in September 2002 by Aguas de
areas for improvement in society’s Barcelona, BBVA, Repsol-YPF and Telefónica,
perception of the company in all RepTrack the FRC (Spanish acronym for Corporate
dimensions and in all countries. Reputation Forum) is an initiative by which
companies share knowledge and
The total results present strengths in the experience in management of corporate
dimensions of leadership, finances and reputation.
innovation; at the same time as clear areas
for improvement in the governance and With the incorporation of Abertis, Ferrovial,
citizenship. By countries, Spain is the country Gas Natural, Iberdrola, Iberia, and Renfe in
with best results compared to the average, 2003, the FRC groups almost 50% of the
and Argentina and Brazil are the countries IBEX 35. The FRC primarily aims to become
where the Group’s reputation is weakest. a meeting place for the analysis and
dissemination of trends, tools and models
Throughout the different RepTrack of corporate reputation in company
measurements, improvements have been management.
recorded regarding the company’s
reputation in society in all countries except Reputation Institute
Brazil. Aware that there are many public In 2004, el Reputation Institute (RI) and the
myths about Telefónica, the company’s Corporate Reputation Forum (FRC) signed
management has established RepTrack as an Alliance by means of which the FRC
one of the key indicators to monitor the became the representative of RI in Spain
compliance of the strategic aim of being a and channels its activities. (see Corporate
“committed and responsible leader”. Reputation Forum above).
The report on corporate responsibility In 2005 the Reputation Institute held

includes Telefónica’s results in the different its Annual Conference in Madrid
RepTrack attributes. with the collaboration of the Corporate
Reputation Forum.

02 Identity
During 2005, the Telefónica Group has reviewed its brand

strategy and architecture model. The aim is to strengthen the
commercial relation with customers and to transmit corporate
values to the company’s stakeholder groups.
Brand
Strategy Model and Brand Architectur
This model defines the roles, criteria and Corporate Values are the Foundations
Over 13,000 brand hierarchies of the Group’s brands, described of the Group
registrations through the principles of identity and a They are the starting point and establish the
graphic coherence between brands. Some of path along which the commitments
its main features are: acquired by Telefónica towards its
2,650 domain names stakeholders to gain their trust are provided
Masterbrand with specific content.
Telefónica, the Group’s main brand, thanks to
its institutional profile and the values Brand attributes
associated to it, provides the backing and Telefónica builds its brands based on two
guarantee to the commercial offer associated main functional attributes: Leadership and
with the commercial brands, providing them Innovation, which take form in the Group’s
with prestige. capacities; and two emotional attributes:
Proximity and Commitment, which seek to
Commercial brands provide the brand with personality and to
They provide the commercial offer with make the relationship with customers closer.
closeness and freshness, differentiation and
relevance, making it more approachable and Telefónica’s Positioning
believable. They also rejuvenate and refresh For Telefónica, understanding and satisfying
the “masterbrand”. the needs of the people it relates to are its
ultimate aims. Only this way, the company
Brand family system will be able transform its technological
The family system is strengthened by means innovations into accessible communication
of a solid and inseparable relationship. It does solutions that make customers’ life easier
not involve co-branding or endorsements, but and better, and contribute to developing
it is rather a system that favours mutual society.
benefits between the Group’s different brands.
The graphic system defines colours, codes, Tone of Voice
formats, styles and typography that transmit a During 2005, Telefónica’s voice perimeter and
balanced and coherent vision of the Group. tone of communication has been
implemented, as reflected in its “Brand
Principles of Brand Strategy Manifesto”.
and Architecture
Telefónica manages it brand strategy and Telefónica Group’s
architecture by means of its identity Brand Portfolio
principles and a graphic coherence between As at December 31, 2005, the portfolio of
its brands: brands and domain names of Telefónica, S.A.
exceeded 13,000 brand registrations and
2,650 domain name registrations worldwide.

02 Identity
Mobile Telephony Brand Name Recognition

Data from Telefónica Móviles (Accumulated for year 2005). The brand Movistar was launched in 2005.
Top of mind Market position based on total mentions

Total mentions
94 95 93
87 87 88
83 84
77 75 98
67 66
55
49 50
39 41
37 36
29 29
22 25
1 1 1 21 1
18
2 2 2 2 2 2
3 3 3
Spain Argentina Peru Chile Mexico Colombia Venezuela Guatemala El Salvador Uruguay Panama Nigaragua Ecuador
Source: Advertising Tracking and Brand Equity 2005. Millward Brown
Brand Committee Tools for measuring

brand strength
The Brand Committee has consolidated Telefónica has developed a set of common
itself during 2005, and is a technical body tools for information management and
reporting directly to the Management analysis for all lines of business and
Committee, led by the General Director of countries, with the aim of constantly and
Corporate Communication and comprised systematically monitoring recognition,
of the technical managers of the various image, satisfaction and suitability of its
business lines and country corporate brands with regard to its different publics.
centres, on occasions involving other
corporate departments for specific issues.
•In the category of fixed telephony, the
Telefónica brand has high levels of
Its mission is to safeguard the correct
recognition.
execution of the Group’s new Brand
Strategy and Architecture Model. •In the category of mobile telephony,
taking into account the launch of the
To this aim, the committee has full new commercial brand in countries
competencies to: where it was not present, the Group’s
mobile telephony operations have
•Catalyse the visions, objectives and needs achieved similar and in some cases
of the lines of business and the
higher recognition levels with regard to
countries, as a consulting body of
previous brands.
Telefónica S.A.’s Management Committee
•Channel all the Group’s initiatives related

to brand (communication, advertising, Fixed Telephony Brand Name Recognition
sponsorships, fairs, events, etc.) with the Source: Advertising Tracking and Brand Equity 2005.
aim of ensuring its correct alignment Top of mind Market position based on
with the established Brand strategy and Total mentions total mentions
architecture model.
•Promote the process of implementation 10 98 98

of the brand architecture system, 97
developing regulations, processes, 99
86
projects and initiatives in order to
strengthen the system if necessary.
73 62
63
48
1 1 1 1
1
Argentina Chile Peru España Brazil1

1
Non-accumulated data corresponding to December, 2005

02 Identity
Main Principles of Telefónica Group’s

Brand Strategy and Architecture Model
1
Telefónica is the Group masterbrand
2
Telefónica

02 Identity
Chile
Nicaragua Argentina
CASE STUDY
World launch of “movistar”
movistar was the first commercial brand to

adapt its identity to Telefónica Group’s new
strategy and architecture. This new model
can be seen through the co-existence of
Ecuador the Telefónica masterbrand and the
commercial brand movistar on a blue band
that acts as a visual link for both brands.
The brand was launched simultaneously in

Uruguay Colombia 13 countries. The first phase started on
March 28, with the advertising campaign,
whose aim was to create great expectation.
On April 6 the Group’s brand Strategy and
Architecture model and movistar’s new
Spain image, was unveiled to the world, entering
into the life of 400 million people. The
image campaign was complemented with
attractive discount promotions and
services, and brought about the brand
image replacement in 25,000 movistar
shops.
Mexico Peru
After the launch, we can say that the co-
existence system between the Telefónica
and movistar brands, has proved that this
degree of linkage improves customer
recognition of both brands.
Panama
Guatemala Venezuela
El Salvador

02 Identity
Telefónica takes part in many activities in society through the

sponsorship of sports, technology, culture and social events. In
total, during 2005 819 sponsorships projects were carried out.
Sponsorships
Telefónica wishes to communicate Culture sponsorships Sports sponsorships

its presence and support to activities Diccionario Panhispánico de Dudas Telefónica Group has continued backing
carried out in society, and to this aim (Pan-Hispanic Dictionary of Queries), which Spanish Formula 1 driver Fernando Alonso
it has a sponsorship portal is the result of a collaboration agreement and the Renault F1 Team. 2005 has been an
(www.telefonica.es/patrocinios) with the Real Academia Española de la important year for them, with their
which is the external window for the Lengua (Royal Academy of Spanish Spanish pilot becoming the first ever
actions it promotes and carries out Language). This significant work has been Spanish Formula 1 World Champion, and
in all fields: sports, culture, society, carried out with the participation of the 22 the team itself winning the team World
etc... Spanish Language Academies, among Champion title.
which all Latin American countries are Telefónica continues to support football as
represented. With this project, Telefónica the sponsor and exclusive supplier of
has intended to strengthen its interest in telecommunications for the two main
the dissemination and promotion of the Spanish teams: Real Madrid C.F. and F.C.
Spanish language worldwide. Barcelona, and has signed a support
agreement for Expo Zaragoza 2008
Monographic exhibition on artist through the Zaragoza S.A.D. football club.
Juan Gris at the Museo Nacional Centro Likewise, it has started a social sponsorship
de Arte Reina Sofía, which has received over programme for football that successfully
160,000 visitors. promotes initiatives such as the Movistar
Cup of Cultures and the Mundialito
4th Centenary of El Quijote: Telefónica Solidario, both aimed at an important
has wanted to be present in this important sector of the population: immigrants. With
homage through the development of a this programme, Telefónica wishes to use
webpage aimed at schools, with interactive this popular sport as a tool for integration.
educational content which allows users to
learn through games about important In addition to the initiatives mentioned
aspects of this novel and its historical above, Telefónica wishes to be closer to the
context. Over 10,000 Spanish schools have societies in which it operates by supporting
taken part in this project through local activities of a cultural or sports
EducaRed, as well as people from different nature. In this sense, in Spain Telefónica
countries: 60% percent of the 194,000 sponsored Madrid’s Popular Marathon in
visits made have been international, while 2005, which brought together 13,000
40% came from Spain. runners, whereas in Latin America it
supported a large number of popular and
Music cultural festivals such as the San Pedrito de
As in previous years, Telefónica Movistar Chimbote festivities in Peru or the Carnival
has wanted to approach the younger public in Rio de Janeiro in Brazil, among others.
through music, and has sponsored concerts These are examples of these activities
and tours in Latin America and Spain of which all transmit an image of proximity,
artists such as Shakira or Carlinhos Brown. that of a global operator with a local focus.

02 Identity
Distribution of sponsorships by Countries Distribution of sponsorships by line of Distribution of sponsorships by activity

Data in number of sponsorships business Data in number of sponsorships
Data in number of sponsorships
Spain LATAM Telefónica Others Sports

297 133 Móviles 362 174
Chile Mexico 436
Telefónica
30 1 S.A
Ecuador Brazil 83
116 77
Others
Nicaragua Guatemala
82
19 17
Social Culture
Argentina Venezuela Telefónica 102 181
51 78 de España
Panama Peru El Salvador 105
17 63 19
Other includes technological, academic, exhibition
and forum sponsorships.
Social action Other sponsorships CASE STUDY

The Group’s social action is mainly Telefónica also takes part in other types of
channelled through the Fundación sponsorships whose aim is to actively Management of Telefónica’s
Telefónica, whose strategy and activity involve and commit the company to the
programme is especially focused on the promotion and development of the
Sponsorships
field of education, which accounts for most Information Society. To this aim, it works
During 2005, 2,657 requests for
of the budget and is complemented with hand in hand with public and private
sponsorships have been received from all
other volunteering activities and art and bodies who share this aim, through the
over the world, which were processed
technology programmes. sponsorship of business forums,
internally by Telefónica. Of these requests,
conferences and international symposiums
approximately 30% were approved.
Within the field of education, the following that bring together the sector’s main
are some of the most important representatives, such as: Internet Global
The Sponsorship Office is the department
programmes: EducaRed, which is a network Congress 2005, Broadband World Forum
that receives sponsorship requests from
of 10,000 schools across Spain and Latin Europe 2005, etc....
institutions and bodies presenting their
America connected via Internet for training
sponsorship proposals. On a monthly basis,
and sharing resources, aimed at teachers This strategic line is also reflected in the
committees are held where all sponsorship
and students (both children and participation in Technical Institutes,
projects are presented and discussed by
adolescents), and the Proniño project, Academies, University Chair Programmes,
Telefónica Group’s lines of business. These
whose main aim is to eradicate child labour etc. It therefore involves collaborating with
sponsorships have previously been
trough training and support to children in sources which generate knowledge in the
approved by the lines of business and their
Latin American countries. field of Information Technologies.
budget justified.
In 2005, once again, Telefónica has provided

technological support, by means of the
installation of lines and
telecommunications services, for the main
meeting of internet users in Europe:
Campus Party at Valencia.

02 Identity
Credits


Investor Relations


Secretariat General







02 Identity

03 Driving Progress
Telefónica is one of the

main driving forces
behind the economic,
technological and social
development of the
countries where it
operates

Contents 4
02 Identity 32
Driving economic development 68
Impact of Telefónica’s activity 68
Distribution of income 72
Evolution of rates 74
Impact of telecommunications on productivity 76
Driving technological progress 78
Information Society 78
Innovation 82
Telefónica I+D (Research and Development) 90
Collaboration with the University Sector 92
Information Systems 96
“Information Society” Report 97
Institutional Collaboration 98
Driving social development 100
04 Customers 104
05 Shareholders 168
06 Employees 178
07 Society 226
09 Providers 292
10 Media 304
11 ANNEX I 310

03 Driving progress
Impact of Telefónica’s activity

Driving Distribution of income
economic
development Evolution of Rates
Impact of Telecommunications on Productivity
Impact of Telefónica’s activity
In the course of 2005, Telefónica has Investments in infrastructure (Capex)

consolidated its position as the operator of corresponding to FY 2005 amounts to over
reference in each of the countries where it 5,358 million euros, a 42% increase with
operates, as a result of its firm regard to FY 2004. Broken down by
commitment to economic, technological business line, Telefónica de España
and social progress and development, as contributed 26% of the total, Telefónica
well as its will to adapt to the reality and Latinoamérica contributed 20% and
needs of each of these countries. Telefónica Móviles contributed 43%, the
two latter representing an increase in
Telefónica, as one of the leading national investment close to 40% compared to
companies in each of the countries where 2004. These figures do not include UMTS
it operates, assumes its role as a driving licenses, or capitalisation of expenses, but
force behind the national economy. In do include activation fees.
2005, Telefónica has become a more
regional company, as a result of its The number of suppliers awarded contracts
commitment to investment and to with Telefónica Group worldwide exceeds
adapting to the needs of each of the 18,000. An average of 85% of the total sales
markets where it operates. This regional volume is awarded to local suppliers.
character is reflected in the distribution of The company has paid over 7,200 million
its revenue; 48% of its revenue in 2005 is euros in taxes, including direct taxes,
from countries other than Spain (40% in indirect taxes, tax withheld, local taxes and
2004). levies. This figure does not include social
security payments or licenses. On the other
During 2005, Telefónica has once again hand, the Group has benefited from tax
shown its commitment to the deductions valued at 340 million euros,
development of its economies; generating understanding as such the tax credit
an average of 1.7% of the GDP in the main granted for certain activities or investment.
countries where it operates. Moreover, Of this amount, 333 million euros
Telefónica Group plays an important role in correspond to Spain, 2 million euros to
redistributing wealth among all its Brazil and 5 million euros de Chile.
stakeholders; approximately 45% is
redistributed among its suppliers, 16% goes
to the various Public Administrations and
8% is devoted to financial remuneration to
its over 200,000 employees worldwide.
1
This information has been consolidated on an accrual basis, whereas the redistribution of income has been
calculated on a cash basis.

03 Driving progress
Distribution of revennue of Telefónica by country1

In percentages
2002 2003 2004 2005
61.6
58.5 60.3
51.9
18
16.9
17.2 7.4
3.7 18.2 5.3 5.2
1.9 6
4 4.9 4.5
2.1 7.2
4.2 4.5 4
2.7 6.2
5.2 4.2 3.4
2.3 3.8 2.7 2.1
Spain Argentina Brazil Chile Mexico Peru Venezuela2 Czech Colombia2 Others
Rep.
1
Taking into account the contribution of each country to Telefónica Group’s consolidated revenue
2
Data corresponding to 2002, 2003 and 2004, not significant.
Percentage of revenue of Telefónica with regard to GDP1

In percentages
2002 2003 2004 2005
2.5
2.3
2.4 2.3 2.2 2.4
2.3 2.0 2.2
2.1
1.8
1.6
1.1
1.3 1.1
1.0
1.0 1.1 1.1 1.1
0.9
0.8
0.14
Spain Argentina Brazil Chile Mexico2 Peru Venezuela2 Czech Rep.2 Colombia2
1
Taking into account the contribution of each country to Telefónica Group’s consolidated revenue
2
Data corresponding to 2002, 2003 and 2004, not significant.

03 Driving progress
Impact of Telefónica’s activities in the World
Present in 19 countries Income of 37,882.1 >1.5 million shareholders

million euros
54 million euros in social and cultural action 181 million accesses
18,000 suppliers 207,000 employees 2,900 million euros in

innovation
Colombia Venezuela
% TEF revenue: 2.1 % TEF revenue: 3.8
% TEF revenue / GDP: 0.8 % TEF revenue / GDP: 1.6
1
CAPEX 2005 : 275.4 CAPEX 2005 : 1
147.8
1
Taxes paid1: 111 Taxes paid : 358
2
Thou. accesses : 6,036 Thou. accesses2: 6,160
Employees: 4,487 Employees: 5,983
Suppliers: 1,272 Suppliers: 1,102
% awarded to local suppliers: 36.9 % awarded to local suppliers: 51.4
Brazil
Mexico % TEF revenue: 18.2
% TEF revenue: 2.3 % TEF revenue / GDP: 1.1
% TEF revenue / GDP: 0.1 CAPEX 2005 : 1
1,068.4
1
CAPEX 20051: 266.7 Taxes paid : 2,894
Taxes paid1:* Thou. accesses2: 46,406
Thou. accesses2: 6,371 Employees: 63,743
Employees: 8,506 Suppliers: 2,161
Suppliers: 590 % awarded to local suppliers: 98.8
% awarded to local suppliers: 95.8
* In 2005, Telefónica received a tax rebate.
Peru
% TEF revenue: 3.4
% TEF revenue / GDP: 2.1
CAPEX 2005 : 1
175.3
1
Taxes paid : 399
Thou. accesses2: 6,668
Employees: 11,548
Suppliers: 2,338
% awarded to local suppliers: 83.4
Chile Argentina
CAPEX 20051: 310.7 CAPEX 20051: 260.4
Taxes paid1: 265 Taxes paid1: 450
Thou. accesses2: 8,189 Thou. accesses2: 13,769
Suppliers: 1,693 Suppliers: 1,514
% awarded to local suppliers: 74.3 % awarded to local suppliers: 83.4

03 Driving progress
(1) Million euros (2) Fixed + mobile + DSL + TV

The information published on this page has been obtained from internal cash flow evolution sources of Telefónica
Group, and verified by the auditor of this report. The mentioned data could be subject to variations as a result of
subsequent events and evolutionary effects that could cause changes in their content.
This information has been consolidated on an accrual basis, whereas the redistribution of income has been calculated
on a cash basis.
For a detailed analysis of the consolidated financial statements of Telefónica Group, the audited information is
included in the annual accounts report.
Countries representing over 2% of Telefónica’s revenues are included. Telefónica revenues in each country are taken as
the country’s contribution to Telefónica Group’s consolidated revenue.
Country
% TEF revenues: Percentage contributed by the country to Telefónica’s revenues, calculated on the basis of the
contribution to Group’s consolidated revenue. (%).
% TEF revenues / GDP Ratio of Telefónica’s revenues (contribution of the country to the consolidated revenues of
Telefónica Group) and the estimated GDP for the country. (%).
CAPEX 2005: Consolidated investment in country by Telefónica in the Financial Year (millions of euros).
Taxes Paid: Taxed paid in the country during the financial year (millions of euros).
Thou. accesses: Number of fixed + mobile + DSL + TV accesses (thousands).
Employees: Direct employees of Telefónica Group in the country (as at December, 31, 2005)
Suppliers: Suppliers awarded contracts in the country in 2005.
% of contracts awarded to local suppliers: percentage of contracts awarded to suppliers with registered address in the
country with regard to total number of contract awards, based on awarding volume.
Spain Czwch Republic

CAPEX 2005 : 1
2,485 CAPEX 2005 : 1
183.2
1
Taxes paid : 2,789 1
Taxes paid : 179
Thou. accesses2: 41,819 Thou. accesses2: 8,298
Suppliers: 4,234 Suppliers: -
% awarded to local suppliers: 93.7 % awarded to local suppliers: -
Countries that represent over 2% of

Telefónica’s revenues
Other countries where Telefónica is
present.

03 Driving progress
Distribution of income
These pages aim to provide a summary of the contribution by telefónica
economic activity to society. The examination of the economic flows the
Telefónica Group is involved in, shows the distribution effect among the
diferent social groups, such as suppliers, employees, public administrations,
lending institutions, shareholders and customers.
Other
Financial 905
suppliers
3,075
Credit institutions represent a
source of funds for growth and
development. In this sense, the
Telefónica Group develops an
intense financial activity, bringing
dynamism to the sector in some
of the countries where it operates
Customers
43,482
The 154 million customers
worldwide as at the end of FY 2005
appreciate the added value
provided by the services offered by
the Telefónica Group. This figure
includes income from customers
and from the rest of operators. On
average, these services account for
approximately 1.70% of the Gross
Domestic Product of the main
countries where the Group
operates (average figure for Spain,
Argentina, Brazil, Chile and Peru).
(1) Million euros (2) Fixed + mobile + DSL + TV

The information published on this page has been obtained from internal cash flow evolution
sources of Telefónica Group, and verified by the auditor of this report. The mentioned data could
be subject to variations as a result of subsequent events and evolutionary effects that could
cause changes in their content.
This information has been calculated on a payment basis, whereas the the information
contained in earlier pages has been calculated on an accrual basis.
For a detailed analysis of the consolidated financial statements of Telefónica Group, the audited
information is included in the annual accounts report.
This data only includes countries that represent over 2% of Telefónica’s revenue.
03 Driving progress
Remuneration to shareholders is one of the basic aspects of the

market economy in which the Telefónica Group operates. To the
direct payment of dividends, whose total amount is included in
the chart, other non-monetary retributions are added, such as
the re-purchase of shares and their subsequent amortisation.
Divestiture Shareholders
4,119 4, 822 Employees
4,213
Telefónica Group has over 207,000
employees, and is one of the companies that
generates the most employment in Spain
and Latin America. The figure includes
salaries, pensions and employee benefits,
other remunerations and incentives for early
retirement, and leave.
Investment
10,524
Telefónica’s profitable growth strategy is
based on the investment in assets which
make it possible to expand the business in
the future (mainly investment in innovation,
market development and one-off acquisi-
tions) and the divestiture in non-strategic
assets.
Total Income
51,581 Public
Administrations
8,511
A Group of the size of Telefónica makes an
important contribution to the public funds
Total Payments of the countries where it operates through
direct taxes, license fees and indirect taxes.
The figure also includes payments to Social
Security, the transfer of value-added taxes,
taxes on consumption, local taxes and
retained taxes.
Suppliers
Commercial
19,087
CapEx
4,423
Telefónica Group redistributes great part of
its income across the over 18,000 companies
with which it collaborates in the countries
where it operates. This contribution is of a
local nature in each country, as can be seen
from the fact that, on average, 85% of the
purchasing volume for each country is made
to local suppliers. The figure provided here
also includes payments for interconnection
services with the rest of the operators.

03 Driving progress
Evolution of Telefónica’s basic rates

Accumulated Average Annual
change Average Annual change with
1998-2005 change regard to CPI
Metropolitan 4.1 0.5 IPC- 2.9
Provincial (47.1) (-5.9) IPC- 9.3
National (64.8) (-8.1) IPC- 11.5
International (53.7) (-6.7) IPC- 10.1
Fixe-mobile (51.8) (-6.5) IPC- 9.9
Average (40.6) (-5.1) IPC- 8.5
Evolution of Rates
Rate reduction provides Telefónica de España has been applying In the sector of mobile telephony, it is
constant reductions to their rates over important to point out that the rates for
consumers with higher recent years, which has contributed to Movistar customers in Spain saw an
purchasing power and improving customers’ purchasing power average reduction of 12% in FY 2005. Given
and has made telecommunication services that Movistar customers represent 50% of
has an anti-inflation more accessible for society in general. the Spanish population, it is natural to
impact on society Specifically, customers of Telefónica de identify this reduction in the rates with an
España have witnessed an average increase of available income for citizens.
annual cut in rates for traffic services of
5.1% since 1998. As a result, it is important to note that in
Spain, communications are the only
component of the consumption basket and
the only sector within public utilities
whose rates have constantly been going
down since the year 2000.
In Latin America, rates have evolved at a

slower pace than inflation in most
countries, especially in Argentina, where
rates have been frozen.
CPI Spain: Rate of variation in Annual Average Source: INE

2000 2001 2002 2003 2004 2005
Food and non alcoholic beverages 3.2 5.9 4.6 4.1 3.0 4.2
Alcoholic beverages and Tobacco 3.8 4.2 4.6 2.8 5.5 5.1
Clothing and footwear 2.3 3.2 5.3 2.5 2.1 1.4
Housing 4.6 1.8 2.9 2.8 4.1 6.0
Household 3.0 2.8 2.4 1.7 1.8 2.2
Medicine 2.3 2.7 2.6 2.0 0.2 0.7
Transport 6.3 -2.9 5.0 1.0 6.0 6.2
Communications (2.0) (2.6) (5.1) (0.2) (0.7) (1.7)
Leisure and culture 5.1 4.3 1.8 0.1 -0.1 0.6
Education 5.5 4.1 4.7 4.3 4.2 4.1
Hotels, cafes and restaurants 4.6 4.7 5.8 4.1 4.2 4.3
General index 4.0 2.7 4.0 2.6 3.2 3.7

03 Driving progress
CPI: Rate of Variation in Annual Averages Residential Local Rate

CPI
172
Argentina Brazil1 Peru
152
145
140
131 129
120
111 112 109
103 103 103 106 106
100 100 100 100 100 100
94
100
81
2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005
Source: Internal
1
1 In Brazil, in accordance with the government concession contract, the CPI is not used as a variation index. The index used up to December 2005 was the IGP-di
(General Price Index, Domestic Availability), which comprises 10% of civil construction prices, 30% of consumer prices and 60% wholesale prices, with the latter being
subject to substantial fluctuations in exchange rates.
CASE STUDY
Estimated evolution of average consumption basket of Fixed
Impact of rates on revenue
Telephony Customers in Spain (Constant euros per line)
per customer
Businesses
These rate reductions have been passed
on to the customer, as is reflected in the 85.4
5.7% average annual reduction in mean 77.7
monthly revenue.
67.9
Average
The regulation of the 59.2
57.3
telecommunications sector has given 55.5
48.6
priority to price competition rather than 44.1
to service innovation, as the favourable 40.5
Residential 36.9
access conditions to Telefónica’s 36.6 36.2
network has allowed the incoming
39.0 35.3
operators sufficient margin to make 33.3 31.1 31.3 31.1
attractive offers to the end customer.
1999 2000 2001 2002 2003 2004

03 Driving progress
Impact of telecommunications on
productivity
It is important to note the indirect impact Wider commercial reach: companies that
of the services offered by the Telefónica use the Internet as a channel for their
Group companies on the dynamisation of relations with clients offer better access to
the economy in the main countries where their services, with fewer physical office
it operates. Thus, the actions carried out to and human resources requirements. In
reduce the digital divide, the reduction of addition, they can extend their offer to
service rates, the increase of broadband in other regions.
Internet access and connectivity, have a
More efficient commercial transactions:
significant impact on the increase in
the possibility of accessing, in real time,
productivity levels of the different
information regarding availability, prices,
economies.
warehouse products or delivery times,
brings valuable benefits in terms of
Positive impact of ICTs on the negotiation with clients.
productivity of companies Improvement in internal management to
The adoption and use of Information and
offer better service to clients: offering the
Communication Technologies (ICTs) on
possibility of personalising the offer, with a
behalf of companies and citizens seems to
higher degree of flexibility to adapt to
have a positive impact on productivity and
clients’ needs and coordinating relations
economic growth in general. This is due to
between clients and suppliers.
the fact that these technologies have
brought opportunities for the development New approaches to work: more focused on
of new business, and the improvement of achieving aims than on fulfilling time-
existing business processes. The possibility tables; thanks to connectivity it is easier to
of reducing costs, the efficient use of work, regardless of time-tables and places.
resources and the possibility of increasing Modernisation of primary and industrial
markets have contributed to citizens sectors: global positioning systems,
benefiting from products of increasing geographic information, remote control…
quality at lower prices. have had a spectacular impact on the
The following is a summary of some of the improvement of the performance of
positive impacts of ICTs on the natural resources, industrial machinery, and
improvement of productivity in business distribution sectors.
sectors and countries:

03 Driving progress
Implementation Difficulties CASE STUDY

Despite the benefits associated with new Effects of the investment of ICTs on
technologies, the penetration of ICTs in the productivity
business environment is a slow process, as
there is no consensus as to the link There is general consensus regarding the
•Lastly, it is likely that the improvements
between the use of ICTs and increased in the organisation of the production
importance of ICTs for economic growth,
productivity. linked to the use of ICTs have a positive
and their contribution to the growth of
effect on the total productivity of the
productivity, which the literature divides
Ignorance and lack of training in new factors.
into three channels of influence:
technologies are the main obstacles faced
by companies that do not perceive the •Firstly, the ICT sector itself is expected to Studies of the European economy show
advantages of investing in ICTs for their see an increase in production and that the growth of ICT production lines and
companies. productivity as a consequence of the the increased use of these goods as a
innovation implemented in the sector. productive factor, have had a positive effect
on GDP growth.
The clearest conclusion from this brief
diagnosis is that investment in ICTs will not
•Secondly, and as a result of the first
point, the rest of the production lines are
improve business productivity and society’s ICT investment, therefore, is a necessary
likely to experience a reduction in costs
productivity in general unless employees condition to gear the economy towards the
derived from a decrease in prices and
and work processes are adapted to the use levels of growth seen in the more
improved quality of ICT goods and
of these technologies. It is not only a developed countries. Undoubtedly, the
services, which would allow an increase
question of companies connecting to the stimulation and incentives to invest in
in investment in new technologies for
Internet, but rather of them integrating the technology must be carried out in
these sectors.
ICTs in their business processes in a collaboration with the Administration and
productive manner. with the private finance sector.
Source: Gaptel
“Productividad, Crecimiento Económico y TIC”
(Productivity, Economic Growth and ICTs) Report.
World GDP Growth vs. World TIC1 Growth

2
World ICT Growth
World GDP Growth3
5.3
4.8 4.9
4.8
4.0 4.3
3.7
3.0
1.4
0.7
2002 2003 2004 2005 2006

1
Information and Communication Technologies
2
Source: EITO 2005 European Information Technology Observatory 2005
3
Real GDP. Source: IMF (April ‘06)

03 Driving progress
Information Society
Innovation
Telefónica I+D
Driving
Technological Collaboration with the University
Progress
Information Systems
Information Society Report
Institutional Collaboration
Information society
Home and Citizen Inclusion Telefónica ADSL services offer different

Telefónica de España takes part, by means prices and packages to cover a wide range
of contributions and dissemination of citizens’ Broadband Internet access
activities, in the initiative Todos.es, needs: Línea ADSL 24 horas (24-hour ADSL
promoted by the Ministry of Industry, Line), ADSL Mini (ADSL Mini), ADSL a tu
Tourism and Commerce and the public medida (ADSL made to measure), Tiempo
business entity Red.es, whose main Libre ADSL (ADSL Leisure), Dúo ADSL (ADSL
objective is to sensitise citizens and Duo), Trío ADSL (ADSL Trio), etc.
increase their awareness of the advantages
of the Information Society, and this way, try Telefónica de España achieved its aim of
to breach the digital divide. exceeding the figure of 200,000 Imagenio
customers during its first year of operation
Telefónica de España is sponsor-founder of in the Spanish market. Telefónica de
FUNDETEC, a foundation that participates in España’s interactive digital television is
the initiative regarding the “Literacy and good available to four million homes in the 140
use of digital contents”. It is aimed, in most populated cities. The marketing of
particular, at collectives that are uninitiated in Imagenio started in Madrid and Barcelona
the digital world, and that are therefore at risk and was extended to the entire national
of digital exclusion, or belong to what is territory within six months.
known as the “digital divide”: Housewives, The Multisectorial Association of Spanish
immigrants, senior citizens, rural citizens and Electronics and Communications Companies
disabled people. The foundation organises (ASIMELEC), of which Telefónica de España
training sessions for these collectives, forms part, approved the first set of
collaborations with public and private entities regulations to achieve standardisation and
to undertake projects for these collectives, normalisation of technologies for the Digital
and, every year, awards the FUNDETEC prizes, Home. This first set of regulations has the
in recognition of the work of public or private aim of establishing a framework of reference
entities that contribute to the digitalisation of for the design of these services, which
these less favoured collectives. enables both the evaluation of homes and
the establishment of a solid foundation for
Telefónica Móviles de España has published a its approval, promotion and adoption.
Catalogue of Mobile Services for Social
Integration: Information regarding the offer of ASIMELEC has also approved the timeline
mobile services aimed at becoming a tool for for delivery of other services that will
overcoming specific situations of disability conclude at the end of this year with the
and special needs (elderly citizens, etc.). creation of a Digital Home Quality Seal,
which will be of great use for real estate
Telefónica de España has reached the developers, construction companies and
figure of three million ADSL lines in end users.
operation, of which 92% are retail accesses.

03 Driving progress
The key to the promotion of the Information Society lies in

managing to transform its potential benefits into actual benefits
for its users. To achieve this, together with the development of
basic infrastructure and significant efforts in terms of studies,
meetings and publications, Telefónica develops, in collaboration
with other companies, services geared to improving productivity
of the different business sectors and Public Administrations.
The following are some of the activities carried out by Telefónica

within the framework of the classification established by the
“Plan Avanza 2006-2010 para el desarrollo de la Sociedad de la
Información” (Plan Avanza 2006-2010 for the Development of the
Information Society).
Competitiveness and In 2002, Telefónica de España launched the

electronic phone bill, e-Factura, accessible
innovation
through its website telefonicaonline.com.
Telefónica’s position with regard to the
The aim of this initiative is to minimise
SMEs, Businesses and Professionals
postal delivery of bills to the customers’
segments is to provide a range of
homes, with the consequent savings in
customer-oriented services, in such a
paper, postal costs and the increase in
manner that the user is not only buying a
comfort for the customers brought by the
product, but also acquiring global
possibility of referring to their bill as and
communications solutions adapted to each
when they wish, by simply accessing the
specific case, in an integrated, modular
website.
manner and with a single interlocutor.
Telefónica de España signed an agreement

In 2002, Telefónica launched a wide range
for the installation of WiFi coverage at 118
of DSL Solutions for SMEs, which attempts
delegations of the Asociación Española de
to offer a value-added service to business
Centros de Negocio (Spanish Association of
professionals, so that they can focus
Business Centres), which handles 30,000
exclusively on advancing their businesses.
business people a year, to whom it provides
In this sense, during 2005, Telefónica
secretarial, diary management and physical
launched the solutions “ADSL Jurídico”
space services…
(ADSL Legal), “ADSL Gestión y Estrategia”
(ADSL Management and Strategy), “ADSL
Telefónica has signed an agreement with
Legal Construcción e Inmobiliarias” (ADSL
the Council of Spanish Medical Societies
Legal Construction and Real Estate), “Sector
whereby it has become its technology
Calzado” (Footwear Industry)...
partner for everything related to
Telefónica and the Fundación Banesto
information technology and
promote the implementation of electronic
telecommunications projects.
invoicing between Spanish companies. The
implementation of electronic invoicing
Telefónica de España will implement a
brings important savings to companies,
private network of over 3,000 chemists in
which can reduce their invoice
Catalonia to support the launch of
management expenses by 90%, before
electronic prescriptions.
even taking into account elimination of
errors.

03 Driving progress
Education in the Digital Era Public Digital Services

The Programme EducaRed, created in 1998 Telefónica, in a Temporary Business Association
by Fundación Telefónica, who manages it, with Indra and Software AG, will develop the
aims to universalise the use of the Internet new Electronic Spanish National Identity
in primary and secondary education and Document for the General Directorate of State
promote the educational use of the Net by Assets.This National Identity Document will
teachers, pupils, parents and schools. Over incorporate an electronic chip that will allow
11,000 schools are registered with the use of digital identity certifications and
EducaRed, with over 350,000 teachers and electronic signatures, offering a higher degree
more than 3,500,000 pupils. The EducaRed of security in e-commerce transactions and
portal has almost half a million pages of the deployment of advanced electronic
contents, tools and services, and it is administration services.
considered by the experts to be one of the
educational portals of reference in Spanish Ciudad Móvil (Mobile City) is a portfolio of
language. services aimed at modernising the services
and management of the Central
Telefónica Móviles España has organised, Government with citizens through their
for the fourth consecutive year, a tour of mobile phones. To date, its implementation in
the Universities to showcase the latest Zaragoza and Madrid has received an award
mobile telephony services. in each city from the user association Autelsi.
Telefónica signed an agreement of Telefónica de Argentina and AHCIET held the

collaboration with Microsoft, HP and Intel First Digital City Symposium, with a view to
to help SMEs and Public Administrations presenting the best practices in Latin America.
access European Union aid and subsidies.
To this aim, they will develop the European Telefónica Empresas took part and sponsored
Union Grants Advisor (EUGA) programme. the II Digital City Forum, organised by the
There are numerous initiatives for Digital Ministry of Industry, Tourism and Commerce
Training (Internet Educativa, Telefónica in collaboration with the governments of the
Accesible, Educared...), details of which are "Comunidades Autónomas".
provided in the chapter Society, under the
section on Digital Inclusion. Telefónica del Perú, Cisco and Intel have
joined forces for the launch of the project
“Cusco Inalámbrico” (Wireless Cusco), which
was presented within the framework of the
Colloquium of the Organisation of World
Heritage Cities.
Telefónica de Argentina sponsored the first

binding voting poll via the Internet in Latin
America, which took place in December in the
province of Mendoza.The voting poll, organised
by the Ministry of Health, allowed over 15,000
doctors to place their vote from more than 35
centres connected to the Internet.

03 Driving progress
Digital Context CASE STUDY

Telefónica de España has won the tender
launched by the Government to provide
Autelsi awards Telefónica
DSL coverage in rural areas in eleven
four prizes
Autonomous Communities in Spain. This
project includes carrying out almost 15,000
During the II Convention of AUTELSI The application developed by Telefónica
installations in 12,000 areas without
(Spanish Association of Móviles España called “Mobile Phone
current broadband coverage over four
Telecommunications and Information Protection against gender violence”. This is
years, using a wide variety of technologies.
Society Users), the Association awarded its a computer programme with a clear social
prizes. This second year of the awards, there orientation that processes calls or
Telefónica offers its Internet connection
were 74 candidates, opting for 11 award emergency calls from victims at risk of
service customers a Security Pack with
categories. Telefónica Group received four abuse.
antivirus and firewall to increase security in
awards:
their accesses to the Internet.
Telefónica I+D received an award in the
A mobile portal with information on category of Environmental Care and
Telefónica de España offers a service called
Madrid City (Telefónica Móviles España), in Protection, for its project of “contribution
Canguronet (“Babysitternet”) that allows
the category of Digital City. This is a project of telecommunications to sustainable
parents to restrict access to certain
carried out in collaboration with the City development”.
webpages or websites on the Internet. This
Council of Madrid, which consists of a
way, parents can select a series of pages
mobile portal for all citizens and visitors to Lastly, Mercadis, a virtual employment
that their under-age children will not be
visit and receive information of interest market for people with disabilities, is the
able to access.
about the city on their mobile phones. project from Fundación Telefónica that was
Telefónica took part in the second phase of awarded the prize in the Category of Social
the World Summit on the Information Commitment.
Society, which, promoted by the United
Nations, brought together 20,000
representatives of governments,
international bodies, companies and civil
organisations in Tunisia.
Telefónica took part in the VIII Summit of

Latin American Regulators and Operators,
organised by AHCIET, under the motto
“convergence and broadband: a proposal to
build the future”. This event was celebrated
in conjunction with two workshops on “the
universalisation of accesses” and the
“Transformation of services in the IP world”

03 Driving progress
Telefónica is aware that only those companies with a solid

commitment to innovation will be in a position to lead and
promote the development of the Information Society.
During FY 2005, Telefónica devoted 2,900 million of euros to

technological innovation, 533 of which were invested in R&D.
Over 6,800 people collaborate with Telefónica in its innovation
activities.
Lo que Lo que
hacemos comuinicamos
Innovation
For Telefónica, innovation constitutes the Technological Innovation

key to profitable and sustained growth.
Model
Innovation is based on transforming ideas
In 2005, Telefónica launched its new
into business processes that are
Innovation Model, defined in 2004. This
substantially more efficient and provide
model focuses not only on technological
competitive advantages; into profitable
innovation, but also on innovation in
products and services that provide value to
commercial, management or process and
the customer; into a flexible and
work organisation areas. Its deployment
personalised offer; into services that
has been led by the Corporate Innovation
provide solutions and into a close approach
Committee, comprised of top executives of
to each individual customer. As a result, any
Telefónica with the aim of focusing on
innovation should imply revenue growth,
innovation proposals aligned with strategy.
increased customer satisfaction, or a
reduction in costs. To achieve these aims,
The Innovation Model encourages
Telefónica has defined innovation as one of
collaboration with other players, who will
the five strategic axes of its programme
become “technological allies” (clients, Public
“Forging ahead to gain leadership”.
Administration, suppliers, other companies,
etc.), as well as the participation of all
Telefónica employees within a new
innovating culture. ”
Diagram of Telefónica’s innovation process
Ideas Projects Products

Evaluate and select relevant Carry our innovation projects Transfer services, solutions concepts for the
business and processes to the market
Generation of value for the customer, for the organitation itself, for society
Collaboration with technological allies, clients, Public Administrations, other companies, universities, R&D
centres

03 Driving progress
CASE STUDY
A New Innovation Culture

An essential factor for Telefónica’s
transformation into an even more
innovative company is the development
The Ideas block promotes and encourages
the contribution of ideas by the employees,
•Business offer, focused on improving
services for business clients and
and promotion of a new innovation culture providing the means for these ideas to be designing a new service combining and
that reaches all employees. To this aim, adequately evaluated, implemented and significantly improving current service
Telefónica is creating specific organisations recognised. Of special interest is the features.
to manage and promote innovation within creation of a new contest, Emprendedores
the Group. (Entrepreneurs), which has allowed the •Rationalisation of products and services
portfolio and processes, that aims to
Group to identify two ambitious projects
transform and optimise products and
An example of the transformation that is with high financial impact that are
services management at Telefónica de
taking place within the new Innovation currently under development. The contest
España. To this aim, we have worked on
Model is the case of Telefónica de España Ideal@b has also continued its
simplifying the development process and
that, during 2005 and within the development, with over one thousand ideas
rationalising the product portfolio that
Innovation module of the meta:cliente presented during the year.
makes up our commercial offer.
programme, offers a framework from
which to promote and cultivate innovation. The Projects block includes a group of
In addition, during 2005, Telefónica Móviles
In order to favour its development in all the highly ambitious projects that are deemed
España has launched the second Patenta,
areas of the organisation, the module is emblematic due to their strategic
Fábrica de Ideas, (Patenta, Factory of Ideas)
divided into three different areas for action: implications:
competition, organised to recognise the
Innovating Culture, Idea Generation Cycle
and Emblematic Innovative Projects. •New Ways of Working, whose aim is to best initiatives of employees related to the
take advantage of the move to the new Improvement of Efficiency. This year, 95
headquarters, Distrito C, as an proposals were presented.
The Culture block has undertaken to
opportunity to perform a cultural shift in
ensure that innovation forms part of the
working habits among all the employees Telefónica Internacional and TPI have also
day-to-day work of all employees. To this
of Telefónica de España. This made significant progress during 2005 in
aim, different activities and measures have
transformation will be achieved with aspects related to management and
been carried out, such as training sessions,
changes in technology, space and promotion of internal innovation, with
contact with other companies, creativity
environment that aid this cultural shift. activities geared to generating and
technique sessions, internal
communication actions and projects for •Home Offer, within which aspects such gathering ideas, incentive policies and
recognition schemes, etc.
the dissemination of innovation, work as the evolution of the Imagenio service,
sessions with people recognised for their voice over IP, home domotics services,
innovative character, recognition to home broadband connectivity and
employees, identification of innovative customers’ home equipment have been
projects, etc addressed.

03 Driving progress
R&D distribution by country Distribution of Innovation by country

In millions of euros In millions of euros
R&D Spain Innovation Spain
R&D Other countries Innovation Other Countries
1,591
1,309
1,303
1,234
1,164
304 305 311
222
599
140 156
2003 2004 2005 2003 2004 2005
Technological Innovation in According to data from the European

Commission, in 2004, Telefónica was the
Telefónica Group in 2005
Spanish company, including all sectors,
In 2005, Telefónica earmarked 2,900 million
which devoted the most resources to
of euros, following the OECD criteria, for
research and development, with an
technological innovation. This is a 20.9%
investment three times that of the second
increase with regard to the previous
company in the classification. In 2004,
financial year, mainly due to the
Telefónica’s investment represented 8% of
incorporation of the new businesses in
private investment in R&D in Spain. With
Latin America and the Czech Republic. 45%
regard to the companies in the ICTs sector,
of this investment went to technological
according to the Spanish Association of ICT
innovation carried out in Spain, 23% to that
Companies, in 2004, the sector devoted
carried out in Brazil and 6% to the activities
1,334 million of euros to R&D, and 5,249
carried out in Argentina. Telefónica Móviles
million of euros to technological innovation
is, once again, with its investment
in general. According to these figures,
accounting for 52% of the total, the
Telefónica accounts for 23% of the ICT
company of the Group with the highest
sector’s investment in R&D, and 22% of its
proportional investment in innovation.
technological innovation investment.
Telefónica believes that in order to achieve
better positioning in an increasingly
complex market, innovation cannot only be
based on technology acquisition. It is
essential that the research and
development activities be made the axis
and focus for the rest of innovation
activities in order to guarantee differential
advantages over competitors. During 2005,
R&D investment rose 15.6% with regard to
the previous year, reaching 311 million euros
in Spain and more than 533 million of euros
worldwide. The latter figure is equivalent to
1.41 % of Telefónica’s total revenues.

03 Driving progress
Technological innovation in Telefonica 2005
Reserch Development Innovation
19
million euros
533
million euros
2.900
million euros
2004
14,5 461 2.398
Telefónica I+D 13 17
25 31 Research Who does it? What is involved?
Backed by the EU 15 Business Lines, 18 Purchase of

35 46 directly machinery and
43 Backed by Public 40 Telefónica I+D 41 equipment
Administrations Other external 19 47 Training and
18 marketing
Backed by companies
Telefónica I+D 45 Design and
22 18 4 planning
22 Backed by 41
Telefónica’s R&D
22 16 Acquisition of other
Corporate Centre
2 knowledge
What is done?
6 Who is involved?
25 33 Infrastructure 15 Telefónica Móviles
2005 Management 7 Telefónica de
27 26 Development of 15 España
2004 Products and Telefónica
Services Latinoamérica
Business 53 52 Others
Management
25
47 Systems 27
Percentages (according to OECD criteria)
42
CASE STUDY
Measurement of innovation,
following OECD criteria
The Organisation for Economic Co- planning activities, as well as new product According to the OECD, R&D activities are
operation and Development (OECD) has commercialisation. the creative work carried out within the
carried out a series of studies to establish organisation, undertaken in a systematic
useful indicators for innovation. These Thus, in the innovation figures published manner with a view to increasing the
studies were gathered in what are known by Telefónica, the following concepts are volume of knowledge that enables the
as the Frascati Manuals for R&D and the included: development of new products or processes
Oslo Manual for innovation in general. or the improvement or already existing
1. Internal R&D expenses
According to these Manuals, the concept ones. The R&D results can be protected
of innovation refers both to the result and 2. External R&D expenses under industrial or intellectual property
to the process itself. 3. Expenses derived from purchase of rights. If these activities are carried out
machinery and equipment related to internally or commissioned from another
With regard to the result, technological products and processes that are organisation, one can speak of internal
innovations include the technologically technologically new or improved R&D or external R&D. In either case, the
important products and processes of the company financing the activities assumes
innovations. An innovation is considered to 4. Expenses for acquisition of immaterial the costs and will eventually be the
be such when it is launched on the market technology industrial or intellectual owner of the
(product innovation) or used in a 5. Expenses for design and industrial result. The following activities are not
production process of goods or services engineering, service planning, and included under R&D: education, general
provision (process innovation). service launching data collection, ordinary standardisation
works, routine tests, administrative and
6. Training expenses related to
As to the process, innovative activities that legal work regarding patents and licenses,
technologically new or improved
lead to the development or introduction of routine software development activities,
products and processes
technological innovations are: etc.
technological research and development 7. Commercialisation of new or improved
(R&D), acquisition of material and products.
immaterial technologies for innovation,
industrial design, engineering and

03 Driving progress
Number of new products of Telefónica

Móviles España and Telefónica de
España
Mobile Services (Telefónica Móviles España)
Internet and Broadband (Telefónica de España)
Voice Market (Telefónica de España)
109
85
42 38
109
23 85 77
77 63
55
43 37 38
27
2001 2002 2003 2004 2005
Technological Innovation •During 2005, TPI launched the search

engine Noxtrum, one of whose main
1,509 patents and utility The technological activities carried out by
Telefónica in 2005 were geared mainly features is that it combines access to all
models towards the creation of value for information available on the Internet
Businesses, especially with regard to with information about companies,
broadband services and mobile services. shops and businesses (Yellow Pages),
1,546 protected The following activities are some of the commercial information, telephone
books, (White Pages), images, news, etc.
intellectual property highlights of 2005:
rights (software products) •The activities developed within the •Telefónica generates employment for
framework of TV over ADSL, the Imagenio over 6,800 people in the field of
Service, that have allowed the launch of technological innovation, with over 1,800
different offers in the market, such as the professionals in companies belonging to
296 new products “triple play” products, combing telephony, Telefónica Group and 5,000 employees at
developed by Telefónica data and television services. At the end of partner companies.
2005, Imagenio had over 200,000
I+D in 2005 customers in Spain, and it was being Another of the results stemming from
launched in the Czech Republic. Telefónica’s innovation efforts is the
Portfolio of Proprietary Products of
•The development of the Broadband Telefónica, which, as at December 31, 2005,
Service Selection Portal, a joint project
included 3,055 patents, models and
aimed at increasing the range of
industrial designs, for which the Group has
broadband services in Latin America,
obtained a total of 26.4 million euros in
especially in Brazil, Chile, Argentina and
royalties, of which 77% from products and
Peru. In 2005 Telefónica exceeded the
technologies developed by Telefónica I+D.
figure of two million retail ADSL accesses
in Latin America.
•The new mobile services developed,

among which the prepayment platform
deployed in practically all of Telefónica's
mobile operators, and those developed
within the framework of the new
generation of mobile technologies,
taking advantage of the emerging
capacities of UMTS and the new mobile
terminals. These new services have
contributed, for instance, to Telefónica
Móviles España’s revenue during the first
nine months for download, navigation
and data transmission already
accounting for 17% of its total revenue, a
45% increase with regard to the same
period of the previous year.

03 Driving progress
Employment Generated by Telefónica’s R&D Activities

By Business Line By Country
Direct Employment Direct Employment

Indirect Employment Indirect Employment
4,008 6,812 2,421 205 6,812
2,264
2.264
3,477
4,186
4,989 157 4,989
2,804 531 2,520
1,512
1,666
1,292 1,823 1,823
Telefónica I+D Otras empresas Total Spain Latin America Other Total
of the Group markets
Management and Process CASE STUDY
Innovation
Telefónica's efforts in the field of MovilForum: a joint
innovation are not only focused on the innovation effort
launch of new services, but also on
commercial and processes innovation and
Within the innovation tools of Telefónica
new models of work organisation. Thus,
Móviles, it is interesting to point to the
Telefónica has developed new
establishment of the MovilForum, an
management systems and substantially
initiative launched by Telefónica Móviles
improved those already in place, within the
España five years ago to promote the
framework of commercial and operational
collaboration with the business world with
management, aimed at designing
a view to strengthening and encouraging
innovative solutions for business processes,
development and commercialisation of
with a view both to providing them with
mobility services and applications.
further intelligence and increasing
profitability and efficacy of the processes of
Movilforum, which offers companies its
Provisioning, Invoicing, Customer Service
platforms and networks to carry out tests,
and Infrastructure Management.
free terminals and training courses,
currently has 5,400 partner members and
There has also been significant activity in
150 registered companies, who already
the field of network and service
have a catalogue of products and services
management Systems, aimed at improving
with over 200 different applications based
infrastructure and its quality, through
on mobile technology to improve business
innovative solutions.
management in various sectors such as
Transport, Health, Insurance, Banking,
Public Administration or Leisure, among
others.

03 Driving progress
Telefónica Innovation timeline
JANUARY FEBRUARY MARCH APRIL MAY JUNE
Innovation for our clients
Telefónica movistar Telefónica Movistar Telefónica de Telefónica de Telefónica de Telefónica launches

users can now use España presents España launches España launches España tests the in Peru the first IP
their mobile to pay ruta movistar, the MMS web service, new service virtual private IP network with giga
in food and drink first online for multimedia "solución adsl copia network centrex ethernet capacity
vending machines navigation service content exchange de seguridad" (dsl service with four in Latin America
for mobiles from fixed back-up copy clients
Mobipay tests bus telephony networks service) Telefónica launches
ticket payment Telefónica Móviles Movistar launches the first landline
through mobile launches in Mexico Telefónica de Telefónica Móviles 'multivoz' in spain, phone with camera
phones in Málaga 'oficina movistar', a España launches España develops a a service where and multimedia
business new “ADSL mini” service for each client pays for message functions
management service for high payments under six part of the call
system via mobile speed navigation, euros
paying only for
information
downloaded
Innovation in collaboration
Telefónica, a César Alierta and Telefónica Móviles Telefónica’s text Telefónica Telefónica I+D
member of the other european and Microsoft sign messaging services Empresas advances develops a Wi-fi
technological Telecommunications an agreement to receive Frost & its interconnection service platform
corporation of company support software Sullivan award to with a new based on free
andalusia, presidents ask developers leadership in generation software
collaborates in the brussels to favour Marketing Strategy technology
promotion of investment and Telefónica I+D leads Telefónica sponsors
R&D&i among innovation a european project 'movistar emoción' Telefónica I+D’s the series "España
companies from to improve the incorporates centre in méxico Innova" (Spain
Andalucia The new centre of quality of voice and exclusive video celebrates its first Innovates) that is
Telefónica I+D in video over IP channel with anniversary with being repeated on
Banesto and Huesca promotes communications Antena 3 news for most solutions television
Telefónica the development of 3G mobiles already
Empresas reach an projects with EU Imagenio, chosen implemented
agreement for the backing as best innovative
development of an idea by the
electronic billing magazine
service Actualidad
Económica

03 Driving progress
JULY SEPTEMBER OCTOBER NOVEMBER DECEMBER
Telefónica de Telefónica Movistar Movistar launches TelesP launches a TPI launches pilot
España concludes España launches its new “tu service offering the version of Noxtrum,
first worldwide Wifi internet tiempo” (your best download its internet search
experience of service for clients time) contract, speed in Brazil engine
simultaneous with contract offering call
navigation by sea invoicing by Movistar launches Telefónica de
and via the Telefónica Móviles seconds from the first pocket España launches its
internet México opens its first second computer with new "dúo ADSL
demonstration videoconferencing mini (2mb) +
centre Movistar Argentina llamadas
launches Movistar and nacionales" offer
International data Telefónica de (DSL mini duo
Roaming with España introduce (2mb) + national
Spain and Chile the first landline- calls)
mobile
videoservices in the Telefónica Móviles
spanish market launches third
generation services
in Venezuela
Telefónica Telefónica Telefónica Móviles The Chinese Telefónica Móviles

Empresas is a organises an and symbian join Minister of Science creates the largest
technology partner international forces to support and Technology blackberry
of the seminar on conference on developer visits Telefónica’s community in Latin
Electronic service standards communities stand at the first America
Signature in for the digital hispanic-chinese
Barcelona home Telefónica is a science and Telefónica
founding member technology forum internacional and
Telefónica de of the spanish the Fundación
España holds a organisation itil, Telefónica and NTT Instituto de
session with Apple recommended by Docomo analyse Empresa launch a
within the initiative the industry ways of research grant
"conectando con la strengthening their programme in Latin
innovación" Telefónica Móviles strategic alliance America
(connecting to españa participates
innovation) in the first tests of
digital television
for mobiles

03 Driving progress
Its mission is to contribute to increasing Telefónica’s

competitiveness by means of technological innovation, keeping
in mind that the R&D results must always be transferable to
customers.
Location of Telefónica I+D Centres
Mexico City São Paulo
Telefónica I+D (Research & Development)
A great part of the R&D activities is carried During the last financial year, Telefónica
out at Telefónica I+D, a subsidiary fully I+D has continued consolidating its
owned by Telefónica. This company works Network of Centres of Excellence,
mainly for the Group’s lines of business, transforming its company into a Network
and participates in other research projects, of Technological Innovation on an
both nationally and internationally. international scale.
In 2005, Telefónica I+D worked on 1,800

•On an international front, the percentage
of activity developed in its Centres in
projects (1,660 in 2004), devoting its work
Mexico City and São Paulo in Brazil has
to developing products, services and
increased. These centres now share the
processes for Telefónica’s businesses, and to
mission of supporting technological
applied research financed by the
innovation in the Group’s companies
Corporation. This activity reflects
that operate in Latin America.
Telefónica’s strategy, followed for many
years now, of promoting its own research •In Spain, a new Centre has been opened
and development activities, as a guarantee in Granada, which complements the
to ensure competitive advantages with activities that Telefónica I+D carries out
regard to its competitors, and to drive the in the rest of its centres in Barcelona,
rest of innovation activities. Huesca, Madrid and Valladolid.
Thus, Telefónica I+D drives the Group’s

•In 2005, the Barcelona Centre has grown
significantly, with the implementation of
technological innovation, with a double a new organisational structure. The staff
role: on the one hand it develops solutions, has tripled, and a new technological
platforms and networks required by strategy regarding the activities to be
Telefónica, and on the other hand, it developed has been established.
identifies emerging technological options
which could have a relevant impact on
business.

03 Driving progress
Valladolid Madrid Granada Huesca Barcelona
Applied Research CASO PRÁCTICO

The new innovation model has encouraged
research activities aimed at obtaining
Telefónica I+D’s Scientific Advisory Council
results in the medium and long terms,
which can be applied transversally to
Telefónica has created an advisory body to support the Group’s new Technological
several business lines. The goal is to detect,
Innovation Model, which establishes a new framework in the development of its R&D&i
understand, develop and apply specific
activities. It is Telefónica I+D’s Scientific Advisory Council, an external body called upon to
aspects that may influence the evolution of
contribute to the creation of new ideas, formed by world-renowned experts in the fields of
technologies related to networks, service
science, business and Public Administrations, from different contexts and locations where
and content platforms, business and home
the Telefónica Group is present.
solutions or information systems.
The Scientific Advisory Council was created with the aim of providing guidance regarding
These Applied Research activities, within
the possible scientific-technical evolution of the ICT sector; identifying its most relevant
the framework of Telefónica’s corporate
aspects, and lastly, providing recommendations regarding the focus of Telefónica I+D’s
environment, are complemented by an
research and development activities. Its current structure is as follows:
extensive participation in European R&D
projects, backed and financed in part by the
Chairman:
EU, which have contributed decisively to
Andreu Mas-Colell (Chair of Economy at Barcelona’s UPF)
Telefónica being the first European
company in terms of participation in this
Members:
type of project.
Enric Banda (Director General of the Fundaciò Catalana per la Reserca i la Innovaciò)
Carlos Enrique de Brito Cruz (Scientific Director of the Fundaçao de Amparo a Pesquisa do
Telefónica I+D is participating from 2004 to
Estado de São Paulo)
2008 in 71 projects promoted by the EU,
Fernando Fournon González-Barcia (CEO of Telefónica I+D)
focused mainly on new multimedia
José Luis Huertas (Director of the Centro Nacional de Microeléctrica of Seville)
services, mobile and global
Julio Linares (Director General of Coordination, Business Development and Synergies,
communications and software solutions to
Telefónica S.A.)
provide new services. In addition, it has an
Gonzalo León Serrano (Vice-Dean, Research, UPM, Madrid)
important role in the EU’s initiatives to
Juan Mulet Melià (Director General, COTEC)
promote R&D through three European
Juan Pérez-Mercader (Director, Centro de Astrobiología (CAB)
technological platforms: eMobility, NEM
Fernando Rey (Director of Research, Marketing and Design, Grupo Antolín-Irausa)
(Networked Electronic Media) and NESSI
Mateo Valero Cortés (Director, Centro Nacional de Supercomputación)
(Networked European Software and
Juan Vázquez García (President, Council of Deans of Spanish Universities)
Services Initiative).
Sergio Verdú (Professor, University of Princeton)
César Vohringer (Chief Technology Officer, Philips Consumer Electronics)
Secretary:
Diego Ruiz Quejido (Director General, Planning and Control, Telefónica I+D)

03 Driving progress
Telefónica is aware of the importance of the need to be in

contact with all the players that take part in the process. That is
why the promotion of the relationship between Universities
and Businesses is a priority goal for Telefónica.
In Spain, Telefónica Group carried out 100 initiatives in 2005

with Universities and Business Schools and awarded 1,100
grants to students from different Universities across the
country.
Collaboration with the University Sector
Distribution of investment in initiatives

with the University Sector by business
The initiatives launched by Telefónica in •The creation of Telefónica Chairs. The origin
this field support both basic research and of the sponsorship of Telefónica Chairs
line in 2005 applied research, encourage the training of goes back to the year 2000, although it
In percentages
future professionals, not only in the field of was in 2001 when most of the agreements
Telefónica Telefónica ICTs, but also beyond the scope of this with the Universities were signed. The
Internacional I+D
sector, and generally aid the expansion of Telefónica Chairs are joint collaboration
5.8 0.2 Fundación new technologies throughout the country’s projects between the Universities and
Telefónica
economy. Telefónica S.A., focused on specific subjects
Telefónica 31.1
S.A. related to the Information Society, and
Telefónica has three great aims in its which are held by a University Chair.
31.6
relationship with the University Sector:
Telefónica
•Academic collaboration with the
de España*
0.6
• Contribution to innovation, supporting University through the organisation,
Telefónica University research groups to enable participation or sponsorship of an
Móviles them to innovate, train and disseminate academic course.
Telefónica
in subjects of their expertise.
2.4 Móviles
•Technological collaboration with the
España
28.3
• Development of the information society, University through projects or promotion
collaborating in the design of training plans specifically created to encourage
* Includes Telefónica Empresas and Telefónica
activities and grant funding for projects research on specific subjects.
Soluciones
or theses related to the implementation
of new technologies.
•The development of educational portals:
EducaRed and CampusRed. The
•Support for the social projection of Fundación Telefónica, with the
Telefónica, through awards of prizes in collaboration of the educational
this field and dissemination of community —social organisations,
publications and results in the media. institutions and Administrations—has
been, since 1998, investing significant
The agreements and collaboration efforts in the incorporation to its
relationships of the different Business Lines educational portals of the most useful
of Telefónica Group with Universities and and innovative tools in the field of
Business Schools are mainly focused on the educational technology.
following:
•The financial investment of the
Telefónica Group aimed at supporting
University training programmes
exceeded eight million euros in the last
financial year, distributed among the
Telefónica Chairs, grants (with a total
investment of approximately five and a
half million euros) and other initiatives
related mainly to academia.

03 Driving progress
Telefónica Chairs
University Telefónica Chairs 2002 2003 2004 2005
Politécnica de Madrid New Generation Internet
Carlos III de Madrid Studies in Telecommunications Economy
Studies in Telecommunications Technology
Advanced Networks and Services
Autónoma de Madrid Service Economy
Complutense de Madrid Master APIE (Association of Finance
and Economy Journalists)
Las Palmas de Gran Canaria Multimedia Experimental Services
La Laguna de Tenerife Unesco Chair of Telemedicine
Politécnica de Valencia Broadband and Internet
Politécnica de Cataluña Technological Specialisation
and Knowledge Society
Pompeu Fabra Multimedia Production
Zaragoza Quality, New Networks
and Telecommunications Services
Oviedo New Information and
Telecommunication Technologies
Santiago de Compostela Telemedicine
Telefónica Chairs
The Telefónica Chair programme has been
up and running since 2001, and in its fifth
year, the activity has continued its CASESTUDY
consolidation process. In 2005, the financial
year was closed with 12 Telefónica Chairs Criteria for assessing the activity of the Telefónica Chairs
and 2 master courses at different Spanish
Universities. In addition, Telefónica Móviles
has two Chairs at the ETSIT of the
Its degree of technological innovation,
bearing in mind the quantity and quality of
the projects and activities carried out
59 technological innovation
Universidad Politécnica de Madrid and at projects (41 in 2004)
the Universidad de Deusto. within the framework of the Chair as well
The activity of the Telefónica Chairs is

as the degree of collaboration of the Chair
with other institutions, schools and
10 projects of collaboration with
Telefónica I+D (11 in 2004)
evaluated on the basis of a combination of companies of the Telefónica Group in said
various criteria that include turnover (30%),
technological innovation (20%), academia
projects.
45 projects in collaboration with
(15%), training (10%), projection and other opportunities and information
visibility (10%), transparency (10%) and centres (17 in 2004)
initiative (5%). On the basis of these
criteria, the Chairs that are best regarded
are the Chair of the Universidad Politécnica
Its academic contribution, bearing in mind
the quality and quantity of the courses
offered by the Chairs, as well as the
35 courses taught (26 in 2004)
de Madrid and the Chair of the Universidad
Politécnica de Cataluña. number of students attending them. 1,969 students attending
(1,254 in 2004)
1,990 training hours

(2,538 en 2004)
Its training contribution, bearing in mind

the grant programme linked to the Chair
(both for End of Degree Projects and
91 grants related to the Chairs
(91 in 2004)
Theses, and in general, for the collaboration
with the Chair)
Its projection and visibility, assessing the

repercussion of the Chair in the field, the Participation in 28forums,
quantity and quality of the relationships conferences and meetings (32 in
established and, generally-speaking, the 2004)
visibility of the Chair in the Autonomous
Community. 37publications (26 in 2004)
Almost all Chairs have their own
website

03 Driving progress
Distribution of grants by business line
Telefónica Telefónica
I+D Internacional
Telefónica 237 Wholesale
Data Services
66 14
TPI Telefónica
Móviles de
112
España
Telefónica 229
S.A.
36 T-Gestiona
Telefónica 14
Soluciones Telefónica
171 Telefónica de España*
Móviles 209
16
Grants CampusRed
Another line of collaboration of Telefónica CampusRed.net, the portal for Universities
with the University is related to the award and university students, is an initiative
of grants to students in the last years of sponsored by Telefónica and Fundación
their degree. In 2005, Telefónica Group Telefónica.With a clearly intercampus
offered 1,104 grants to students of technical approach, it provides a powerful technological
degrees from various Spanish universities platform that offers not only the possibility of
(1,014 in 2004). For this collaboration, the managing and administrating courses,
Telefónica Group holds 178 agreements developing research or supervising doctoral
with Universities and Business Schools. theses, but also the programmes and tools
required to share work.
In 2002, Telefónica launched a grant
programme, in collaboration with the Within the framework of this initiative,
Fundación Carolina with a view to collaborations have been established with
establishing a line of collaboration with the Universidad Internacional Menendez
institutions working in the field of Pelayo, Universidad Pompeu Fabra,
postgraduate training in new technologies Universidad Complutense de Madrid,
in Latin America, for the development of Universidad Politécnica de Valencia,
qualified professionals with international Universidad de las Islas Baleares, UNED,
interests. The twenty-six participants in Instituto Universitario de Investigación
2005 came from the different companies of Ortega y Gasset, Universidad Rovira i Virgili,
Telefónica in Argentina, Brazil, Chile and Universidad Carlos III de Madrid,
Peru. The grant receivers follow trainee Universidad Autónoma de Barcelona,
programmes at the Group’s companies in Universidad Antonio de Nebrija and
Spain, while complementing their training Universidad San Pablo CEU.
with postgraduate programmes at Spanish
institutions. R&D Prizes to Innovation
Since 1999, Telefónica I+D annually awards
Telefónica Internacional has launched a the “Premios I+D a la Innovación” (“R&D Prizes
joint call for grant applications with the to Innovation”), for which all officially
Centro Euro-Latinoamericano (CEULA) of registered students in their third year or
the Instituto de Empresa. The programme above in the current academic year, studying
promotes applied research on subjects Telecommunications or Computer Studies,
related to the Information Society and the from any University belonging to the
development of Latin American countries. Autonomous Communities of Madrid, Castilla
The programme is aimed at Latin American y León, Catalonia and Aragon are eligible.
university teachers and researchers
working in fields related to the proposed The main aim of the awards is to
study subjects. The call for grant encourage and reward initiative and
applications for 2005-2006 is focused on innovation efforts of students at Spanish
subjects related to the digital divide and Universities, within the fields of
the development of Latin America. telecommunications and computer studies.
The idea is to recognise original and
innovative ideas of the students, either
individuals or teams.
03 Driving progress
Other collaborations with the It is a board member of the ENTER studies

centre, of the Instituto de Empresa,
University Sector
focusing on the analysis and evaluation of
Together with the Telefónica Chairs, the
the Information Society and
Company closely collaborates with the
Telecommunications.
University to promote the debate about new
technologies and the information society:
It has collaborated for some years with the
The IESE in the organisation of the “XI
Universidad Internacional Menéndez Pelayo
Telecommunications Sector Conference”,
in the organisation of the Encuentro sobre
which focused on the convergence of
Telecomunicaciones (Telecommunications
services. In addition, it is a member of its
Conference). In 2005, the XIX
Centro de Estudios Sector Público-Sector
Telecommunications Conference was held,
Privado (Centre of Studies of the Public and
focusing on “Time for convergence”
Private Sectors).
Telefónica de España / Telefónica Empresas Collaboration agreement. Universidad de

España Sevilla.
I Forum Ipv6 red Iris. Universidad de Valencia Collaboration agreement. Universidad de
II Conference of Distance Learning of Castilla Córdoba.
y León: “Promoting the Knowledge Society”. Collaboration agreement. Universidad de
Universidad de Burgos Extremadura.
IV Professional Guidance Exhibition. Collaboration with the Gamelab department.
Universidad de Salamanca Universidad de Oviedo
Party UHU: Seminar on New Technologies, Summer courses. Universidad Europea de
Communications and Computing. Madrid
Universidad de Huelva
Festibity 2005, Universidad de Barcelona. Telefónica I+D
Murcia LAN Party 2005, Universidad de Science Week of the Autonomous
Murcia Community of Madrid
Expomanagement 2005. IESE Universidad Politécnica de Madrid,
17th Euromicro Conference on Real Time participation in the SATELEC seminars.
System. Universidad de las Islas Baleares Universidad Alfonso X el Sabio: company
presentation.
Telefónica Móviles SA / Telefónica Móviles Participation in several Technology and
España Employment Forums: U. Carlos III de Madrid
Seminar on Telecommunications and (Foroempleo-05), U. de Valladolid
Disabilities at the School of (Presentation at Technical Employment
Telecommunications Engineering. Forum), U. Alcalá de
Universidad Politécnica de Madrid Henares (Alcajob-05), U. Complutense de
Seminars on Corporate Social Responsibility. Madrid (Presentation at Employment Days
ESIC. and Computecno), U. de Salamanca
Agreement for expert legal advice and (Employment Forum).
consultancy in the scientific-medical field. U. Politécnica de Cataluña participation in the
Universidad de Valladolid Teleccomunications and Electronics Forum.
Summer courses. Universidad Politécnica de U. Pompeu Fabra sponshorship of the Forum
Cartagena. U-Feina 05.

03 Driving progress
Indicators of information system performance in Telefónica Group

In percentages
2004
2005
99.8 99.4 98.9 99.8
74 74
71
4 4
Degree of satisfaction Availability of critical Network % of unattended
of internal clients and applications availability: calls
External Benchmark
Information Systems
The mission of the areas of Telefónica contributes to the improvement •Integration of ERPs of the Latin American
Information Systems is to of productivity of many of its clients by companies, managing to optimise their
means of communication solutions and operational infrastructures and reduce
define, develop, implement the number of current data processing
information systems. Information systems
and manage the systems are an essential resource for evolution of centres. (Candelaria project)
that provide optimal the businesses and the alignment of
operations in the transformation process of In addition, important progress is being
support and competitive
Teléfonica. made in the dissemination and application
advantages to the business of common methodologies applicable to
processes of the companies. In addition, the way in which Telefónica the entire life cycle of the Information
often explains to its clients the possibilities Systems by means of standards such as ITIL
offered by the new systems is by (Information Technology Infrastructure
demonstrating the solutions on their own Library) together with CobiT (Control
systems. An example of this is e-Domus, Objectives for Information and Related
the Intranet of Telefónica de España, which Technology) and CMMi (Capability Maturity
has served as a demonstration platform for Model Integration). These standards are
all clients who requested a similar solution. acquiring increasing importance in the
methods of managing the exploitation of
The Information Systems costs incurred by information technologies and can benefit
the different companies of the Telefónica the different areas of Information Systems,
Group during FY 2005 exceeded 1.3 billion outsourcing businesses in general and all
euros (1 billion euros in 2004), with a staff companies offering services based on IT
of their own human resources of almost infrastructure. At the forefront of these
4,000 employees (3,300 in 2004). initiatives, Telefónica has once more
become a key driving force behind
The following projects are some of the technological development.
milestones reached in FY 2005:
The information systems department
•Integration of economic-financial and evaluates performance with the aid of a
logistics IT systems of Telefónica de
series of indicators. The results obtained in
España and t-gestiona, with the
FY 2005 place Telefónica above market
integration of the IT systems TeleSAP and
standards: the degree of satisfaction of
CorpoSAP
internal clients reaches 74%, compared to
•Evolution and integration of the the external benchmark of 71%; the
commercial systems in Telefónica response time of the internal network the
Latinoamérica (systems technically called applications run on is 13 milliseconds, the
ATIS, SCL and Altamira) Availability of Critical Applications is 99.4%
and the Network Availability is 99.8%.

03 Driving progress
“Information CASE STUDY

Society” Report Information Society Portal
In 2000, Telefónica was a pioneer in
publishing the first Information Society
In 2005, Telefónica launched the • Documents from round tables on the
information society portal. With the aim of Information Society
report, a document that year after year, has continuing with the work carried out for
analysed the state of the Information the publication of annual reports and • Articles analysing the contribution of
Society in Spain. Together with the telecommunications to sustainable
becoming a window for all citizens to
traditional Round Table cycles aimed at development
access information about the latest
providing a space for debate on the
Information Society, during 2005, the
technological innovations and their • Documents, links, courses, tutorials...
repercussion on sustainable socioeconomic
Telefónica Group companies promoted the development. In order to keep users informed of the
following publications: portal news, an Information Society,
•Telefónica published the sixth edition of In its first nine months of existence, the
portal has published over 1,200 information
Technology and Innovation Bulletin was
created. This Bulletin is distributed to over
the report on the information society. This
edition pays special attention to SMEs, entries, including: 2,000 users subscribed on a weekly or daily
basis, depending on the option chosen.
under the premise that the incorporation
of information and communication
• Over 850 news items related to the
development of the information society
technologies to companies is a basic
pillar for development. • Opinion and dissemination articles
regarding new technologies and their
•Telefónica CTC Chile presented the book implications for society
“La Sociedad de la Información en Chile:
2004-2007, Presente y Perspectivas” • Reports on the Information Society
(Information Society in Chile: 2004-2007, published by Telefónica (and other
Present and Outlook”). publications related to ICTs)
•Telefónica Móviles España presented M-

Sociedad, with the aim of promoting an
increasingly mobile society and
improving people’s lives through mobile
telephony. In a Seminar, promoted by the
TME Chair of the Universidad Politécnica
de Madrid, projects were presented
related to the possibilities offered by the
new mobile telephony services in fields
such as mobile administration, mobile
health or new mobility trends.
•Telefónica I+D, in collaboration with

AHCIET, published the book
“Telecomunicaciones y Movilidad en la
Sociedad de la Información”
(Telecommunications and Mobility in the
Information Society)

03 Driving progress
Institutional Collaboration
Telefónica collaborates with prestigious and recognised Spanish Associations and Bodies
associations and bodies worldwide, contributing to the
development of technology standards and the professionalisation •AECE (Asociación Española de Comercio Electrónico)
of the businesses. The main associations and forums with which
Telefónica participates actively are those related to
•AETIC (Asociación de Empresas de Electrónica, Tecnologías de la
Información y Telecomunicaciones de España)
telecommunications, mainly in the regions where the company
operates (Spain, Latin America and Europe) •AESPLAN (Asociación Española de Planificación y Dirección
Estratégica)
International Associations and Bodies •APD (Asociación para el Progreso de la Dirección)

•AHCIET (Asociación Hispanoamericana de Centros de Investigación •AUI (Asociación de Usuarios de Internet)
y Empresas de Telecomunicación)
•AUTELSI (Asociación Española de Usuarios de Telecomunicaciones y
•AEPIA (Asociación Española para la Inteligencia Artificial) de la Sociedad de la Información)
•Benchmarking Plus •Asociación de Ejecutivos de Finanzas

•BRT (Brussels Round Table) •CEOE (Confederación Española de Organizaciones Empresariales)
•CITEL (Comisión Interamericana de Telecomunicaciones) •CIECAT (Círculo Español para la Calidad en Telecomunicación)
•DSL Forum •Círculo de Empresarios
•DVB (Digital Video Broadcasting) •Club Gestión de la Calidad
•EIF (European Internet Foundation) •COTEC
•ELRA (European Language Resources Association) •Foro de Comunicación Interna
•ERT (European Round Table of Industrialists) •Foro de Reputación Corporativa
•ESF (European Services Forum) •Fundación Iberoamericana de Gestión de la Calidad
•ETP (European Telecommunications Platform) •Movilforum 2320
•ETNO (European Telecommunications Network Operators) •N-ECONOMÍA
•ETSI (European Telecommunications Standards Institute) •SEDIC (Sociedad Española de Documentación e Información
Científica)
•FS-VDSL Forum
•GBDe (Global Business Dialogue on e-commerce) Argentine Associations and Bodies
•GeSI (Global e-Sustainability Initiative) •CICOMRA (Cámara de Informática y Comunicaciones de la República
Argentina).
•GSMa-GSMe (GSM Association - GSM Europe)
•ICANN (Internet Corporation for Asigned Names and Numbers) •AmCham (Cámara de Comercio de los Estados Unidos en la República
Argentina : Comité de Telecomunicaciones y Comité Legal & Tax).
•ICC (International Chamber of Commerce) •COPITEC (consejo Profesional de Ingeniería en Telecomunicaciones,
•Ipv6 Forum Electrónica y Computación)
•MPEG (Moving Picture Experts Group) •Cámara Argentina de Comercio – CAC

•MEBF (Mercosur European Union Business Forum) •Unión Industrial Argentina – UIA
•OMG (Object Management Group) •Cámara Española de Comercio de la República Argentina
•OSGI (Open Services Gateway Initiative) •AEA – Asociación Empresaria Argentina
•SDR Forum (Software Defined Radio) •Fundación Mediterránea
•Telemanagement Forum •Fundación Capital
•Transatlantic Policy Network •Fundación de Investigaciones Económicas Latinoamericanas – FIEL
•UIT (Unión Internacional de Telecomunicaciones) •Instituto para el Desarrollo Empresarial de la República Argentina –IDEA
•3GPP (3rd Generation Partnership Project) •Instituto Argentino para el Desarrollo de las Economías Regionales – IADER
•Fundación Carlos Pellegrini
•Cámara Argentina de Telecomunicaciones y Afines – CATYA
•Cámara de Empresas de Software y Servicios Informáticos – CESSI
•Asociación
– USUARIA
Argentina de Usuarios de la Informática y las Comunicaciones
•Cámara Argentina de Bases de Datos y Servicios en Línea . CABASE :

03 Driving progress
Brazilian Associations and Bodies Associatons and Bodies from Nicaragua

•AMCHAM - Câmara Americana de Comércio •Cámara de Comercio, Cámara de Industrias de Nicaragua y Cámara
•Câmara Oficial Espanhola de Comércio no Brasil Española.
•CDES – Comitê de Desenvolvimento Econômico e Social, ligado à •COSEP (Consejo Superior de la Empresa Privada)
Secretaria de Relações Institucionais do Governo Federal Brasileiro
•INDE (Instituto Nicaragüense de Desarrollo).
•CEAL - Conselho Empresarial da América Latina / Consejo Empresario Associations and Bodies from Panama
de América Latina
•CPqD - Fundação Centro de Pesquisa e Desenvolvimento •APEDE (Asociación Panameña de Ejecutivos de Empresas)
•FIESP - Federação das Indústrias do Estado de São Paulo, com •Cámara de Comercio, Industrias y Agricultura de Panamá, Cámara
participação nos seguintes órgãos: COPS - Comitê de Orientação Oficial Española de Comercio de Panamá
Política e Social, COTRI - Conselho de Orientação Técnica em Relações
Industriais, NAS - Núcleo de Ação Social e Instituto Roberto Simonsen
•INDESA (Asociación para la Investigación y Desarrollo)
•IEDI - Instituto de Estudos para o Desenvolvimento Industrial Peruvian Associations and Bodies
•ADEPSEP (Asociación Privada de Empresas de Servicios Públicos)
Chilean Associations and Bodies •Cámara Oficial de Comercio España en el Perú
•SOFOFA, Chilean Federation of Industry •Club Empresarial
•PERU 2021.
Associations and Bodies from Colombia •CONFIEP-CRECE PERU (Confederación Nacional de Empresas Privadas –
•ASOCEL (Asociación de la Industria Celular de Colombia) Comité de Promoción del Perú).
•CCIT (Cámara Colombiana de Informática y Telecomunicaciones). •AMCHAM (American Chamber or Commerce)

•ASETEL (Asociación de Empresas de Telecomunicaciones) •COCEP (Cámara Oficial de Comercio de España en el Perú)
•ANDI (Asociación Nacional de Industriales) •APESAN (Asociación de empresas patrocinadoras de la Escuela Superior
•FENALCO (Federación Nacional de Comerciantes) de Administración de Negocios)
•ANEP (Asociación Nacional de la Empresa Privada) •SNI (Sociedad Nacional de Industrias)
•Cámara de Comercio de Lima
Associations and Bodies from Ecuador •IPAE (Instituto Peruano de Administración de Empresas)
•ASETEL (Asociación de Empresas de telecomunicaciones) •Procapitales
•CCQ (Cámara de Comercio de Quito) •SENATI (Servicio Nacional de Adiestramiento en Trabajo Industrial)
•CCG (Cámara de Comercio De Guayaquil)
•Cámara Oficial Española de Comercio e Industria de Quito
•Cámara de Comercio Ecuatoriano-Americana
Associations and Bodies from Guatemala
•Gremial de operadores de Guatemala
•CASETEL (Cámara de Empresas de Servicios de Telecomunicaciones)
•Cámara de Comercio de Guatemala, Cámara de comercio
Americana, Cámara de Industrial de Guatemala y Cámara de
Comercio e Industria Guatemalteco Mexicana.

03 Driving progress
The 21st century will be characterised by the unstoppable

spread of the Information and Knowledge Society, but also by
growing concern regarding issues related to the environment,
the progress of developing countries, human rights, health,
education, employment and development of local communities.
Driving social
development
Positive Aspects Implementation Barriers
Use of energy Energetic efficiency of the networks Production and use of electronic equipment
in the Digital society
Effect of replacing transports Consumption of equipment
with telecommunications in stand-by mode
Use of ICTs as a means of creating Energy consumption of network operators
awareness with regard to energy savings
Digital home Improvement in quality of life Power consumption

Improvement of home health assistance Cost to citizens
Improved home security
Increased leisure opportunities
Electroninc Speed, comfort and flexibility Need for connectivity

Administration Simplification of bureaucracy Usability and accessibility
Closer approach to the citizens Lack of experience and training
and higher citizen participation
Higher efficiency in bureaucracy procedures Security and lack of trust
Reduction of errors and increased efficiency Investments by the administration
Telecommunications at the Prevention and early warning Vulnerability of telecommunication

service of emergencies systems
Warning systems for citizens Dependence on geographic and social
and speed of response economic setting
Help for coordination tasks
Mobilisation and channelling of
humanitarian aid
Universal access to information Design “for everyone” by manufacturers

Telecommunications and and service developers
inclusion of people with Improved opportunities (study, work...) Implementation difficulties
disabilities Solutions for integration of hearing, Cost of adaptation of services
speech, sight, physical, intellectual,
aging disabilities

03 Driving progress
Positive Aspects Implementation Barriers
More educational Need for equipment and

Distance Learning
resources for existing students infrastructure (investment required)
Taking education to excluded groups Lack of motivation among students
(rural areas, people with disabilities,
areas in conflict...)
Improve education in developing countries Lack of training of teachers
More flexibility and wider reach “Life-long” training
for universities
Use of paper in Efficiency in work place Bad printing habits

the digital society Mobility and collaboration Implementation difficulties for the electronic
signature
Administrative procedures without paper Tired eyes due to reading on screen
Dematerialisation (commercial transactions, Need for new equipment and technologies
online publications, email, learning...)
Electronic Commerce Lower travel prices for tourists Lack of trust in the security of electronic
Applied to Tourism purchase processes
Increased information regarding Increase of greenhouse gas emissions
tourist destinations (due to increase in travel)
Opportunities for regional development and Improved adaptation to traveller’s needs
development ofcountries with an
incipient tourist market
New technologies at the Improved emergency management Heavy initial investment in equipment
service of health (early diagnosis and preparation) and training
Improved diagnosis and training of Interoperability problems between
health professionals health centres
Improved hospital management Adaptation of health staff to new
(clinical records, appointments, treatments) technologies
Patient attention where-ever and whenever Lack of trust in the security of personal
details (privacy)it is needed (rural medicine,
long-term patients, post-surgery recovery...)

03 Driving progress
Credits


Investor Relations


Secretariat General







03 Driving progress

04 Customers
Customers: Quality
and fulfilment
Telefónica, S.A. |Corporate Responsibility Report 2005

Contents 4
02 Identity 32
04 Customers 104
Customers relationship 106
Customers relationship cycle 106
Customer satisfaction 108
Dialogue with Consumer Associations 110
Critical processes for customers 112
Commercialisation 112
Service provision 118
Operation 120
Billing 124
Customer attention 126
Technical service 130
Excellence in service 132
Service improvement initiatives 132
Quality certificates 134
Service Responsability 136
Telecommunications secrecy 136
Protection against Internet abuse 136
Data protection and privacy 142
Protection of infancy 145
Terminal theft 148
Responsible use of telecommunications 149
Markets where telefónica operates 150
Competitive situation and market evolution 150
Regulatoy situation and free competition 154
05 Shareholders 168
06 Employees 178
07 Society 226
09 Providers 292
10 Media 304
11 ANNEX I 310

04 Customers
Customer relationship cycle

Customer Satisfaction studies
relationship
Dialogue with Consumer Associations
Customer relations ship cycle
Performance of quality studies with customers; in

order to know their opinion on the service, their concerns and
what they ask of a company like Telefónica.
Certification of the customer offer processes through the

standard established by ISO 9001 customers.
These certificates, maintained in time, are a reflection of the will and
interest by the Company to assure that all of its operations comply
with the strictest quality requirements.
A
Determination of the critical processes for
F B customer satisfaction
The results of the qualitative studies serve to
determine and prioritise the most critical processes
from the perspective of the customers. In the case of
fixed telephony, these processes are
commercialisation, supply, operation, billing, attention
and technical support.
Introduction of the projects for
improving the quality of the service
E C
The aim is to achieve significant improvements in
the customers’ perception of the quality offered
Measurement of the satisfaction of customers
in the different processes of the Company’s action with the service offered by Telefónica.
towards customers. D In drawing up these studies, the result may be classified in
terms of the type of service, the process evaluated and the
company’s situation with regard to the competition.
Prioritisation of the critical points for
improvement, based on the relative importance
afforded to each process by customers and Telefónica’s
classification with regard to the competition. The
commercialisation and customer attention processes are
those in which Telefónica traditionally has the greatest
potential for improvement.
Telefónica aims to optimise its customers’ satisfaction. To do

this, it has established a model for managing the relationship
with its customers, which includes six stages:

04 Customers
Profitable, sustained
growth
Coherence Confidence Deep knowledge

in the business in the customer service from of the customer and desing
management from an effective, flexible, of a value proposal adapted
indicators focused on the responsible performance to their needs
customer
Customer processes
Capacities
Organisational culture and effort
CASE STUDY
Customer commitment
In 2004,Telefónica Latinoamérica turned Based on these pillars, a series of 23
the company strategy towards the regional projects were defined for the three Of particular note is the development of
customer, which it considered the keystone customer segments: residential, SMES and strategies aimed at popularising broad
to growth. The strategy was drawn up companies. band and the renewal of traditional
under the motto of Customer business. Latin American SMES have a new
Commitment, the objective of which is to The main developments led by the valuable proposal from Telefónica.
assure the profitable, sustainable growth Customer Commitment initiative in 2005
of the operators. Its introduction has meant were: What makes them different is their own
the inclusion of commercial and customer commercial attention structure for the
satisfaction with the critical processes for
•The definition of a regional methodology segment, independent of the existing one
for prioritising improvement plans
the consumer. for the residential segment. With respect to
depending on the results of the
the business sector, the Global Customer
satisfaction surveys.
The greater commercial orientation of Attention Model has been developed, the
Telefónica Latinoamérica will allow use to •The creation of an independent introduction has been agreed of 224
be made of the new opportunities that are committee for Claims. improvement plans aimed at excellence in
arising as a result of the structural change
being caused in the telecommunications
•The development of a total 98 service, and innovation continues in
projects related to IP Telephony and fixed-
improvement projects based on Six
sector. This plan, lasting 1,000 days, Sigma methodology. mobile convergence.
continued developing throughout 2005.
Among the actions aimed at the residential Commercial employees on
The programme is based on three segment we highlight those related to
fundamental pillars: Awareness, the whole payroll of Telefónica
optimising attention in the customer
Trustworthiness and Coherence. attention centres and the greater
Latinoamérica
(In percentage)
commercial focus of the promotional
activities and product launch. 2003 29
2004 33
Commitment 2003-2006 ~ 38
Note: Not including data on Telefónica Empresas

América nor TIWS
Source: Internal

04 Customers
CASE STUDY Satisfaction surveys

The voice of the customer
present in improvement
Customer satisfaction is the priority Studies and surveys are outsourced to
actions in Telefónica objective of the Telefónica Group and the companies that are shown the objectives
Latinoamérica central axis of its whole strategy. In order to to be known by Telefónica. The samples are
know the evolution of this satisfaction and determined at random, guaranteeing at the
A system has been established as a to check the effects of the different same time that it is representative of the
methodology to identify improvement measures adopted by Telefónica, the universe of customers to minimise the
actions, based on the results of the companies of the Group perform periodical margin of error. Telefónica de España took
customer satisfaction surveys. follow-ups of the levels of satisfaction more than 500,000 samples in its
Having obtained the results of the surveys through surveys. The methodology used by satisfaction surveys of 2005. In the last
for the six critical processes Telefónica Internacional and by Telefónica sample in the year (November – December)
(commercialisation, provision, operation, de España is the same, and its use is to be in Latin America interviews were made on
billing, technical support and attention), extended to Telefónica Móviles from 2006. 4,789 customers of the basic telephone
the areas responsible for them identify and service, 3,624 SMES, 1,079 companies and
prioritise improvement actions in terms of The objectives of the measurement are: 3,499 customers of the Speedy broadband.
the importance that the customer gives to The number of interviewees in Telefónica
the attributes associated with the process, •To measure the overall satisfaction and Móviles España studies was 27,000, 14.5%
establish the improvement strategies to
the satisfaction expressed and the up on the previous year; reaching in 2005 a
increase satisfaction among current
difference with respect to the competition. satisfaction rate of 85.6%.
customers.
This led to the identification of more than
300 improvement actions in 2005 in the •To measure customers' future behaviour. The customers answering the survey are
region, of which the focus was placed for
pursuing and introducing the TOP 10 in
•To analyse the evolution of perceptions generally those responsible for paying for
the service (residential segment) or those
in time, both of their own customers and
each country. those of the competition to find the keys responsible for contracting it (company
in the market evolution. segment). The questionnaires are drawn up
from general questions on satisfaction
Furthermore, in 2006, the commitment with Telefónica to more specific questions
was assumed to evolve this model in a on satisfaction with the processes. The
standardised manner for the whole socio-economic class of the person
Telefónica Group in order to: interviewed and the breakdown of the
contracted services are also important.
•Measure the perceived quality and
establish its impact on general
satisfaction.
•Obtain a measurement methodology in

line with the main international bodies
that are referents in measuring customer
satisfaction (ACSI, ECSI).
•Relate the qualitative perception with 1

Calculated with regard to number of clients in
each country: in Mexico and Uruguay are not
the future behaviour of customers.
included, due to the lockof that sort of studies
with uniform methodology.

04 Customers
Fixed telephony: Satisfaction of the residential segment

Data in percentage
Year Satisfied Neutral Dissatisfied

Spain 2005 84 7 9
2004 81 7 12
Argentina 2005 73 16 11
2004 68 17 15
Brazil 2005 55 25 21
2004 51 24 25
Chile 2005 66 17 17
2004 61 21 19
Peru 2005 63 24 14
2004 58 27 16
Fixed telephony: Satisfaction of the business segment 2005

Data in percentage
Satisfied Neutral Dissatisfied
Spain 79 8 13
Argentina 83 12 5
Brazil 77 16 7
Chile 82 12 16
Peru 59 30 11
Colombia 81 10 8
Usa 83 10 7
Mobile Telephony: Customer satisfaction

Data in percentage
Servicio Atención
y postventa
Spain 86 -
Contrat Latam1 70 69
Prepaid Latam1 78 75
1
Calculated on a weighted basis with regard to number of customers per country. Data forMexico and
Uruguay has not been included, as no studies of these characteristics and methodology were available

04 Customers
OPINION Dialogue with Consumer Associations

What do our stakeholders
think?
Spain Latin America
Telefónica has a fluid dialogue with a large In Brazil,Telefónica has permanent channels of
In the RepTrak study, we asked society
number of consumer and user associations, dialogue with the different consumer
about their perception of whether
some specialised in ICT. The Company has associations.The company relates to public
“Telefónica satisfies the needs of its
established a single channel of information bodies in defence of consumers, called
customers”. Society’s opinion as a
that deals with transferring the questions PROCON (there are 181 PROCONs active only in
consumer is highly significant, as the
that the associations ask Telefónica to the the State of Sao Paulo), and non governmental
samples wholly identified those
different companies and business lines of organisations in defence of consumers, and is
interviewed with customers of the
the Group. In the case of Spain, Telefónica represented in IDEC (Brazilian Institute of
Telefónica Group.
currently actively collaborates with a total Defence of Consumers) and PROTESTE.
The results obtained in December 2005
16 associations, 12 national and 4
were as follows
autonomic. TeleSP managed to receive the number of
Procon claims in the city of Sao Paulo by
Spain 66.7
Of these, due to the volume of activity 51.7% (503 claims in 2005 over 1,042 claims
developed alongside them, we must in 2004). With 95.8% of the claims
Argentina 63.9
highlight the Internaut Association (AI), the attended, Telefónica is the company of the
Association of Internet Users (AUI), the public service providers that best attends
Brazil 57.9
Organisation of Consumers and Users the complaints brought before Procon in
(OCU), the Andalusian Federation of the city of Sao Paulo, which includes other
Chile 69.7
Consumers and Users in Action (FACUA), fixed and mobile telephony operators that
the Union of Spanish Consumers (UCE), the offer a service in the capital.
Mexico 72.6
Association of Users of Communications
(AUC) and the Spanish Confederation of Periodical meetings were held in Argentina
Peru 59.9
Consumers and Users (CECU). with the “Defensoría del pueblo” and different
associations in the country (Adelco -
For Telefónica this relationship is of great Proconsumer - Adecua - Procurar - Prodelco -
importance, as it allows us to transfer the Consumidores Argentinos - Deuco - Unión de
many suggestions we receive from these Usuarios y Consumidores). Likewise,Telefónica
associations to our customers in the form Móviles Argentina, along with CICOMRA
of improvements to the products and carried out an informative meeting with the
services we offer them. The main subjects Union of Argentine Customers (UCA).
we dealt with with them in 2005 were the
irregular pre-assignments, the rounding off Telefónica Móviles Colombia is an
of prices in telephony, the quality of the institutional member and forms part
internet access and the new ADSL offers of the Corporate Board affiliated with
and packages, amongst others. the Association of Communications
Users, ASUCOM. Work is under way
from this association to improve
dialogue and communication
between customers and clients.

04 Customers
CASE STUDY CASE STUDY

Proyecto Espejo in
Managing the customer
relationship
The Proyecto Espejo by Telefónica de
Within this effort towards greater España consists of the operations area of
customer orientation, the motivation and the Company calling customers to find out
conviction of the professionals and their satisfaction with the action of the
collaborators of the Company is essential. Company.
This is the aim of the “Customer
Commitment” programme of Telefónica Given the impact of this measure on
Latinoamérica and “meta:cliente” of customer satisfaction, in 2005 it was
Telefónica de España. decided to extend the calls to 100% of
customers requesting any action by
In 2005, Telefónica de España’s commercial Telefónica de España in supply or
development programme made a survey maintenance, thus guaranteeing contact
among its professionals with the following with customers.
results:
•More than 81% of those surveyed are Among the measures implemented by the
company as a result of listening to the
aware of the objectives of the
Commercial Development Module. customers’ needs, is the “Customer
Communication” initiative, the aim of
•96% think that commercial which is to contact all customers when it is
transformation is necessary. not possible to meet the times agreed with
•More than 75% believe that Telefónica is them. In the calls, Telefónica will explain
the reasons for the delay and will set a new
more and more concerned for customers.
commitment date with the customers.

04 Customers
Marketing Service Operation Billing Customer Technical

provision attention Service
Critical processes
for customers
Marketing
Products adapted to the In the case of Telefónica Móviles España, a

great effort has been made to provide
demands of customers
customers with the terminals and
In 2005, Telefónica developed a series of
applications that can made best use of the
measures aimed at enhancing the
potential and band width of the new 3G
development of broadband and the society
networks. Particular mention of the UMTS
of information through the
cards for laptops, the multimedia
commercialisation of products adapted to
messaging service and online electronic
customer needs.
mail, the applications of audio-visual
contents or accessories for terminals. All of
The free doubling of the speed of the ADSL
these initiatives have been combined with
service, the Dúo and Trío combined offers
great activity in reducing rates and bill
(ADSL, calls and Imagenio digital
simplification through service packages.
television), the new modes of ADSL by time
or volume, the ADSL solutions for smes or
the joint offers of ADSL and personal
computers are some of the commercial
proposals developed by Telefónica de
España in 2005. In the case of Telefónica
Latinoamérica, similar initiatives have been
made associated with the Speedy service,
and particularly:
•Free duplication of the speed in

Argentina, Brazil and Chile.
•1,500 WiFi Hot Spots in the region to give

broadband mobility.
•Combination of Speedy with satellite TV

such as, for instance, Speedy Skye in
Brazil or Speedy TV Satelital in Chile.
•Bundling of products such as: Mobile

Telephone and ADSL in Argentina and
Fixed Telephone and ADSL in Chile.
•24 Hour assistance service for PC, Doctor

Speedy, complementing the offer of
broadband solutions in Peru.

04 Customers

Imagenio, an innovative service Savings products offered by
recognised by the consumers Telefónica Móviles España
The Spanish Union of Consumers (UCE) in Among the savings products offered by •Tarifa Mundial Activa, a single rate for
September 2005 published a report Telefónica Móviles España in 2005: communications in roaming, regardless of
the operator connecting, the time of the
highlighting the advantages that Imagenio
offers consumers and users over cable
•Mis Cinco: reduced prices and single rate communication and only depending on the
for calls, text messages, multimedia
television. international area to which the country
messages and video-calls to five
The UCE stresses the importance of the belongs from which the traffic is sent
numbers selected by the customer.
development of ADSL broadband over cable
to achieve convergence between voice, data •Mi Familia: a rate reducing to 0.03 €/min. •Anticípame Saldo, a service aimed at
controlling expenditure, which allows
and television services in the digital the cost of the calls between a
pay-as-you-phone customers meeting
household, and makes a comparative study maximum five movistar contract and/or
certain requirements to ask for their
between the Imagenio services and cable movistar card held by the same
balance to be reloaded for a set amount
television, to highlight the following customer.
at any time.
advantages of Imagenio: •Mi Favorito: low, single rate for calls, text •Combi 250 combines different services,
•Imagenio can give its offers to virtually messages, multimedia messages and
video-calls to the movistar number
including some Third Generation (3G), in
all homes. exchange for a single, invariable monthly
selected by the customer.
•Simpler installation. •Sub-26: enhances communication
quota for customers. It includes 250
minutes of voice, 250 minutes of video-
•The Video on Demand (VoD) enables the between movistar contract and prepaid calls, 250 short messages (SMS) and a
users themselves to decide what they customers under 26 years of age, further 250 multimedia messages
want to see and the best time to do so. with a reduction of 33% both on call (MMS), free navigation in emotion and
•Allows IP voice services minutes and on SMS. 50 MB of data (internet).
•Internet and interactive services from the •Contrato Club: enhances the use of the
calls customers make in their habitual
television.
circles without any need to be concerned
•Compatibility with Terrestrial Digital about time bands. Savings of up to 50%
Television (TDT). on the price of other movistar contract in
normal or commercial hours.
•Contrato Tu Tiempo: this contract favours

calls between movistar customers with a
rate of 0.07 € a minute in low rate time
band, with the calls billed by seconds
from the first second of conversation

04 Customers
Advertising investment of the Telefónica Advertising investment of the Telefónica Advertising investment of the Telefónica
Group by country (2005) Group by business line (2005) Group in media
Data in percentage Data in percentage Data in percentage
Terra Rest
Rest Argentina
Brasil 2 Fixed 4
9.5 5.6 Press
10.2 17 19
Chile
4.7 TPI
México 5
Rest Foreign
8.9 TV
6 18
Venezuela 47
Spain 4.6
Mobile Internet
56.5 70 3
Radio
10
Advertising controversy, by establishing an ethical

Advertising is the main means of framework where a responsible, true
informing customers on new products and commercial communication is developed.
services offered by the company. In
business lines, mobile telephony is the The Telefónica Group is a member of the
most active in the field of advertising, Spanish Association of Advertisers, where
followed by the fixed and long distance it forms part of the board of management
telephony businesses. As for the means and actively participates in the media
used in support of this investment, the commissions.
main ones mentioned are television,
newspapers, radio and street boards, which In other countries, the operators of the
concentrate 93% of the advertising Grupo Telefónica Móviles take part in
investment. similar groups:
In all the countries where it operates, the

•Argentina: Cámara Argentina de
Anunciantes
Telefónica Group maintains its
commitment to develop a clear, respectful •El Salvador. Asociación de anunciantes
advertising policy. All the advertising de El Salvado
carried out by Telefónica goes through a
double approval process before it is finally
•Guatemala: Asociación de anunciantes
de Guatemala
issued. On the one hand, the companies
have the approval of the legal advisors in •Peru: Asociación Nacional de
Anunciantes
each of the companies, with a view to
ensuring respect for the regulation and •Uruguay: Cámara de Anunciante de
the competitors. On the other, the Uruguay
campaigns have a pre-test phase with a
small group of people, to make sure that
•Venezuela: Asociación Nacional de
Anunciantes
the customers clearly understand the
messages and promotions given, and that
Six claims were brought against the Grupo
they do not contain messages that are
Telefónica Móviles for deceitful advertising
offensive for any particular group.
in Chile (consisting of divergences with
respect to the terms and conditions
In Spain, the Telefónica Group is a member
applicable to the promoted plans), nine in
of Autocontrol (Association for the Self-
Panama (in the same promotional
control of Commercial Communication),
campaign), three in Peru (from
made up of advertisers, agencies, media
competitors) and two in Uruguay.
and other commercial communication
service companies, which as a whole
represent more than 80% of the Spanish
advertising investment. In turn,
Autocontrol is a member of EJNetwork and
the European Advertising Standards
Alliance (EASA). Its aim is to prevent and
resolve any possible advertising

04 Customers
Shops and distributors Loyalty plans

In Spain, Telefónica de España has 104 We must stress the efforts made by
shops of its own (Tiendas Telefónica) where Telefónica (and particularly Telefónica
customers can carry out all kinds of Móviles España) in loyalty activities,
processes, see the Telefónica services and launching campaigns to reward long times
check out their terminals. There are also as customers by offering favourable
2,572 indirect sales points through conditions for terminal renewal and
distribution agreements with other encouraging greater commitment from
companies, which supposed an increase in customers at the same time. Therefore, in
the network of more than 600 sales points 2005, there were more than 4.5 million
in 2005. changes (+23.2% over 2004) in the Movistar
points programme, which in 2005 had been
TeleSP has 124 establishments of its own running for five years.
and 552 attention points in Post Office
shops. There are also 120 companies
indirectly distributing its products and
services.
Telefónica de Argentina has 51

establishments of its own, 55 attention
agents and 57 indirect sales points.
Throughout the world, Telefónica Móviles

has more than 30,000 shops of its own,
distributors and commercial centres in the
different companies where it operates. The
Company has made a noteworthy effort to
unify and extend its direct commercial
attention channels in 2005 after taking
control of the operations of the ten
operators purchased in the previous year.
Given the large proportion of customers

with pepaid services, Telefónica Móviles
strives to facilitate and simplify the
reloading of the balance in the terminal,
either through electronic reloading services
or by extending their reloading
commercialisation network (Argentina,
Ecuador, Guatemala, Mexico, Nicaragua,
Panama, Peru, Uruguay, Venezuela)

04 Customers
Online channel Telefónica’s Internet introduction is

Telefónica is presented on Internet as an transparent to organisation and
integrated provider of telecomunications technology to achieve great flexibility and
services in each of the countries where it speed to meet market demands. The
operates. The “telefonica.pais” model seeks transparency in the organisation allows us
to establish a single Internet access point in to adapt to the changing commercial
each country that allows customers to models and maintain the operative
transparently access all the commercial and independence of the businesses without
institutional information of the Company. altering the model.
To achieve this, since 2003 more than 200
projects have been developed in 13 In 2005, the “telefonica.pais” websites also
countries, involving more than 500 people. carried out a series of technical actions to
improve the accessibility of their pages and
The final result is a product and service achieve a better overall position on
offer in accordance with the needs of the Internet. The number of visits received in
customers; offering specific solutions for 2005 in all of the “telefonica.pais” portals in
individuals, professionals and companies. Latin America exceeded sixty million, with
The other interest groups of the Company more than 400,000 users individually
(stakeholders, investors, suppliers, partners, registered. The “telefonica.es” portal ended
employees, media and citizens) also have 2005 with over three million visits a month.
specific sections in each of the
“telefonica.pais” websites.
Telefónica on Internet
Germany http://www.telefonica.de
Argentina http://www.telefonica.com.ar
Brazil http://www.telefonica.com.br
Chile http://www.telefonicactcchile.cl
Colombia http://www.telefonica.com.co
El Salvador http://www.telefonica.com.sv
Spain http://www.telefonica.es
USA http://www.us.telefonica.com
Guatemala http://www.telefonica.com.gt
Morocco http://www.telefonica.ma
Mexico http://www.telefonica.com.mx
Peru http://www.telefonica.com.pe
Puerto Rico http://www.telefonica.pr/empresas

04 Customers
CASE STUDY
www.telefonica.es www.telefonicaonline.com Telefónica Móviles España
Customer Channel
The www.telefonica.es website is the The Telefónica de España commercial In 2005, Telefónica Móviles España set up
Telefónica Internet access for all people who channel on Internet is called the customer channel
wish to find commercial or institutional www.telefonicaonline.com and offers www.canalcliente.movistar.es which
information on the Company in Spain. This interactive attention to customers seeking enables certain processes to be done by
portal has increased its visits by 100% over information, the opportunity to contract Internet. These include the possibility of
early 2005, and was receiving three million products and services, to contact customer seeing the breakdown of their calls,
visits a month by the end of the year. attention or to access their bills online. It is reloading their card, seeing the catalogue
aimed to cover the needs of all customer of points and exchanging them, modifying
The www.telefonica.es has seen how some segments (residential, smes and large their personal data, changing the contract
of its dependent portals, such as “Para companies or corporations), to offer all or card form, consulting and managing
casa”,“Telefonía fija”,“Para las Pymes” and Telefónica products and to attend all movistar services or contracting savings
“Guías” increased the number of visits from incidents in the phases of the commercial options.
January to December 2005 by 50%, 197%, cycle (pre-sales, sales, post-sales and e-
18% and 423% respectively. marketing). In the first eight months in which the
Telefónica Móviles España customer
Moreover, it is seen that many users that in The contents are intended both for channel was up and running, it already had
the first instance access the registered users recurrently accessing the nearly a million users.
www.telefonica.es website to use a specific web and those seeking information
service or tool remain browsing in occasionally on some product or service.
telefonica.es after using it. This is the case They are available in Spanish and Catalan.
of the visits to the White Pages, with 18%
staying there after making their queries, At the close of 2005, the figures for
the speed test with 20%, and electronic www.telefonicaonline.com were as follows:
mail consultation with 12%.
•2,525,743 million registered users (growth
of 621,988 over 2004), of which 329,034
were active users at the end of 2005.
•More than 27 million visits to

complement over 520,000 sales.
•148,850 eFactura customers, with an

increase of almost 31,000 over 2004

04 Customers

Service provision
Fixed telephony ADSL

In 2005, Telefónica de España installed ADSL is one of the services most demanded
more than 1,100,000 telephone lines and by Telefónica customers. It is therefore
met the installation commitment fundamental to guarantee the utmost
established by the customers in 99.17% of quality both in the installation phase and
cases. Although the average time for in resolving faults. In Spain, in 2005
installing a line is under 10 days (9.68 days), Telefónica de España installed more than a
the Company is working to reduce the million lines with an average installation
installation times for the lines that most time of 11.53 days (9.8 in 2004). The longest
fail to meet the expected time (percentile waits by customers were under a month
95 of the installation time at 23.9 days) (percentile 95 installation time = 29.9 days)
In Latin America, Telefónica is striving to In addition, Telefónica de España acquires a

install lines in the shortest possible time, commitment with the customer for an
with an average 5.67 days in 2005 (6.84 in installation date in practically all ADSL
2004). In this sense, the line installation installations (99.998%), a date met in
target times are set in accordance with the 91.18% of cases.
respective regulators, and an indicator is
established associated with the percentage In Latin America, the average time for the
of lines installed in under 5 days, which for installation of the Speedy service in
the whole of Telefónica Internacional was December reached 5.53 days (4.8 in 2004) .
80.84% in 2005 (66.4% in 2004). The This means that 58.26% of the ADSL lines
results are different in the case of installed in 2005 were made available to
Argentina, as in this case, customers are customers in under 5 days. This percentage
required to pay for the cost of installing the is worse than that achieved in December
line before the installation is actually done. 2004, basically due to the spectacular
increase in the number of lines installed by
In giving the service, it is not only important Telefónica in the region, specially in Brazil.
to do the work fast, but also to do it Against this, the percentage of faults
precisely. Telefónica Internacional has associated with the provision of the service
therefore established an indicator
associated with the supply fault percentage.
At the end of 2005, this indicator achieved a
result of 11.62%, with an improvement of
the value of 13.5% for 2004.

04 Customers
fell to 22.2% from 27.6% in the previous Percentage of basic telephone lines for the residential segment
year. It must be said that in the case of the
only country that failed to achieve the set
installed in under 5 days
targets, Argentina, work is being done Argentina Brazil Chile Peru
directly with the collaborating companies Dec 2005 17.6% 90.9 % 83.3 % 66.9 %
to improve the indicator. Target 2005 14.9% 82.4% 92.0% 50%
Dec 2004 11.8% 75.9% 75.8% 41.2%
Data circuits of largest band Note. The residential segment is chosen as it is the one where the Telefónica compliance percentages are
poorest.
width
The data circuits with the largest capacity
are installed much more sporadically than Faults associated with the provision of the basic telephony service
the basic telephony lines or ADSL lines. Argentina Brazil Chile Peru
Furthermore, each customer demands
Dec 2005 13.1% 12.3% 8.1% 8.7%
different characteristics, which means that
Target 2005 18% 13.4% 6% 6%
the service supply times are usually longer.
Dec 2004 13.4% 15.4% 8.1% 6.8%
Note: number of faults in the 30 natural days following supply with respect to all lines installed
In Spain, the average time for the initial Note. The residential segment is chosen as it is the one where the Telefónica compliance percentages are
supply in 2005 was 28.08 days. In 62.4% of poorest.
installations, Telefónica acquired an
installation commitment date with its
customers, which was met in 85.6% of cases. Percentage ADSL for the residential segment
installed in under 5 days
Argentina Brazil Chile Peru *
Dec 2005 33.1 % 56.3 % 78.2 % 88.5 %
Target 2005 35.2% 30% 95% ND
Dec 2004 35.7% 63.9% 90.8% ND
Note. The segment is shown because it is the one where Telefónica has greater comparability between countries
Peru: the measurement of the indicator started in 2005, so the objective and the historical value are not available
Faults associated with the provision of the ADSL service

Argentina Brazil Chile Peru
Dec 2005 6.1 % 28.6 % 4.0% ND

Target 2005 3% 31.2% 8% ND
Dec 2004 3.4% 31.5% 9.1% ND
Note: number of faults in the 30 natural days following supply with respect to all lines installed
Note. The residential segment is chosen as it is the one where Telefónica has the greatest comparability
between countries.

04 Customers

Operation
Operation of the mobile Telefónica Latinoamérica continues to work

on the directives established in the
telephony networks
Regional Quality Plan launched in 2003. The
All of the companies of the Telefónica
result of this initiative was the definition of
Móviles Group keep constant quality
the Strategic Quality Indicators, a series of
control through a series of indicators that
common, similar parameters to allow
allow them to periodically check the state
objective quality to be pursued (operative
of the networks and services. These
parameters) and with a direct bearing on
indicators also serve to set targets and
the perceived quality (satisfaction surveys
validate the results of the improvement
and claims). On the regional level, the
projects or network extensions. The
average percentage of faults in basic
weighted average of the effectiveness of
telephone in Latin America in December
the CDMA and GSM networks of the
2005 reached 4.17% as opposed to the
Telefónica Móviles operators lies at 92%,
4.49% of the previous year.
including the operators that were brought
into the Group in 2005.
One of the aspects identified as one of the
main concerns of our customers is
One of the best factors most appreciated
repeated faults. Telefónica has therefore
by mobile telephony customers is the
established indicators intended to measure
possibility of going to other places and
the percentage of repeated faults with
keeping their telephone number as a point
respect to the total faults in the region. In
of contact. In this sense, Movistar
December 2005 this reached 19.43% (23.11%
customers in Spain can use their mobile
in the same month in 2004).
phones in more than 200 destinations
thanks to the 419 roaming agreements
This improvement in the indicators is
established by Telefónica Móviles España
accompanied by growth in satisfaction
with other operators. This mobility requires
with the operation process of 4.3pp over
an obvious effort in synchronising the
December 2004 for the residential
customer location systems, directing calls
segment.
and billing.
Operation of the fixed Operation of the ADSL /

telephony networks Speedy service
ADSL is one of the services that requires
In 2005, the average number of faults
greatest reliability, as very often customers
per 100 lines of basic telephony was 2.18
do not have alternative means to access
for Telefónica de España (2.07 in 2004).
Internet with broadband. The average
The average availability of the fixed
availability of the service in Spain in 2005
networks in Spain was 99.95%.
was 99.97% (99.98% in 2004), measured as
the percentage of attempted calls
completed with success. Furthermore, the

04 Customers
average number of faults per 100 ADSL Data circuits of larger

lines was 1.39 (1.13 in 2004). OPINION
bandwidth (> 2 Mbps)
The availability of data services with a band What do our
These service quality levels were achieved in
width of over 2 Mbps was over 99.95% in
a year when Telefónica de España doubled stakeholders think?
Spain in 2005. This availability is a critical
the speed of its ADSL for its customers free
factor for customers contracting these
of charge. This measure, which had already
kinds of services, as on many occasions In the RepTrak study, we asked the
been taken once in 2004, places the basic
they can not risk having any problem. The company about its perception of whether
mode ADSL at 1 Mbps.
number of fault reports per 100 lines in “Telefónica offers high quality products and
this type was 3.98 in 2005. services”. The opinion of the company as a
In June 2005, the Internaut Association
consumer is highly significant, as the
made its third study of the speed of the
Public telephony sample identified all of the interviewees
Internet access and held Telefónica’s ADSL
In Latin America the public telephony with customers of the services of the
service as the fastest and most regular
services are an essential alternative for Telefónica Group.
amongst all ADSL and cable operators, with
a speed exceeding the other alternatives by users who do not have telephones in their
homes, which is why the availability of this The results obtained in December 2005
up to 32%. This study was based on more
service is a need for society. Telefónica were the following
than 215,000 samples collected over five
months. In addition to this, in September, Latinoamérica broadly exceeded the
the Union of Spanish Consumers published established target of 85% service
availability, achieving an average Spain 70.4
a report highlighting the advantages of
Imagenio over cable television. availability of 99.4%.
Argentina 61.8
In Latin America, the percentage of faults This availability is particularly important if it

is contemplated from the double Brazil 62.4
per ADSL line for the residential segment in
December 2005 was 4.99% (7.02% in perspective of the fact that Telefónica has
more than 600,000 terminals for public use Chile 77.3
December 2004). As in the case of the basic
telephone line, special attention is paid to in the region and that this equipment is
often the victim of vandalism or sabotage. Mexico 75.1
the indicators of repeated faults, which on
the regional level amounted to 19.36% at
Peru 66.4
the end of 2005 (19.2% in 2004).
Satisfaction with the process, comparing
December 2004 with December 2005, rose
in the region by 1.5pp.
All of these data are highly significant if we

bear in mind that the ADSL plant rose in the
region to 2,165,000 lines, as opposed to the
almost 1.5 million lines in December 2004.
In the case of Brazil, where Speedy has more

than a million users, the readers of the Info
magazine chose the Telefónica service as
the best broadband on the market.

04 Customers
Effectiveness of mobile telephony networks.

% Calls % calls % Effectiveness
not completed network
interruptions
Argentina
CDMA 2.91 1.01 96.11
GSM 1.27 1.85 96.90
Chile
TDMA 1.7 1.3 97
GSM 3.1 1.9 95
CDMA 1.5 0.8 97.7
Colombia
TDMA 1.42 0.22 98.36
CDMA 1.69 0.09 98.22
GSM 0.74 0.13 99.13
Ecuador
TDMA 0.66 1.14 98.2
CDMA 2.83 1.09 96.08
GSM 1.08 0.93 97.99
El Salvador
CDMA 6.26 2.11 91.63
GSM 1.47 1.6 96.93
Spain
GSM 0.33 0.77 98.9
Guatemala
CDMA 5.49 2.49 92.02
GSM 4.31 1.67 94.02
Mexico
GSM 0.8 1.52 97.68
Nicaragua
CDMA 1.17 1.69 97.14
Panama
GSM 1.13 1.1 97.77
CDMA 1.57 0.99 97.44
Peru
CDMA 0.2 0.5 99.30
Uruguay
CDMA 2.52 2.19 95.29
Venezuela
CDMA 4.7 1.1 94.2

04 Customers
Repeated faults associated with the basic telephony service CASE STUDY
Dec 2005 16.06% 22.15% 9.37 % 14.62% Speed test
Target 2005 17% 25.1% 6.5% 10%
Dec 2004 24.7% 24.4% 7.7% 10.1% One of the applications most widely used
Note: number of repeated faults with respect to the total number of faults on the Telefónica website is the “speed
Note. The residential segment is chosen as the one in which the Telefónica compliance percentages are worse.
test”, which may be used by all people who
wish to measure the true speed of their
Repeated faults associated with the ADSL service broad band connection.
Data as of end Fiscal Year
The service is available at
2005 7.9% 20.13% 6.95% 22.8%
www.telefonica.es and in 2005 was used
Target 2005 8.2% 18,2% 9% 22% 4.8 million times.
2004 7.6% 21.2% 10.8% 16.7%
Note: number of repeated faults with respect to the total number of faults
Note. The residential segment is chosen as the one in which the Telefónica compliance percentages are worse.

04 Customers

Billing
As the telephone bill is of great importance the number of billing complaints from
for customers and a means of permanent residential customers by 42% in September,
contact to build confidence, the companies and by 31% among SMES, thus achieving
of the Group work to offer clarity and the established target of 40% and
precision in communications of this kind matching the level of complaints in 2004.
with their customers, and offer
complementary information that might be With respect to large customers, Telefónica
of interest to them. Specifically, Telefónica has the objective of establishing a single
de España and Telefónica Latinoamérica bill in 2006 to bring together the billing of
have completed the processes of all voice and data services referring to the
introducing their respective billing systems same date of close and in a single file. To
(FAST and ATIS). The modification of the complement this measure, clarity is
billing systems and the bill formats caused improved in the bill concepts concerning
a short term increase in the complaints charges for sales of equipment and
received from customers. material, and with respect to the
complaints. Telefónica thus replies to one
The proportion of complaints about of the greatest dissatisfactions perceived
Telefónica de España bills in Q4 2005 by these customers, who had been
reached 3.48 per thousand, with the receiving up to three bills a month referring
objective value established by the regulator to different closing dates, which made it
being 5 per thousand. This calculation considerably difficult to understand and
was made for more than 28 million supervise them.
bills issued in the quarter.
In addition, since 2005 Telefónica de
In 2005, Telefónica de España made a España has offered its customers the
diagnosis of the reasons for complaints in opportunity to receive notification by
the bills of the residential and SME, electronic mail of the bills pending
business and professional segments. The payment a few days before they fall due.
root causes identified are mainly In this way, any possible non-payment
associated with functional shortcomings due to reasons beyond the control of the
and incidents in the billing systems, customer is avoided. In the last month of
difficulties in understanding the bill, the 2005, Telefónica Latinoamérica achieved a
application of commercial bonuses percentage of complaints on basic
through claims, complexity in telephony bills of 1.28% (1.59% in 2004). If
commercialising new products and we determine the percentage of these
discrepancies with the customer in billing complaints resulting in adjustments in
the after-sales services. To reduce these favour of the customer, this value was
sources of claims, Telefónica de España set 65.47% for the region in the residential
up a plan of action with 21 initiatives to be segment. In the case of the ADSL service,
developed in 2005 and 2006. The first this value amounts to 2.67% of
completed initiatives managed to reduce complaints on all bills in the region,
04 Customers
2005
Movistar 1º Q 2º Q 3º Q 4º Q
Number of billing complaints 1,134 1,430 1,588 1,655
1,000 service invoices
Data provided to telecomunicatian state secretariat.
which supposes a significant fall from •Telefónica Móviles El Salvador started the CASE STUDY
8.08% the previous year. process of developing the on line bill
project, which will be included in a
In the line of improving the Billing process project of Web processes, through which Telefónica bill in Telefónica de
and the treatment of the associated it will be possible to consult details of Argentina
complaints, different certificates have been calls, balances and to cancel the service.
achieved in the region, such as: certification Telefónica has not only modified its bill
of Billing processes in Argentina for the •In Mexico development began on a new format, but also tries to explain the
residential and sme segments; certification bill based on the results of market different elements of the bill to its
of the process of collecting information, studies and the communications of the customers. The example described in the
price setting and billing in Brazil. customers with the call-centre; and also following presents the explanation of the
focus groups in which the bills of Telefónica de Argentina bill presented at
Telefónica Móviles is also developing its different companies were analysed. http://www.telefonica.com.ar/micuenta/
billing system for its almost 100 million
customers around the world:
•Telefónica Móviles España launched the
“efactura” electronic bill service in 2005.
• In Argentina, Telefónica Móviles has
•In Peru, the formats and contents of the
updated the bill model by unifying the bills have been improved
description of the services in the systems
and with a new conceptual and graphic
design.
•Telefónica Móviles Chile, redesigned its

bill, which helped to improve the
perception of our customers. The use of
Internet as an alternative means of
making queries and delivering the bill
has also been enhanced, and there are
now 100,000 customers receiving their
bills only in this way.
•In Colombia the introduction began of

the new system for billing and managing
customers, by adopting new definitions
and formats for the bill to be clearer and
more transparent.

04 Customers

Customer attention
Calls attended in the telephone attention centres The telephone is the means most widely
Data in millions used by Telefónica customers to
communicate with the Company and send
Nº calls Nº calls
attends 2005 attends 2004
it their queries, requests and complaints.
The calls to customer attention centres are
Telefónica Móviles1
free in most countries (except for El
Argentina 51.4 13.7
Salvador and Guatemala). Attention is also
Chile 23.1 18.5
given in several languages in the case of
Colombia 23.0 14.9
Ecuador 6.6 10.6
Argentina, Brazil, Chile, El Salvador, Spain,
El Salvador 1.3 1.5 Guatemala, Panama and Uruguay
Spain2 81.0 42.0 (depending on customer demand).
Guatemala 2.7 1.1
Mexico 16.0 21.2 Satisfaction of customers with
Nicaragua 2.4 0.9 the attention received
Panama 3.8 2.0 In 2005, Telefónica modified the
Peru 7.1 7.6
methodology used in measuring customer
Uruguay 1.0 0.6
satisfaction with the attention offered by
Venezuela 35.3 16.1
asking them whether the reason for their
Telefónica de España call had been settled, just before the end of
Spain 84.3 69.8 the conversation. This change in
Telefónica Latinoamérica3 methodology means that the 2005 figures
Argentina 13.6 19.9 are not comparable with those calculated
Brazil 205.4 189.8 in 2004, but this absence of past references
Chile 14.8 12.2 is compensated by greater objectivity in the
Peru 9 7,2 measurement.
1
At times, greater activity obeys an increase in the number of customers associated with the merger of
several operators in the country or several promotional campaigns associated with the launch of the new In 2005, Telefónica de España attended
brand. more than 84 calls from its customers, 77%
2
Information provided by Telefónica Móviles España to the SETSI for Q4 2005.
3
Calls attended in STB and ADSL included for all segments. The 2004 data are calls attended before 10s. The
of which were attended in under 20
data for 2005 concern all calls attended. seconds (87% in 2004). The score given by
In the case of Argentina, in 2004 all the calls were considered, whereas in 2005 only the commercial calls to customers to the service offered by
bring it into line with the TISA criteria.
Telefónica reached a value of 6.77 on a scale
of ten points.

04 Customers
Attention through the website or SMS for customers of Telefónica Móviles
Guatemala
El Salvador
Nicaragua
venezuela
Argentina
Colombia
Uruguay
Panama
Ecuador
Mexico
Spain
Chile
Peru
Through the website
Services and price information
Queries and complaints mailbox
In prepaid: card reloading
In contract: online bill
In prepaid: consultation
of balance and list of calls made.
Change of price plan
Service activation
Chat 24 hours
Account payment
Through SMS
Balance query
Change of price plan
For its part, in 2005 Telefónica Automatic customer attention

Latinoamérica received more than 245 CASE STUDY
million calls from customers, 84.1% of
systems
which were attended in under 10 seconds
To reduce the time for customer attention, Customer Defence Service in
automatic systems are alternated for the
(77.3% in 2004). Only 6.9% of the calls Spain
simpler questions or to direct calls to more
entering the telephone attention centres of
specialised operators for the more
the company for this segment were The Telefónica Group wishes to become a
complex. By way of example, Telefónica
unattended. The improvements made world referent as a commercial company,
Móviles España attended 75% of the 81
throughout the year, such as Atento al and 2006 was a landmark in the process
million calls it received from its customers
Cliente, which is based on resolving with the launch, amongst others, in Spain
in under 10 seconds; of these 51.7% were
customer requirements on the first of the Customer Defence Service.
attended by operators and 48.3% by
contact, obtained the recognition of the The Customer Defence Service appears
automatic systems.
customers as satisfaction with the process with the purpose of maximising the quality
rose 3.4 percent over December 2004. excellence commitment that the Telefónica
In Telefónica we are aware that the
Group maintains with respect to the
automatic systems may cause a certain
There is still no standard methodology in attention and service it gives its customers,
rejection among customers, who do not
the Telefónica Group to classify the type of by providing a way to check dissatisfied
feel comfortable interacting with them.
calls received in the call centres, which is customers who would previously have
Therefore, whenever a customer contacts a
why it is impossible to offer an overall scale resorted to the ordinary forms of making
telephone attention centre, they are able
of the reasons why customers call, complaints that Telefónica makes available
to select the option of talking to a person.
although it is clear that most calls involve for them.
queries and requests for information. With the launch of the Customer Defence
Similarly, there are customers who wish to
Service, Telefónica becomes the first
do their transactions more quickly than
operator to proactively create a unit of such
talking with an attention system or an
characteristics.
operator. Therefore, the companies of the
Telefónica Group are developing parallel
attention channels, such as the website or
sending SMSs.

04 Customers
CASE STUDY
Resolution on the First Contact they were given access to applications and The introduction process had an initial
procedures that had not previously been adaptation that caused an increase in
accessible in the call centre. traffic and a fall in satisfaction. However,
The aim of the Telefónica Attention Centres
- A modification in the contract with the two key results were immediately achieved:
is to effectively reply to customer demands
service provider, Atento Brasil, which a highly significant increase in satisfaction
in the shortest possible time. With this
enhanced the resolution capacity. This and a considerable fall in the traffic
objective and experimentally within the
contract is based on a price per call received in the customer attention centres.
group, the “Atento ao Cliente” project was
conditioned by a band of durations for each This analysed from an already appreciable
developed as a joint initiative between
of the calls. If the resolution capacity time period, it is detected that the traffic
TelSP and Atento Brasil. The project is based
improves, the price improves and the call has fallen considerably, but it is also
on three basic premises aimed at
duration band is increased. appreciated that the quality has reached a
improving the resolution:
limit that does not seem to depend on
whether the call resolution increases or
- A very strong training programme for
not.
teleoperators to improve their knowledge
and attention capacity.
- Access by these better trained
teleoperators to a greater management
capacity on subjects that previously had to
be resolved in other instances. To do this,
Evolution of the customer attention programme

Trafic
Satisfaction: Transactional
Launch Optimisation Permanent system from

until Q1 2005 until Q2 2005 until Q3 2005
100
40 95
90
30
85
80
20
75
10 70
65
0 60

04 Customers
Formal channels for making claims with Telefónica CASE STUDY

Internacionall
Argentina Call (112 y 0800 UNPRe) Telefónica Móviles España
Boxes: Customer attention; Speedy; Infocliente; Alcancía Telefónica; contacts its customers on
Complaints and claims module; Unrecognised lines; Reimbursement demand
management; Sivetel Reimbursement Management; Adjustments and
PC Credit Notes; Process box; GAC process box; Call centers
If a customer wishes us to get in contact
Notes
with them to clarify any query on our
Complaints book
products or services, they just have to
CNC
complete the questionnaire available at
Consumer defence
www.atencionenlinea.movistar.com. This is
Ombudsman
Account executives
the best way we can anticipate our
Commercial offices customers’ queries and resolve them more
quickly.
Brasil Residential call centre
SME call centre
Company call centre
Business manager
Customer attention shop
Virtual shop
Ombudsman
Consumer protection agencies
Regulating agency
Chile Call Center, 105 attention platforms (a platform required by SUBTEL for
general claims), 104 (telephone attention), 107 (commercial attention) and
TCTC customers that require attention and from telephones of the
competition access through 600600105, 600600104 and 600600107.
Customer portfolio
Letters to direct line of the “El Mercurio” newspaper.
Trades received from SUBTEL (communications sub-secretary)
Trades received by SERNAC (national consumer service)
Corporate web centre
Perú 104 telephone line
Presence through multi-centres
Letter
The regulation also allows it to be done virtually, but not used to date

04 Customers

CASE STUDY Technical Service

Re-establishment of Deloitte
operations following the fire in
Telefónica customers hope not to need the Service order returns
the Edificio Windsor technical service, as they expect the service Service order returns are one of the main
offered to be of great quality. However, when causes of customer dissatisfaction, as while
Telefónica Empresas collaborated with the the intervention of the technical service is customers expect to receive a reply from
company Deloitte to re-establish its necessary, customer expectations are that it Telefónica, the Company has no indication
operative activity following the fire in the should be resolved rapidly and effectively. in its registers that any action has to be
Windsor building, located in the financial
carried out with the customer.
center of Madrid, where the auditing firm
Fixed telphony
had its head offices and occupied 20 of the
The mean time for resolving faults in a In order to reduce the current level of
25 floors of the building.
basic telephone line in Spain was 16 hours returns, Telefónica de España has planned
This work was carried out under a Disaster
in 2005, an identical value to that achieved two pilot experiences based on the areas of
Recovery Plan that Deloitte had drawn up
in 2004. In Latin America, this value was 42 greatest influence in service order returns,
hardly a month before the catastrophe,
hours on average between the three which are located at the beginning and the
which identifies the critical nature of every
segments (Residential, SMES and end of the value chain:
application and the steps to be taken. The
Companies). In December 2004, this figure
communications and information recovery
was 42.75. The targets set for 2006 are •The commercial area, as a result of the
and support work was performed quickly inadequate closure of the sale (35% of
based on adapting the times to the
thanks to Telefónica’s skill and experience the returned service orders on gross
expectations of each customer segment.
in Business Continuity Solutions and BRS sales).
(Business Recovery Services). Specifically
determining were Telefónica’s on order
ADSL •The installations area, associated with
The mean time to resolve problems with an problems in contacting the customer
storage and backup services, which (30% of the returned service orders on
ADSL line in Spain was 14.15 hours (10.36 in
provided the necessary resources almost gross sales).
2004). In the case of ADSL in Latin America,
immediately, and on which the auditing
the mean time for resolving problems was
company began to recover its information From the results achieved in both
21.8 hours (19.45 in 2004), a small increase
stored on security tapes. experiences and the reduction of the
bearing in mind the broadband explosion
Hardly 24 hours after starting the recovery indexes of returned service orders, the
in the region in the past year, reaching
work, practically all of the delegations adequateness of these actions and the
2,165,000 ADSL lines.
already had an Internet connection and convenience of their territorial extension
began to use their electronic mail, which will be evaluated.
enabled the company to start the process Data circuits with
of activating the applications supporting a larger bandwidth
their business and the documentary In 2005, faults on circuits with a larger
management. bandwidth in Spain were repaired
in an average time of 8.39 hours.

04 Customers
CASE STUDY OPINON

Telefónica technical assistant for ADSL customers What do our stakeholders
think?
Telefónica de España has provided customers with a new Technical Assistant to solve In the RepTrak study, we asked society
incidents with the ADSL service. This is a software tool to protect, check and automatically about its perception of whether “Telefónica
resolve the most frequent problems that might occur with any computer user in relation guarantees its products and services”.
to the use of ADSL. Society’s opinion as a consumer is highly
significant, as the sample completely
The functions provided particularly include: identified those interviewed with
•It automatically detects and resolves connection and mail setup problems. customers of the services of the Telefónica
Group.
•It allows system setups previously stored to be restored to re-establish the connection
with the previous parameters. The results obtained in December 2005
• It provides detailed information on hardware, software and customer PC connections. were the following
•It includes simple tools to optimise the resources of the customer PC: connection tests,
router rebooting, cleaning IE caché, resetting IP, etc.
España 68.4
• It provides online assistance from the telephone attention centre (TAC), by opening a
chat session, and also, when authorised, allows the remote control of the customer PC Argentina 64.4
from the CAT.
Brasil 57.9
All of these facilities will enable the number of calls to the TAC and the time for resolving
incidents to be reduced, with a direct impact on customer satisfaction and the costs of the Chile 71.5
TAC.
The aim is that all ADSL customers should have this tool, so the Assistant has been México 77.1
distributed by electronic mail to 350,000 customers, and has been made available to
customers through the website, the Customer Attention Centres have been trained and Peru 62.4
the application has been included on the ADSL installation CD for all customers.

04 Customers
Service improvement initiatives

Excellence in
service Quality certificates
Service improvement initiatives
Telefónica de España Some of the Six Sigma projects developed

The strategic programme meta:cliente in in 2005 were:
2005 in Telefónica de España started a new Brazil:
wave of improvement initiatives structured Logistics efficiency of the Speedy
in four modules, one of which is Operative self-installable Kit. Programming Speedy
Excellence, focused specifically on customer installation and repair services. Reduction
satisfaction and increased efficiency of repeated STB faults.
throughout the value chain. In 2005, the
following six transversal work teams were Argentina:
established, from which around 150 Optimisation of the SME customer
planned actions arise: complaints.
Optimise and systematise the provision of
•Residential and small business and personal protection elements.
professional customer attention centres Optimise the times for giving Company
•Broadband services Customers service.
•Large customer billing Chile:

Speedy ADSL Broadband customer
•System renewal and availability complaint attention.
•Effectiveness in different units Resolution of STB Household and SME
complaints on the first contact.
•Comprehensive material management Time for delivering quotes to customers.
Telefónica Latinoamérica Peru:

The Six Sigma methodology is being used in Complaints associated with new
the four operators in Latin America as a key campaigns and products.
tool to identify the processes and levers Efficiciency in managing installations.
critical for improving quality. The bases of Incidents in the network affecting the
the project are the Rules for the customer.
Introduction of Six Sigma approved in 2004. 2005 saw a close collaboration between
the commercial, operational and quality
More than 250 Six Sigma projects were areas of Telefónica de España and
carried out in 2005 (96 in 2004) involving
over 2,100 professionals from Telefónica
Latinoamérica in the Six Sigma training
processes. The work plan established for
2006 includes the training of a further
1,000 professionals in the different tools of
the Six Sigma methodology.

04 Customers
The Six Sigma improvement methodology, based on

controlling the variability of the processes and training
people, pursues customer satisfaction and has been
constituted in the reference methodology of the Telefónica
Group for process optimisation.
Introduction of the Six Sigma methodology in Telefónica

Latinoamérica
Seis Sigma projects 17 197 16 28
People involved in the training 123 1,735 111 143
Telefónica Latinoamérica. With this, Chile (Six Sigma)

successful experiences were shared and Increase the capacity to resolve claims for
common work areas were identified in first line reloading failure
subjects such as commercial intelligence, Reduce the time for generating and
sales models and channels and customer approving credit notes
attention, in offering broad band products
and traditional business.
Ecuador (Six Sigma)
Guarantee the availability of the cellular
Telefónica Móviles network each month
In 2005, Telefónica Móviles España Reduce the time required to deal with
established different work groups in order serving goods and services in the
to establish improvement initiatives in the management areas
service offered to its customers.
El Salvador and Guatemala
• Management of the service quality from Reduction of the number of claims by
the customer’s viewpoint (3 projects). solving root problems through the Claims
Committee
•Resolution of root cause of customer Reduce repeated claims
complaints (8 improvement groups).
Mexico
•Automation of the management of the Increase network availability and added
quality of the services from the customer
value service platforms
viewpoint.
Reduction of the percentage of failed calls
•Evaluation of 6 services, introduction, Reduction of the number of rejected SMS
improvements and table of indicators. Panama (Six Sigma)
•Improvement of the quality Reduction of billing complaints
Reduction of commercial attention time
management of the internal customer (3
improvement groups). Reduction of activation time
Telefónica Móviles operators applied Peru (Six Sigma)

the Six Sigma methodology to develop Reduce the amount of external customer
projects and initiatives to improve the dissatisfaction
service, as described below: Increase the service level of the call center
to minimise customer waiting time
Argentina (Six Sigma) Increase the satisfaction of customers with
Increase the productivity of the call centers the process of activating pay-to-phone
Reduce demands for personal attention. cards and virtual reloads
Reduce the logistics time
Venezuela
Reduce the service centre attention times
Reduce the reply time to corporate
customer failure scaling
Improve the price change control process

04 Customers
Quality certificates
The introduction and achievement of Telefónica Latinoamérica developed

quality certificates shows us that both the significantly in ISO 9001 certifying its
processes and procedures of the company quality processes. These processes in the
management are controlled and region involved more than 5,000
standardised, resulting in an improvement professionals of the Group and had the
in the efficiency and efficacy of the following results.
organisation. These certificates are drawn
up by external independent entities and Telefónica Móviles is also moving forward
are made under criteria determined by in the process of certifying its processes
international standards to guarantee a in all countries of Latin America where
quality service from different aspects. The it has operations.
ISO 9001:2000 standard nourishes the
company in the culture of Continuous
Improvement and increases the customers’
confidence in the products and services
offered by the Company.
Telefónica de España has had a quality

system implemented and certified since
2001, applicable in all processes of the
organisation and in the whole of the
territory where the Company operates. In
2005 Aenor carried out a further follow-up
audit of the quality management system
for which all the transversal processes of
six products were audited, from the
development of the products to the billing
and payment. The chosen products were
Imagenio, ADSL and KitADSL for the
residential segment and SolcionesADSL,
Wifi and “Líneas Retribuidas” in the small
business and professional segment. In
addition, in 2005, the “Madrid Excelente”
certificate was renewed.

04 Customers
Development of the ISO 9001 certification process in Telefónica Internacional

Country Activity Certification Date
Argentina Attention in queries, processes, withholdings and cancellations, receipt of customer complaints and October 2005
claims in the commercial centres of the Residential business Unit.
SMEs, Wholesalers and Large Companies November 2005
Billing (Residential and SME) Activities from pre-billing calls and processing to issuing, enveloping,
dispatching and distributing bills.
Billing of Data / Solutions and Control of invoice delivery (TEmpresas). September 2005
Telephone attention for requests, queries, sales, cancellations, claims and complaints from preferential
customers, companies and wholesalers and the commercial management of SME customers and indirect channels.
Telephone attention and First Level Technical Support for Customers with Data Services and Datacenter November 2005
Brazil Guarantee of installation, operation and technical support for April 2005
ADSL technology broad band access (Speedy Home and Business).
Attention and support for Ombudsman management April 2005
Maintenance of the process of collecting, recording, prices and billing (ABNT) June 2005
Chile Planning, Design and Development of Communications Products and December 2005
services for Companies (Telefónica Empresas)
Peru Assurance of orders, information management and contacts November 2004
OTF billing claim management February 2004
Management of claims concerning data and value added services (TEmpresas)
Cyclical billing of services of Added Value and February 2004
Packages including Added Value of Telefónica Empresas and Telefónica del Perú
Provision, Management and Maintenance of Connectivity Networks and Services (TEmpresas). August 2005
OTF Billing process control. November 2003
Corrective and preventive maintenance for the Fixed and Data Transmission services. December 2004
Assignment and Installation of Fixeds and maintenance of the customer access network. December 2004
Development of the ISO 9001 certification process in Telefónica Móviles

Argentina In the course of COPC-2000 PSIC certification. The process covers 100%
of customer relations with Movistar (call center, retention, customer experience centres, back
office and help desks...) Certification is expected for December 2006.
Chile 100% of the processes associated with customer attention are ISO 9001 certified and approximately 65% of the company activities.
Colombia The main customer attention processes are ISO 9001 certified, affecting 80% of the processes associated with the
transactions of the sales and service centres.
The first mobile phone operator in the country to achieve this certification.
Ecuador The operation and maintenance of the radio bases are ISO 9001 certified
El Salvador 100% of all the business line processes are ISO 9001:2000 certified
Spain 100% of activities are ISO 9001:1994 certified, from service design, network building and commercial
attention to after-sales and throughout the country.
Guatemala 100% of all the business line processes are ISO 9001:2000 certified.
Mexico In November 2005, a follow-up audit was made of the ISO-9001:2000 Quality Management System
and the ISO-14001:2004 environmental management system.
Nicaragua Certification according to ISO 9001:2000 complete in 2006.
Panama In 2005 the certification process began according to ISO 9001:2000.
Peru 100% of the claim registering, treatment, resolution and close processes through the Call Center, Commercial Offices,
Integral Agencies and Multicentres of the city of Lima ISO 9001:2000 certified.
Venezuela In the process of appointing consultants and launching the ISO 9001:2000 certification process.

04 Customers
Secret of telecommunications
Protection against Internet abuse
Responsibility in Data protection and privacy

the service offered Protection of infancy
Terminal theft
Responsible use of telecommunications
Secret of Customer
telecommunications protection against
The State jurisdictional agencies, such as “Internet abuse”
the Tax Office and other bodies of the
different Public Administrations, have asked Despite the innumerable advantages that
for information and action from our Internet offers its users, it can also present
Company in their respective areas of certain threats. The global extension of the
competence, in which Telefónica is obliged networks makes it possible for users to
to carry out instructions issued from them receive external attacks such as spam,
or to provide the required information. intrusion, attacks on intellectual property,
unsuitable contents, child pornography,
The legitimate action of the mentioned fraud, phising, offence...
public bodies in carrying out their
functions at times comes into conflict with In 2005, a growing situation was detected
the, also legitimate, rights of people. of the problems of security from people
Therefore, the requirements demanded seeking recognition among the Internet
with respect to the legal raising of community from making viruses, trojans,
telecommunications secrecy are strictly etc to seeking an ever more obvious
fulfilled both in the Constitution and in the economic benefit, as is the case of
Law of Criminal Judgement, through the phishing, the fraud of the Nigerian letters,
intervention and observation of spyware, etc. In Spain, phising has been one
communications or the connection to the of the increasing problems, with the
circuit of malicious calls. appearance of webs pretending to be
banks and entities of electronic commerce.

04 Customers
The document “Obligations of the

Corporate policy of protection Companies of the Telefónica Group related CASE STUDY
against “Internet abuse” to the Management of Abuse in Internet
In March 2004, Telefónica started up a services” was approved by the Security Intelectual Property Defense
corporate initiative to co-ordinate the Committee in November 2005. The
policies and processes used in detecting principles included are the following: Telefónica states its solid support to
and resolving IP incidents in the networks. promote the use of licit content in the
The companies making up the •To develop and introduce products, Information society and its refusal to carry
services and/or secure networks.
Subcommittee of Internet Abuse are out criminal acts or third rights infractions
Telefónica SA, Telefónica de España, •To attend any claims of abuse brought in through digital networks. Some of the
outstanding iniciatives carried out by
Telefónica Móviles España, Telefónica by the customers or other users.
Wholesale Services, Telefónica Empresas Telefónica during 2005 are:
España, TeleSP, Telefónica de Argentina,
•To start up technical measures to
identify and counter the said abuse.
Telefónica del Perú, Telefónica CTC Chile, Public iniciatives support:
Telefónica Empresas América. •To co-ordinate actions with other Telefónica states its firm support to the
companies of the group. Integral Plan of decreasing and eliminating
The objectives of the initiative are the
following:
•To co-operate with other actors of the the activities against Intelectual Property,
approved by the Spanish Cabinet in 8th
society of information
April, 2005.
• To reply to the demands for security and
•To inform and/or educate customers of The objective is to establish a shared
protection declared by the customers the importance of security. opinion, in every Telefónica’s Group
• To mitigate the perception of poorer
•Centralisation of the “white list of companies, that could be submitted in the
service by our customers Telefónica mail servers”. The objective of different Forums created by the main
• To assure continuity in the service, this is to avoid blockage between

addresses of customers of the Group, thus
affected stakeholders for this plan and with
the aim of adopting a unique stance in the
avoiding blockage by other networks
guaranteeing the continuity of the service. Telecommunications Industry against
•To reduce the costs of network piracy
maintenance
The Sub-committee has developed
• To manage the risks to Telefónica’s “Common procedures related to the Sectorial initiatives support:
Besides an internal working group
reputation management of abuse in Internet services”,
which will be discussed and approved in constitution, Telefónica has also joint the
In 2005 the Subcommittee of Internet 2006. This document establishes the working Group created by the different
Abuse developed a series of rules actions that must be carried out by the affected agents, who are interested in
concerning the management of such companies of the Telefónica Group when implementing an anti-piracy plan.
incidents by the companies of the they receive reports about attacks from
Telefónica Group. spam, virus, intrusion, fraud, phising...;
infringement of intellectual property; child
•The “Policy of Acceptable Use of Internet pornography; terrorism; xenophobia;
Services” (approved by the Security
unsuitable contents; blockage due to black
Committee in June 2005) establishes the
lists; offence...
recommendation to the companies of
the Telefónica Group of informing their
customers of the need to make suitable
use of the Internet services.

04 Customers
What can our customers do?

Protect their equipment
•Establishment of sanctions in the
contracts with integrators to avoid
Contrary to what it might seem, practically unwanted messages or voice calls from
all spam incidents registered in Telefónica being sent to customers (e.g.: Ecuador,
de España are due to the existence of Panama, Venezuela)
customer equipment with vulnerabilities
and security holes that allow others to •Anti-spam service, thanks to which
customers can indicate that they do not
send unauthorised mail without the
wish to receive Movistar campaigns (e.g.
knowledge of our customers.
Chile, Ecuador)
There are a large number of units

Report attacks
connected to Internet that do not meet
Telefónica de España has more than 20
minimum security requirements as regards
electronic mail addresses for reports
their browsing habits and use of Internet.
available for its customers and computer
As a result of this, their units end up under
security companies and other operators.
the control of “hackers” or “spammers” from
These include abuse@telefonica.net for the
other countries to carry out their attacks.
electronic mail service and abuse@rima-
tde.net for the connectivity services (ADSL,
The companies of the Telefónica Group
RTC, RDSI, Satélite, etc). All messages
have strengthened their tools to guarantee
received are sent to the Telefónica de
the protection of their customers both in
España Nemesys centre. Other similar
the use of Internet services and to prevent
services are abuse@terra.es and
them from being victims of them.
abuse@telefonica-data.com
The companies of Telefónica Móviles have

Showing its leadership in the sector, in
also introduced the necessary systems to
2005, Telefónica organised the first
protect customers from spam as far as
meeting of Internet abuse attention groups
possible:
in Spain, an event that received the
•There are solutions that allow it to be collaboration of more than 20 Internet
determined on the basis of statistical service providers, Universities and other
criteria whether messages are spam, groups interested in sharing best practices
eliminating those identified as such (e.g.: to combat the said abuse. The meeting
Argentina, Peru, Uruguay...) analysed subjects such as undesired
•There are permanent traffic monitors electronic mail messages, viruses, attacks,
the sending of false messages to collect
and controls that allow customers
confidential data or black lists.
making massive mailings or short
messages to be identified and their use
limited (e.g. Colombia, Panama...)

04 Customers
Tools offered by Telefónica de España

to protect its customers
Protection Input Output
Customer PC Anti virus

Anti spyware
Anti Intruders
Network Anti spam Customer blockage due
Anti phising to complaints in Abuse
Content filter
Mail server Anti spam Authentication
Anti virus Anti virus
Black list Anti spam
Punisher Punisher
Customer blockage due
to complaints in Abuse
CASE STUDY
Advice when using Internet
•Under no circumstance must links be followed that lead to the user’s banking portal or
their electronic banking system. It is necessary to always use the addresses entered in
our browser by hand. The banking entity never asks for codes of any kind by mail, nor
sends mail messages with subjects on the need to confirm data in the event of
supposed cancellations. Such messages must always be mistrusted.
•The electronic mail must also be watched. Almost all fraudulent messages arrive by this
means, so it is recommended to have a safe address for banking matters. This address
must not be published or given in forums, chats or public media. The large majority of
unwanted mail lists come from tracking through chain mails, forums, chats and notice
boards on the net, so if we avoid taking part in such emails in these places, it is a
guarantee that we will not receive advertising or dangerous messages.
•Make sure that the name of the page corresponds to the name of the entity, for
example: http://www.BancoOnLine.es. Normally with fraudulent pages, instead of this
there is a numerical sequence or one of the following type: http://218.12.31.xxx, which
does not belong to any entity of the bank entity. Other times there is an almost
imperceptible modification in the name of the bank, a letter is inserted or repeated in
some part of the name http://www.BancoOnLinee.es, or ttp://www.BancoOnLiine.es, or
a spelling mistake is intentionally given which is not noticed by some users,
http://www.BamcoOnLine.es or http://www.vancoonline.es/
•Be suspicious of mail and web pages where there are serious mistakes of spelling and in
the grammatical construction of the sentences. In general, translations placed in mails
and websites are made by people with no knowledge of our grammar, and the use is
also noted of very poor automatic translators in their creation
•Note that the page works with SSL protocol, or safe servers that guarantee traffic
encrypting between machine and customer. This may be seen simply at sight if the
address bar of our browser gives "https://" instead of "http://;" at the beginning of the
address, or if the state bar shows a padlock that warns us that this is a safe page.
•As a final piece of advice, we should do nothing of which we are not absolutely sure.

04 Customers

Telefónica Empresas España Telefónica de España Nemesys Phising
centre Telefónica de España was informed of 52
and its customers’ security cases of phising generated from their
networks (attacks against banks and
Telefónica Empresas España is a In Telefónica de España, the Centro
companies).
pioneering company in guaranteeing the Nemesys deals with attending and
protection and security of its customers. In processing claims received from Internet
In order to protect all Internet users from
2005, they strived outstandingly to protect on illicit or fraudulent activities or abuse
such frauds, Telefónica de España puts into
their customers from virus, spam and made from its IP network.
practice that of the protocol of action
other attacks such as phising.
against phishing agreed with the Centre
Spam
for Interbanking C-operation and other
In 2005, 1,418 million electronic mails were Despite having reached more than
National -phishing Work Groups:
analysed (+ 47.5% over 2004). The increase 400,000 complaints about spam from the
in the number of mails analysed is due to Telefónica networks, there is no recognised •By detecting and blocking all phishing
the inclusion of mail from employees of active “spammer” in such networks. When a webs that have been reported,
new companies that are customers of
Telefónica Empresas España. The
spam report is received, the following is
done:
•By blocking the access to these webs
from the net,
conclusions of the analysis are as follows:
•Identify the origin of the attack / spam •By eliminating the phishing webs
•67 million emails carried a virus (4.7%). A among the customers. detected in our customers’ equipment
fall of 29.75% is seen in the number of
emails with a virus (despite the increase •Notify the customer of the sending of
spam from their computer.
in the number of mails analysed).
•Spam traffic was multiplied 5.8 times, •According to the “Policy of Acceptable
Use”, customers are eliminated from the
reaching 168 million mails (11.84%). This
service who repeatedly try to make use
increase in traffic is due to the explosion
of the Telefónica networks to carry out
of fraud on the net (phising) and the
mailings.
activation of heuristic detection filters
(in addition to black lists and spam
signatures). Telefónica Empresas España
Center Nemesys
is the national leader in antivirus and
antispam on the net, analysing more 90,000 Spam
than 56% of the traffic documented in 80,000 Virus / hacking
“red.es”.
70,000
• In 2005, 291 cases of “phising” were 60,000

detected in Spanish entities (33 in 2004). 50,000
The United States is the origin of 50% of
40,000
the attacks on Spanish entities, and
30,000
Germany, Korea and Taiwan account for
20,000
a further 25%. Telefónica Empresas
España collaborates with its customers 10,000
0
in resolving attacks, and solves over 60%
Jan. Feb. Mar. Apr. May. Jun. Jul. Ago. Sep. Oct. Nov. Dec.
of the cases in under five hours.

04 Customers

Management of Spam Code of conduct with
and Abuse in Telefónica de Mobile Spam
Argentina
The Code of conduct with Mobile Spam
Telefónica de Argentina manages spam in reflects the commitment of the operators
the mail platform used by customers of and GSMA (GSM Association) against spam
residential, preferential and company in mobile phones. This code is applied
business lines. This work involves specifically to commercial short or
approximately 90 hours of work each multimedia messages that are sent to
month. customers without their due consent,
including, as required in national
To control the spam, checks are made on legislation, messages that invite people to
the amount of mailings in each account, contact premium services (short messages,
the authentication of the sender and the telephone calls...) or messages that are
control of sending times for very long fraudulent.
mails. The most outstanding results in
2005 are: Telefónica Móviles signed this code, the
general principles of which are the
•More than 7,500 domains and 545,000 following:
mailboxes are analysed
•Approximately 400 mailboxes are •To include anti-spam clauses in all new
contracts with service providers
blocked each month as not respecting
the “Policy of Acceptable Use”. •To establish a mechanism that assures
the consent of the customer to such
services, assuring control with respect to
the marketing actions of the mobile
operator
•To collaborate with other mobile

operators to face aspects of spam
•To inform and give resources to

customers to help them to minimise the
levels and impacts of mobile spam
•To encourage other anti-spam activities

to reduce the level and impact of mobile
spam
•To involve governments and regulators in

supporting the industry

04 Customers
Data protection and customer privacy
In 2004, Telefónica started the Proyecto The use of the application reduced the
MADRE (Automated Regulation exposure of the Telefónica en España
Maintenance), initially conceived as a tool companies to administrative sanctions as a
to facilitate the compilation of data result of shortcomings or the infringement
protection material. The MADRE application of administrative and management
allows the effective, efficient management procedures provided in the mentioned law.
of compliance with the Organic Law on The main landmarks in 2005 were the
Data Protection (LOPD) and the Safety following:
Measure Regulation (RMS).
•Registering the intellectual property of
the computer application to show the
The application is developed from initial
innovative effort and safeguard the
experiences in Telefónica Móviles España
interests of Telefónica.
and the additional requirements of the
Telefónica Group Security Committee •Making personal visits to all the
derived from the regulations themselves. companies (May-June) to give them
The maintenance of the application in time support and attend their needs in
has implied that it has to be constantly implementing and starting up the
adapted to the legal framework and the service.
organisational circumstances, regulations
and techniques of the companies of the
•Presenting the MADRE application in
Securmática 2005 (26th April 2005): XVI
Telefónica Group. To develop it, in 2004 a Spanish Congress of Information Security
work group was set up with Telefónica, the joint sponsored by Telefónica Empresas.
results of which were implemented in 2005. The application aroused interest in the
sector and offered an image of Telefónica
as an innovative, proactive company in
safeguarding the personal data of its
customers.
The rules and procedures of Telefónica

companies in protecting the personal
information of customers stipulate that
information is only given to holders of lines
and applications are only processed that
refer to services given directly by them. The
request for information on customers
made by third parties is only attended with
authorisation from the court or competent
authority in each country

04 Customers
Fixed Telephony Spanish Data Protection Agency has

Spain released a resolution against Terra and
Telefónica de España has been a pioneering other againts Telefónica Soluciones.
company in Spain in assuming
commitments of protection and security Latin America
that guarantee the inviolability of personal Telefónica guarantees the confidentiality of
data, and to this effect, in July 1994, it drew its customers and employees, etc. data in
up the first Deontological Code registered all countries where it operates. The
with the Spanish Data Protection Agency. Company guarantees that it will adopt and
fulfil all security measures in all treatment
Telefónica de España respects and fulfils centres, premises, equipment, systems,
the directives established by the Spanish programmes and therefore all personnel
Data Protection Agency (AEPD) concerning involved in their treatment, according to
the privacy of the personal data of citizens. the functions and measures established in
In 2005, Telefónica de España passed over the Safety Measure Regulation and other
ten inspections and started up several internal regulations established there for.
initiatives to assure compliance with these
requirements. The initiatives include the In accordance with its concession
following: agreement, Telefónica del Perú has given
ten annual reports on activities carried out
•Preparation of a Decalogue of rules on to guarantee secrecy in
Data Protection, to which the Lawyers’ telecommunications. The Central Offices of
Offices collaborating with Telefónica de the Operations of Telefónica Perí in the
España must be subject. second half of the year started ISO
•Preparation of a Decalogue of rules on 27001:2005 certification concerning
Information Security, and completed the
Data Protection, to which the
distributors and the agents audit with “zero non-conformities” with the
commercialising Telefónica de España recommendation of the certificate for the
products and services must be subject. said office. The certificate was received in
March 2006, and this is the first Peruvian
•Inspections of the files of entities company and one of the first in Latin
responsible for treatment.
America to achieve it.
•Proposed extension of the typical Data
Protection Code of Telefónica de España A claim was brought against Telefónica CTC
to all companies of the Telefónica Group. Chile, alleging damages for not having
respected the confidentiality of telephone
Approximately one hundred and fifty lines when it published numbers in the
reports by customers determined the residential telephone directory. After the
opening of different claims against appeals, Telefónica was finally sentenced to
Telefónica de España by the Spanish Data compensation.
Protection Agency (Inspection, Informative
File, Right-holdership, Sanctions…). In 2005,
Telefónica de España was sanctioned in
two Cases, and the proposed sanction was
reduced to a minimum. Likewise, the

04 Customers
require registers to allow users

consulting the mobile number to be
detected.
Mobile telephony •Operations with customer data leave a

trace of every user who enters, with
The Telefónica Móviles España S.A.U.
information on the user, date and a
Security Sub-committee fulfilled the
comment.
Strategic Security Plan 2005 and presented
a new Strategic Security Plan 2006 in order •Accesses to the system are handled
to increase security in the Company’s exclusively by the Computer Security
systems and processes. group.
Likewise, in 2005 an online course in

•In the online channels, accesses are by
security code and all corporate websites
Security Culture was drawn up to make all
have an approved certificate to
workers of Telefónica Móviles España S.A.U.
guarantee confidentiality in
aware of the importance of respecting the
communications.
confidentiality of information.
The Data Protection Agency has published
An automatic process is being developed to
6 resolutions against Telefónica Móviles
enable customers and users to control their
España.
personal data, in order to comply with data
protection legislation.
In 2005, two claims were brought against
Telefónica Móviles Colombia (ordinary civil
Systems containing details of customers of
liability proceedings) for the supposed
Telefónica Móviles are structured in the
undue use of customer data. These
following way to protect the information:
proceedings are in the initial phase. In
•The structure of the system allows the Argentina, Chile, Ecuador, El Salvador,
different elements to be dealt with Guatemala, Nicaragua, Panama, Uruguay
independently (example: Queries, and Venezuela the absence of claims of
customer operations, etc.). this kind has been confirmed.
•Each user has a profile that controls

personal access to the different
elements.
•The profiles have confidentiality levels,

which allows more delicate information
to be controlled. Moreover, actions may
be carried out on customer information.
•Users may not use options without

previous access. Certain delicate queries

04 Customers
Protection of infancy
Despite the general recognition of the role Collaboration in the struggle

Internet plays in modern society, activities
against child pornography
are developed through the net with aims
Telefónica has sought the support and
that are not shared by society. The use of
collaboration of the most representative
Internet to spread illicit contents, for the
public institutions and agencies in the
illicit use of contents, and for committing
fight against such crimes, and also private
the so-called technological crimes means
entities and associations. There has long
that such crimes have risen giddily. It is a
been direct and stable discussion between
particularly alarming fact that a large part
them, and in line with this collaboration,
of these attempt directly against the
some measures have been taken, such as:
weaker sectors of society and which must
be the object of greater protection: infancy •Suppression of the service of anonymous
and the young. personal pages thus making it easier to
pursue child pornography.
Telefónica considers that it is necessary to
take a step further towards strengthening
•A campaign encouraging users to report
any activity that was illegal, illicit or
its current collaboration with different immoral included or accessible through
public and private associations and personal portals or pages
entities; at the same time the crimes
committed on Internet are of an ever rising •Establishment of internal procedures to
degree of sophistication shown both in the give a rapid, safe and effective reply to
form and speed of their reproduction, and reports and investigations proposed by
in the skill to avoid any kind of control and the State Security Forces and Agencies,
follow-up, especially with regard to their such as the Spanish Civil Guard
authors. Therefore, in 2005, Telefónica led Telematic Crime Group. These actions, co-
several Round Tables in the head offices of ordinated by the Contentious Juridical
the Defender of Minors, which discussed Advice department of Telefónica S.A. are
the main problems derived from the extended to all countries where the
insecure use of the net. Telefónica Group develops its activities
•Collaboration with the main NGOs

protecting infancy on Internet, such as
Protegeles and ACPI (Association against
Child Pornography).
According to data from the Civil Guard and

the Police, this all contributed to reducing
illicit actions by 99% and very particularly
the display of child pornography.

04 Customers
Awareness of the good use of Adult content management

Internet regulation
One of the most effective measures to The Commission for HR and Corporate
prevent the poor use of Internet is to make Reputation of the Telefónica Board of
society aware of it, as well as the Management favourably reported on the
availability of resources from parents and Adult Content Management Regulation in
educators to guarantee the protection of June 2005. The general principles of these
minors and at the same time nurture the regulations are:
good use of new technologies.
•To protect the reputation, brand and the
• Dissemination through talks and institutional values of Telefónica
discussion, animated scripts and leaflets
of the advantages of the use of Safe
•To foster Telefónica’s commercial
relations with its customers, based on
Internet in different schools of several
the idea of confidence, the core value of
Autonomous Communities. This
the Group.
campaign will continue in 2006.
•Safenet Project; of collaboration with the •sensitive

To foster the creation of a philosophy
to protecting citizens from
European Union concerning the
contents liable to offend their sensitivity.
protection of minors, prevention of illicit
activities and secure use of the net. In •To guarantee the protection of citizens
2006, this agreement was materialised for whom society demands special
in the publishing of specialised attention, and specifically the young and
magazines, leaflets, CDs and educative infancy.
websites aimed at turning the net into a
secure, amusing tool... and the later
•To promote the necessary preventive,
technical and organisational
distribution of all this to parents, mechanisms to avoid these citizens
teachers and pupils. accessing unsuitable contents.
•In February 2005, coinciding with the •To make possible the effective use of its
International Day of Safe Internet, a new infrastructures and networks.
Agreement was signed to extend the
field of protection to minors. This •To contribute to the effective
agreement for the first time includes development of the Information Society
NGOs, institutions and different business by streamlining and hindering the
entities of the sector. inclusion of unsuitable contents.
These activities have focused mainly on

•Total opposition to any type of illicit
conduct related to adult contents.
Spain, as this is the country where there is
greater access to new technologies by This regulation has specific section that
minors. In 2006, Telefónica had the deal with Internet, mobile telephony and
objective of disseminating these materials television, and a common characteristic is
in all countries where it develops the establishment of systems of access to
operations, for which it made use of the contents for adults on the express wish of
possibilities offered by Educared. the customer (opt-in).

04 Customers
Tools for protecting infancy When such contents are offered by

providers legally connected to the CASE STUDY
Fixed telephony
Telefónica de España offers its customers of Telefónica Móviles platforms, current
ADSL a service to control access to habitual rules consist of warning Preadolescent pack
unsuitable contents under the name of customers that they are accessing
CanguroNet. With this service, guardians information authorised only for adults. The In Spain, Movistar has launched an
may enable a filter that blocks access to associated voice and chat services are exclusive, unique product on the market so
undesired contents, by selecting the generally more difficult to control, as their parents could have a mobile phone service
categories they wish to block: sex, violence, contents are not always declared. adapted to the communication needs of
racism, sects... There are up to 22 categories their children. The pack is designed bearing
that the customer may filter or allow at In 2006, Telefónica Móviles has the in mind criteria of security and tranquillity;
their own discretion. Likewise, there is a objective of sharing policies of action, control on spending and access to
service mode that inhibits the undesired methodologies and systems with O2, as contents; saving; communication and
advertising of websites and spyware. this operator has great experience in protection of children and parents’
managing relationships with customers in demands for security and saving. The
Mobile telephony more sensitised markets such as the British initiative has the backing of the "for
Telefónica Móviles operators do not offer and Irish. responsible consumption" guarantee of
adult contents, although there is the the Union of Spanish Consumers (UCE),
possibility of accessing these kinds of and one euro for each pack sold will be
products prepared by others through the used to collaborate with Aldeas Infantiles
SMS, WAP or BREW platforms. SOS de España.
Telefónica Móviles Colombia launched the

Firefly telephone with Movistar plans, the
first product truly designed for children in
this country. It is a simple, amusing
telephone that allows control of both the
incoming and outgoing calls through a
book of contents previously programmed
by parents with a key.

04 Customers
Terminal theft
In 2005, Telefónica Móviles España In other countries, Telefónica Móviles is

continued to work on the programme to working in a sector manner and with the
control the theft of terminals. The blocking local authorities to seek solutions that not
was processed by means of an application only minimise the consequences of robbery
that confirms the IMEI/MSISDN link, and if for customers, but also serve in turn to
there is conformity, the terminal is blocked discourage this activity by leaving stolen
in all national operators. The total number terminals completely useless.
of terminals reported stolen exceeded half
a million, and 18.5% were disabled by the
•In Argentina, Chile, Colombia, Ecuador,
Panama, Peru, Uruguay, Venezuela... files
system. are exchanged with the registers of the
units reported stolen between the
Similarly, in the area of fraud prevention, different national operators for the
the Company is taking part in initiatives to different existing technologies.
warn users against techniques of deceitful
obtention of card codes or reloads intended •In the case of Colombia, Ecuador and
for making undue charges to accounts or Peru, given their closeness the databases
balances. were exchanged between the Telefónica
operators.
•In El Salvador and Guatemala the

systems do not yet exchange
information with the other operators,
although they do have the tools to
deactivate the units in their own
network.

04 Customers
Responsible use of telecommunications
As stated in the section “Motor of social

development” of this report, there is CASE STUDY
considerable social consensus on the
positive impact of telecommunications on Manual for understanding •Using discreet call signals, reducing the
society. However, due to the speed with mobile telephony. volume or using the vibration mode.
which the new technologies are adopted,
telecommunications are having a In this field, Telefónica Móviles España has
•Trying to talk quietly and, if possible, in a
separate place. In addition to avoiding
fundamental impact on people’s lifestyles, signed a collaboration agreement with the disturbing others, it will preserve their
and at times can have a negative impact Spanish Union of Consumers (UCE) with privacy.
on them. the aim of improving the information to
citizens on mobile telephony, protecting •In surroundings where it is not possible
This negative impact is usually associated their rights and seeking solutions for users to hold a conversation (cinemas,
with misuse of mobile telephony, in to improve the services, applications and concerts), using the mobile to send or
particular in public places such as cinemas, mobile contents for the Information receive messages, browse, etc., always in
theatres, churches, conferences, academic Society. One of the first joint projects silent mode.
places. Furthermore, despite the growing
social sensitisation, many drivers use their
resulting from the agreement is the
publication of the “Manual for
•If the mobile phone is able to take
photographs, never photograph anybody
mobile phones while driving, with the understanding mobile telephony”, a guide without their permission. In no case
resulting risks to their integrity and that of intended to provide users with clear, simply must minors be photographed.
the traffic. information on how to use and enjoy
mobile telephony better. •Specific recommendations are also
included on the use of mobiles in
For this reason, different operators of
hospitals, on planes, in petrol stations
Telefónica Móviles have produced Amongst other things, the manual explains
and in the car, and the use of mobile
information aimed at sensitising what mobile telephony is and how it works,
phones by children.
customers on how to use the technology. the contribution of mobile telephony to
Therefore, in Spain, Chile, Nicaragua, social well-being and economic
Further information at
Colombia and Peru, web campaigns have development, and recommendations for
http://www.empresa.movistar.es/elcompromiso
been developed, leaflets have been the good use of mobile telephones, such as:
published and advertising supports and
banners have been placed on invoices.
It is important to remember that Telefónica

Móviles has also informed its customers on
questions such as electromagnetic fields
and health. The breakdown of the said
activities is presented in the environment
chapter of this report.

04 Clientes
Markets where Situation of regulations and free competition

Telefónica
operates Situation of competition and market evolution
Competitive situation and market

evolution
Fixed Telephony The total plant of retail accesses to
Spain Telefónica broadband Internet reached
Land line accesses in Spain are estimated 2,719,669 accesses at the end of 2005,
to have grown by 0.9% in 2005, whereas which according to our estimates is
those of Telefónica de España fell by 1.2%, approximately 55% of the whole market in
leaving the Company with an estimated Spain. It is significant to see that this
market share of nearly 85% of these growth was achieved in an aggressive
accesses, after lining up the historical series commercial environment, both from our
with recent data from the CMT cable competitors and local loop rental.
(Telecommunications Market Commission)
The total plant of rented local loops, 116,112
As regards the land voice analogue traffic, at the end of 2004, reached 434,759 units,
the total estimated volume in the Spanish which according to our estimates is 8.8% of
market, expressed in minutes, experienced the total plant of broadband Internet
a fall of 3.1% over the year. After lining up accesses and 11.1% of all ADSL lines. Of all of
the historical series with recent data from the local loop rental lines, 64.2% are shared.
the CMT, the estimated share of Telefónica
de España in this market in December Argentina
would be 66%. The management of TASA adapted to a
context of growing activity and
The market of broadband Internet accesses consumption, and in a market of frozen
in Spain reached 5 million accesses on the rates, has enabled growth of Fixed line
close, according to our estimates. The accesses and voice traffic and an expansion
success of Telefónica ADSL contributed of the broadband. At the end of 2005, with
significantly to this growth, which as a a 34% market share and 50% in telephony,
whole (wholesalers plus retailer, including TASA is still the market leader. In its area of
accesses only providing the Imagenio influence, their share is 73% in broad band
service) reached 3,479,824 accesses at the and almost 100% in local telephony.
end of 2005. Furthermore, the local loop
rental market share made Telefónica
de España’s share in the ADSL market in
Spain fall to 89%.

04 Clientes
In all markets where Telefónica is present, there is

sufficient effective competition with the entity so as to
limit its significant weight in the market, and on
certain occasions, without it being able to be the
leader. As a result of the strong competition in the
markets, Telefónica is therefore obliged to take into
account the competitors (current or even potential),
the suppliers and the Administration in its decisions.
Brazil Peru
TeleSP closed 2005 with a 46% growth in In 2005, Telefónica del Perú (TdP) saw a
its broad band accesses and the alternative considerable increase in the number of
plans for land lines such as Líneas accesses (+13.7%), as a result of a strong
Económicas. In March the Línea de commercial activity throughout the year,
Economía Familiar was launched, which in both in Fixed telephony (prepaid and
under nine months exceeded a million consumption control accounts for 59% of
customers, taking the total number of Fixed line accesses in December 2005) and
Líneas Económicas to over two million in broadband (more than 340,000 retail
accesses. accesses to broadband Internet).
TeleSP finished 2005 with a market share These figures represent a market share of
of 77% in local telephony and 78% in 96% in local telephony and 98% in broad
broadband (referring the the area of band. The good behaviour of the Cable
original concession). Television plant (Cable Mágico) is also
stressed, with inter-annual growth of
Chile 18.8%, reaching 462,211 customers by the
Telefónica CTC notes a total 314,200 broad end of the year.
band Internet accesses at the end of the
year (289,600 retail), reaching a market
share of 43%. This growth reflects the
commercial effort made in the year to
spread broadband massively throughout
the country. New forms of variable
broadband have been developed (Speedy
reloaded) and new packages of broadband
+ voice have been launched, in addition to a
joint offer with satellite TV and new
distribution channels.
The total traffic of the Telefónica CTC

network continued to fall, mainly due to the
strong replacement of mobiles and Internet.
Fixed to Fixed local traffic fell by 10.5% in
2005, whereas land-to-mobile grew by 8.4%.
In long distance national and international,
the total market continues to fall.

04 Customers
Mobile Telephony Brazil

Spain Mobile phone penetration in Brazil rose to
In 2005, the Spanish mobile phone sector 46.6% in December 2005, with a total 86.2
was characterised by greater competitive million customers. In an environment of
intensity, exceeding 43 million lines and continued competitive aggressiveness, at
achieving a penetration of 97%. At the end the end of December Vivo had reached 29.8
of 2005, Telefónica Móviles was reaching 20 million customers (+12.3% over Q4 2004).
million customers (+5% over 2004).
Central America
We must stress the strong commercial In 2005 Telefónica Móviles México
effort made throughout the year. Including continued focused on the development of a
new customers, migrations and terminal quality distribution network and the
changes, Telefónica Móviles España improvement of its processes, making
accumulated 10.7 million actions in 2005 changes in its commercial offer,
(+19% over 2004). strengthening customer attention and the
quality of its services. In this context, in a
In a competitive environment characterised year characterised by greater commercial
by a large amount of actions in numerical activity, the number of accesses managed
portability, Telefónica Móviles España in December 2005 amounted to 6.37
achieved a negative net balance, including million (+12.9% over 2004).
prepaid and contract, in the yearly
accumulated figure of 116 thousand lines. Guatemala was characterised by great
market growth marked by intense
Equally, we must stress the effort made by competitive pressure among the operators.
the Company in loyalising activities, by In this context, Telefónica Móviles was the
launching campaigns to reward time spent second largest operator in the country with
as a customer and offering favourable a market share of 26.4%.
conditions for terminal renewal,
encouraging greater commitment from our In 2005 cellular penetration in El Salvador
customers. Therefore, in 2005 nearly 4.5 reached 31.9%, 17 p.p. higher than that
million changes were seen (+23.2% over achieved in 2004. In this context,
2004). Telefónica Móviles achieved a market share
of 23%, reaching a figure of 538 thousand
In the fourth quarter of 2005 new data customers, a gain of 40% over 2004.
rates for connectivity were brought in, with
concepts close to those of flat rates, prices In Nicaragua, the growth of the number of
of 30 euros/month for 1 Giga and 58 customers was marked by the intense
euros/month for 5 Gigas. competitive pressure among the operators
of the competition, based on two
companies under the same consortium.
The year culminated with 355,705 active
users for mobiles, 15,871 Fixed lines and
7,000 public telephones, representing an
annual growth of 31%.

04 Customers
Panama achieved a market penetration of Southern cone

53% with respect to the 39% in December The Argentine mobile market maintained
2004. A large part of this growth was its high growth rate in 2005, with a strong
driven and capitalised by Telefónica Móviles acceleration driven by the favourable
which, with a sustained strategy of macroeconomic environment in the
accelerated growth, achieved a market country and the development of the
share of 49.5. competitive surroundings. In this way,
estimated penetration in December 2005
Andes region reached 55% (almost 21 percentage points
In 2005, a strong commercial activity was higher than at the close of 2004). In this
maintained in the mobile telephony context, the commercial efforts made by
market in Venezuela, which translated into Telefónica Móviles in Argentina were
significant growth in estimated positive, which allowed 8.34 million
penetration, up to 48%. In December 2005, customers to be reached in December
Telefónica Móviles Venezuela had reached 2005. The weight of GSM over the whole
6.2 million customers (+42.4% up on was now 51%.
December 2004), after registering net
gains of more than 1.8 million lines in the Despite the initial penetration, in 2005 the
twelve months of the year. Chilean market continued to develop with
great dynamism, advancing 10 percentage
In 2005 the Colombian mobile telephony points in its estimated penetration rate to
market was the one of greatest growth in over 71%. In this context, at the close of
the region, with a development of almost December 2005, Telefónica Móviles Chile
25 percentage points in its estimated accounted for 5.28 million customers, after
penetration rate to 48% in December 2005. achieving net gains in the whole of the
Telefónica Móviles Colombia in December year of 525 thousand new customers. GSM
2005 had reached over 6 million customers, was now 51% of the total.
83% up on 2004.
At the close of the year, cellular penetration
The Peruvian market was characterised by in Uruguay had risen from 17% to 34%. In
an increase in competitive activity in the this context, Telefónica Móviles achieved a
last quarter of the year. In this context, market share of 38%, with 419 thousand
Telefónica Móviles Perú in December 2005 customers, representing a net gain of more
had 3.5 million customers, (+20.4% over the than 106% over 2004, and leading the
close of 2004). number of new customers in 2005.
The penetration of the Equatorian cellular

telephony service at the end of 2005
reached 45%, a growth of 61% over 2004. At
the close of 2005, Telefónica Móviles
Ecuador accounted for nearly 1.9 million
customers, after achieving net gains
throughout the year of 763 thousand new
customers.

04 Customers
Telecommunications services are considered services of public

use in many of the countries where Telefónica develops its
operations. This is one of the main reasons why services of this
kind are regulated by public bodies. The different companies of
the Telefónica Group amply meet the different service quality
objectives established by the regulators.
Regulatory situation and free competition
Within the framework of a regulated Telefónica de España

market, the different companies of the Telefónica de España meets 12 of the 16
Telefónica Group periodically give the quality objectives established by the CMT,
objective quality results of the service as can be seen in the table attached to this
given, according to the established chapter. According to the study made by
indicators. Each regulating body defines the Secretary of State, Telefónica de España
independent mechanisms to follow up on offers better average quality than the
the quality of the service given. alternative operators in the thirteen
measured parameters.
With such a situation, the different
operators of the Telefónica Group have The point of greatest conflict for Telefónica
established common parameters to pursue de España is the instruction by the CMT
quality in the service in order to be able to and the Court of Defence of Competition
establish corporate objectives on a Group (TDC) of several sanctioning processes in
scale and transfer the best practices relation to the action of Telefónica de
between some countries and others. Some España as the established operator and the
of these parameters are those presented in dominant operator. There follow the most
the chapters associated with the critical important sanctioning resolutions imposed
processes for customers. by the CMT and the TDC that have been
the object of appeal before the competent
One of the objectives of the regulating jurisdictional bodies.
bodies is to achieve maximum competition
in the markets. In this situation, the Contentious-Administrative appeal
Telefónica operators (and particularly fixed against the Resolution of the
operators) receive many claims from their Telecommunications Market
competitors associated with abuse of their Commission of 23rd July 2002.
dominant position. This Resolution ended a sanctioning
process brought against Telefónica de
The main suits brought against Telefónica España, S.A.U., in relation to the commercial
in previous years and still under appeal by conditions offered to Closed Groups of
the Company are gathered in the official Users, in which a fine was imposed against
documentation provided by the Company it of 18 million euros.
on its different stock markets.
Telefónica de España, S.A.U. brought a
The main regulatory resolutions against contentious-administrative appeal against
Telefónica in previous years and which are the resolution, which was followed before
still being appealed against by the the Eighth Section of the Contentious-
Company are presented in the Administrative Chamber of the National
documentation provided by the Company Audience (Court order nos. 8217/2004),
in its different stock markets. which overturned the appeal with the

04 Customers
sentence of 29th June 2004. On 18th

CASESTUDY
October 2004 Telefónica de España, S.A.U.
drew up an appeal for annulment against
the Sentence, which has not yet been
Report on the quality
resolved. of the fixed telephone
service in Spain
Contentious-Administrative We must also stress the greater quality
In 2004, as in previous years, Telefónica de
appeal against the Resolution of demands that TdE agrees to assure in
España maintained high levels of service
the Telecommunications Market providing the fixed service in comparison
quality, as is understood from the "General
commission of 10th July 2003. with its competitors, and the degree of
report on the quality of service relative to
This Resolution ended a sanctioning compliance with the regulatory objectives
the Fixed Telephone Service in España",
process brought against Telefónica de required of the company. In this sense, it
corresponding to 2004, which was
España in relation to the supposed must be said that generally the service
presented by the Secretary of State for
infringement of a resolution of the CMT quality commitments for the different
Telecommunications and for the Society of
concerning the prices applied to VIC quality parameters required Telefónica’s
Information of the Ministry of Industry,
TELEHOME. With this Resolution Telefónica current regulations, as the operator
Tourism and Trade in 2005. Its preparation
de España, S.A.U. was fined 8 million euros. designated for the provision of the
included the collaboration of the
Against this resolution Telefónica de Universal Service, are more demanding
Commission for the Pursuance of Quality
España, S.A.U. brought a contentious- than the average minimum quality levels
in providing telecommunications services,
administrative appeal against the for the year 2005, which the main national
in which alongside the Administration,
resolution before the Contentious- alternative operators have voluntarily
representatives of the operators and the
Administrative Chamber in the National agreed to offer their customers
users also take part. This report includes
Audience, under Court order number
details from fifteen fixed operators which,
731/2003, thus requesting the suspension The data have been audited by independent
on the close of 2004, had a joint market
of the execution of the sanction. The entities, which have made sure that the
share of 99% with regard to direct
Appeal is pending vote and decision. measures have been carried out according
accesses.
to what is provided in the Quality Order
Contentious-Administrative and that all the data have been obtained
Telefónica de España obtains above-
appeal against the Resolution of with a precision of over 95%.
average results in the thirteen parameters
the Telecommunications Market
considered than the average level achieved
commission of 24th October 2002.
by the main alterative operators in the
The challenged Resolution was given in the
country (Auna, Uni2, Jazztel and Grupo
sanctioning process brought against
Ono). TdE’s strengths stress the parameters
Telefónica de España, S.A.U. for the
related to the operation of the Red
supposed infringement of the resolution of
Telefónica (0.22% average 2004 in failed
the CMT concerning interconnection
international calls against 0.81% by Uni2
obligations for voice + data capacity, and
and 0.61% by Jazztel) and in line
for which Telefónica de España, S.A.U. was
installation time (17.25 days average 2004
given a fine for 13.5 million euros.
in the percentile 95 against the 71.75 of
Jazztel or the 67.25 of Uni2).
Telefónica de España, S.A. brought a
contentious-administrative appeal against
the resolution before the Contentious-
Administrative Chamber in the National
Audience (Court orders no. 97/2003), in

04 Customers
which on 5th July 2005, the sentence Opening of proceedings against

overturned the appeal. On 24th October Telefónica by the European
2005, an appeal for annulment was drawn Commission (EC)
up against the mentioned sentence by The European Commission (EC) informed
Telefónica de España, S.A. of its decision to open formal proceedings
against Telefónica, by sending a set of
Contentious-Administrative appeal charges with their preliminary conclusions
against the Resolution of the Court on the past 22nd February as of 2006.
of Defence from Competition on 1st
April 2004. In the mentioned charges, the EC considers
On 1st April 2004, the Court of Defence that Telefónica S.A. and its subsidiaries
from Competiton (TDC) passed a sentence Telefónica de España S.A.U., Telefónica Data
in which it estimated that Telefónica de de España S.A.U. and Terra Networks España
España, S.A.U. had incurred in conducts S.A might be incurring, at least since 2001,
restricting competition and in abuse of its in abuse of their dominant position,
dominant position, imposing a fine of 57 consisting of undercutting prices in the
million euros. market of broadband internet access.
On 16th April 2004 Telefónica de España,
S.A.U. brought a contentious-administrative
appeal, which was processed before the 6th
section of the Contentious-Administrative
Chamber in the National Audience (appeal
162/2004), in which the suspension was
requested of the execution of certain
decisions of the Resolution of 1st April,
including that concerning the application of
the fine. By Court order of 29th June 2004,
the Chamber granted the cautionary
suspension of the execution of the
sanction, upon provision of bail for the
same amount by Telefónica de España, S.A.U.
At the current time, the main proceeding in

pending indication of a date for voting and
decision. Based on the opinion expressed
by its advisors, the Company understands
that there significant factual and legal
arguments that might lead to a total or
partial upholding of the presented appeal.

04 Customers
Fulfilment of the objectives established by the CMT. 4th quarter 2005

Parameter Measurement Value Quarterly Fultilment
Q4 2005 targets
Supply time of the initial connection for Time for 95% of lesser 21.0 25
all request duration (all customers)
% supplied on the agreed 99.0 85

date with respect to all agreements
Proportion of faults in the Fault notifications /100 access lines / quarter 4.2 4
access network per access line
Proportion of faults in the rest Fault notifications /100 access lines / quarter 0.4 4
of the network per access line
Time to repair faults in the Time to repair 95% with less duration 65.2 48
access network % repaired within the target time 88.5 90
Time to repair 95% of least duration 51.9 48
% repaired in target time 92.4 90
Proportion of overall failed calls % failed calls for domestic calls 0,3 1
% failed calls for international calls 1.19 2.5

% failed calls for calls to mobiles 0.2 2.5
Overall time to establish calls Overall mean time 2.0 3
Reply time for directory enquiry services Mean time to attend calls 17.6 18.3
% attended in under 20 seconds 94.0 90
Percentage of public Telephones in service % in full service 96.4 95
Percentage of claims on invoice correction Per thousand 3.5 5

Cumplido
No cumplido

04 Customers
Telefónica del Perú competition. The few processes started

Osiptel supervises of the Telefónica Group’s against any of the companies of the Group
observance of the regulations. In December concluded in resolutions that overturned
2003, Telefónica del Perú asked the the claims. In the same period, other
Peruvian State for the renewal of their telecommunications companies were
concession agreements for a period of five sanctioned for infringing advertising
years. In accordance with the planned regulations.
procedure, Osiptel issued an evaluation
report in which it recognises that the The main questions pending in this area are:
company has met the measurable targets
and objectives established in the
•In 2002, an Official Osiptel Agency
imposed a fine in first administrative
agreements and makes observations only instance on Telefónica del Perú of 1,097
in 6 of the 24 obligations analysed. UIT for presumed acts of abuse of its
Osiptel’s evaluation report finds that the dominant position affecting AT&T Latin
company has deserved sanction in under America. The Company took the claims
2% of the claims brought against the head on before the Judicial Powers,
company due to presumable infringement where the corresponding contentious-
of the rules of interconnection, on all the administrative action has been
interconnection relations, amongst others. processed.
As Telefónica del Perú has informed the •As a result of the claim made in 2001 by
the company Comunicaciones Alfa E.I.R.L
Ministry of Transports and
(Alfatel), Osiptel ordered Telefónica del
Communications (MTC), Osiptel’s
Perú in 2003, to lease its posts to the
observations do not in any way impair the
claimant so that it might use them to
high level of the obligations, so the renewal
support a coaxial cable network to give a
of the time of the concession agreements,
radio broadcasting service in the town of
in the view of the Group, must be granted.
Huaycán. Although it disagreed with the
analysis of the regulating body, the
The companies of the Group that hold a
Company complied in full with the
dominant position in the markets in which
provisions and approved a policy, which
they take part are subject to intense
is currently being applied, of leasing
supervision by the Agency of Supervision
infrastructure to third parties.
of Private Investment in
Telecommunications (Osiptel). This is the •In addition to the mentioned cases, in
entity entrusted with the application of 2004 cases were brought against
the Law of Free Competition in the Telefónica Multimedia, for supposed
telecommunications market. abuse of its dominant position. The
proceedings, now concluded, exonerated
In the past two years, none of the the companies of the Group in all cases.
companies of the Telefónica Group in Peru
has been sanctioned by the National
Institute of Defence from Competition and
Protection of Intellectual Property
(Indecopi) for infringement of regulations
that control both advertising and

04 Customers
Fulfilment of the objectives established

by Anatel Average 2005
Concept No. of Months of
% Fultilment indicators non-fultilment
Local service quality 232.6 9 0

Domestic long distance service quality 196.5 6 0
Attention to requests for repair 107.4 4 5
Attention to requests for line transfer 102.3 3 0
Telephone attention 104.9 3 0
Public telephony 138.7 2 0
User access code information 103.1 1 0
Attention by post 100.0 1 0
Personal attention 104.0 1 0
Billing 140.5 4 6
Network modernisation 104.6 1 0
TeleSP There are some working processes in TeleSP

Telefónica periodically informs the National by Economie Administrative Defense Boby,
Telecommunications Agency (Anatel) on Secretary of Economic Right (SDE) and the
the fulfilment of the indicators established National Telecommunications Agency
in the General Quality Plan. In 2005, this (ANATEL). TeleSP strives for preventing
plan included 35 targets, and Telefónica possible processes and resolving the
complied with 97% of the indicators existing ones.
throughout the year.
Currently, an anti-Trust fulfilment
•In the first half year, the infringement programme is ongoing in TeleSP, fact that
was associated with the number of bills
has been released to the Court of Defense
receiving complaints from customers,
of Competition. This programme pursue
with the maximum value being two per
the objective of resolving competition
thousand. After starting up an indicator
issues together with Anatel, CADE and SDE;
revision committee, Anatel’s objective
TeleSP joint the the “Termos de Cessaçao de
was met in the second half-year.
Conducta” agreements, which allow to
•In the second half-year, the indicator was interrupt, whitout any fine for the
not met of “97% fault repair requests Company, the following processes:
attended in under 24 hours”. Seasonal
factors such as rain and storms, together
•Embratel´s claim against TeleSP
(Representaçao 53500.005770/200) for
with vandalism and the theft of cables
supposed abbuse of its dominat position
caused the deviation from the target. To
in the local loop provision.
correct this, the Company put 35 million
reales into the preventive maintenance •Oneworld´s Administrative process
of the external network, created (Administrative process
contingency plans to attend critical areas 08012.007667/2004-48) for supposed
and strengthened actions against calling blockade to Oneworld´s network
vandalism and cable theft.
In the last twelve months, the company
On the past 22nd December, Telesp signed proved its commitment with the Defense
the renewal of its concession agreement, of Competition Law, achieving to file
which expired on 31st December 2005, for a important processes.
period of 20 years. The conditions of the
new agreement were approved by Anatel in
•Embratel / Intelig against TeleSP
(Representaçao 53500.001821/2002) for
December, and include the obligation to supposed discriminatory practice in the
invoice local traffic in minutes instead of collection of the fare for using local
pulses (although on the past 23rd February, telephony network (September 2005)
Anatel announced a 12 month delay in the
enforcement of this measure), the new •Federal State Ministry against TeleSP, TPI
and Listel for supposed anti-Trust
reference index for price revision (IST), and
conduct of TeleSP in relation to
the new productivity factor applicable in
Telephone Guides.
price revisions, the new interconnection
price regulation and the provision of a new
form of service to facilitate access for low-
income customers (AICE).

04 Customers
Telefónica CTC Chile Voissnet presented a claim before the

The Chilean regulator (Subtel) periodically Court of Defence of Free Competition
requests information from all (TDLC) on 14th March 2005 for supposed
telecommunications operators in the acts that would attempt against free
country to produce national statistics and competition, the development and growth
as a way to supervise the observance of the of Internet technology, basically broad
regulations. band technology and access, to establish
the prohibition of passing voice through
•The number of lines in service and traffic the Internet access broad band service
are statistical information for the provided by Telefónica CTC Chile. Voissnet
regulator to be able to draw up national hopes that the TDLC might oblige
statistics. They are therefore not an Telefónica CTC Chile to allow third parties
indicator and have no objectives (only to to provide IP Telephony via Internet on
inform on the true current situation). Telefónica ADSL lines.
•The remaining items (network Telefónica CTC Chile rejected each and
disintegration facilities, Fixed Charge
Returns and Reports of network faults) every one of the claims of the claimant by
are information that the regulating body giving market, legal and regulatory reasons
requests to be able to protect compliance on the market, legal and regulatory
with certain regulations established in backgrounds on the development of the
law. These reports that are delivered to broad band market in Chile, indicating that
Subtel are not an indicator either. large investments have been made to
develop broad band in Chile and that they
have facilitated the participation of all the
ISP through an open model, and that they
are not opposed to IP Telephone but rather
to the anti-competitive practices that
companies try to carry out by taking
advantage of others’ investments.

04 Customers
Telefónica de Argentina Fulfilment of the objectives established

Telefónica de Argentina meets the 16 by the Argentine regulator 2005
quality objectives established by the
Concept No. Indicators with
regulating body, as can be seen in the table
% Fultilment indicators non-fultilment
attached to this chapter.
Service installation 307.7 1 0
Faults and repairs 113.0 4 1
Historically, Telefónica de Argentina has
(Repairing delays: 99%)
nineteen open processes related to
Customer Associations, within the
Public Telephony 106.0 1 0
Administrative Chamber from Argentina,
Telephone attention 113 3 0
although only two of them correspond to
Fiscal Year 2004 and 2005.
•Consumers and users Union claimed

agains Telefónica de Argentina in 2004,
with the aim of returning to users all the
liquidated and received amounts by way
of tax to credits and debits in current
bank account, and other operations (Law
25,413) in each period before 02.07.03
•The Deaf’s Argentine Foundation

presented a claim against Telefónica and
Telecom in 2005, by which they are asked
for the fulfilment of public and
semipublic phones provision, installation
and operation obligation aimed to
hipoacustic and speech disabality
persons in public places.

04 Customers
Mobile telephony Spain

Telefónica Móviles España led four of the Claims against settlement of the tax for
six parameters evaluated in the study of reserving the public radio-electric domain
the quality of mobile telephony services in corresponding to the GSM, DCS-1800 and
Spain, drawn up by the Spanish Ministry of UMTS services, and to the year 2001.
Industry, Tourism and Trade. The study is Faced with the modification of the formula
based on a campaign on 8,000 for proceeding to calculate the tax for
measurements per operator in towns of reserving the public radio-electric domain
over 5,000 inhabitants, made by Ericsson with a significant increase, applied by Law
on the request of the State Secretary for 13/2000 of 28th December concerning the
Telecommunications. General State Budgets for the year 2001,
Telefónica Móviles España, S.A. brought in
Telefónica Móviles España is highlighted in three economic-administrative claims
this report in the section on blocked calls, against the settlements corresponding to
that is, the percentage of calls that a user the GSM, DCS-1800 and UMTS services for
tries to make in areas of cover, but which the year 2001, which were overturned so
can not be completed as 0.52% of attempts Telefónica Móviles España, S.A. proceeded
are blocked. The company also leads call to make administrative contentious
establishment in voice services, with the appeals before the National Audience and,
lowest time, that is, 3,514 milliseconds. at the same time, against the payment of
Among the current challenges of the the settlements before the State Secretary
company is the optimisation of the dual for Telecommunications. At the present
GSM/UMTS service, in which it is hoped to time, in the proceedings against the
continue to expand the frontiers of settlement of the DCS-1800 and GSM
improvement. taxes, an edict has been given by which it is
agreed to raise the question of
Telefónica Móviles España, S.A. and the unconstitutionality. In the proceedings
companies of its Group are involved in against the UMTS tax, Telefónica Móviles
several suits the unfavourable resolution of España, S.A. has presented a letter to the
which, in the opinion of the Company, National Audience, asking for the question
would not significantly affect the of unconstitutionality to be brought for a
economic-financial situation or the second time before the Court of Justice of
solvency of the Group, based on the reports the European Union. The quantities
of the advisors dealing with the cases. claimed for undue income amount to
228,357 thousand euros.
Of these cases, those for which an
unfavourable outcome is expected have Economic-administrative claim against the
been adequately covered. With respect settlement of IAE (Tax on Economic
those with respect to which a possible Activities – 2003)
unfavourable outcome might be expected In December 2003, Telefónica Móviles
and which do not require provision, there España, S.A. made and Economic-
follows a list of those which could be Administrative Claim before the TEAR in
considered particularly significant either Madrid against the settlement of the IAE
because of their subject or due to the size tax for 2003 for 26,000 thousand euros.
of the sum claimed. Telefónica Móviles España, S.A. understands

04 Customers
that the Tax Administration made a mistake Germany

in the administrative act of settling the tax, Ostheimer
by annulling a previously transferred In 2003, the expert company Ostheimer
amount of 3,226 thousand euros. GmbH brought a claim against Quam
Telefónica Móviles España, S.A. has paid the GMBH for compensation of 100 million
amounts requested so the object of the euros for damages deriving from the
claim is the return of the amounts termination of the framework agreement it
considered unduly paid. had signed with Quam. In 2005 a
resolution was passed in favour of Quam
Prices of terminating the interconnection GMBH with the mentioned resolution
of Retevisión Móvil, S.A. recently appealed against by Ostheimer.
By resolution of 12th January 2006, an end
was put to the conflict of the Termination of the licence granted to
interconnection posed by RETEVISIÓN Quam GMBH
MÓVIL, S.A. against Telefónica Móviles In December 2004, the Regulatory
España, S.A. concerning the prices of Authority for Telecommunications and Post
terminating the calls on the network of the /(RegTP) terminated the UMTS licence
former. This obliged Telefónica Móviles granted in 2000 to Quam GMBH. After
España, S.A. to regularise the RETEVISIÓN achieving the suspension of the
MÓVIL termination prices from 4th termination order, on 16th January 2006,
February 2005 in line with those holding the company Quam brought a claim before
on the previous 7th October 2004. the German courts against the
Telefónica Móviles España, S.A. made an termination, which consisted of two main
administrative appeal for reversal which parts: the first defends the annulment of
was wholly upheld by the CMT by the termination order determined by the
Resolution of 16th February 2006. This RegTP, and the second, if the first is not
determines that the termination prices for accepted, calls for the total and partial
RETEVISIÓN MÓVIL, S.A. previous to 7th reimbursement of the price paid for the
October 2004 are not applicable for licence.
Telefónica Móviles España, S.A., and that,
therefore, Telefónica Móviles España, S.A. is Italy
not obliged to regularise the payment of Before the refusal of the Italian
such prices for an amount higher than that Government to accept the return by Ipse
effectively paid during the period of 2000, S.p.A. of the additional 5MHz of
conflict. A contentious-administrative spectrum that they had been adjudicated
challenge may be brought by RETEVISÓN with the concession of the UMTS licence,
MÓVIL, S.A. against the Resolution of the Ipse 2000, S.p.A. presented the
CMT within a time of two months. corresponding claim based on the basic
right to waive the rights granted by the
administration and requesting the
reduction of the amount pending payment
by 826 million euros (corresponding to the
aforementioned 5 MHz).

04 Customers
Alongside this, in view of the new regulatory payment of an annual levy for the use and
framework that establishes a maximum operation of frequency bands that have
annual price for every 5MHz below that set been granted from the year 2003. As a
in the adjudication of the licence to Ipse, result of the participation of Telefónica
S.p.A., in December 2003, it presented a Móviles México, S.A. de C.V. in a suit carried
claim before the same body against the out in 2005, it was adjudicated frequencies
Italian Ministry of Communications, asking in the 1900 MHz band in April 2005, with
for the cancellation of the amounts pending respect to which they are obliged to pay
payment derived from the adjudication of the said contribution.
the UMTS licence, which might determine a
reduction with respect to the initial amount Telefónica Móviles México, S.A. de C.V.
to 1.2 and 2.3 billion euros. Equally, on 31st promoted a protection judgement by
May 2004, Ipse, S.p.A. brought a claim claiming the unconstitutionality of the rate
against the assignment by the Italian on the rights contained for the use and
Government of GSM frequencies free of operation of the bands that had been
charge. awarded to it.
All of these claims are currently in a single Telefónica Móviles México, S.A. de C.V.
process. In August 2005, the TAR brought an appeal for revision against the
overturned the first 2 recourses and Sentence overturning the claim in
postponed its decision on the last of them December 2005.
(assignment of GSM frequencies).
Telefónica Móviles México, S.A. de C.V. has
Mexico paid all corresponding rights, so the aim of
Law on income Tax, interest deduction the suit is to have the amounts paid
Telefónica Móviles México, S.A. de C.V. and returned or paid.
companies of its Group promoted a
protective claim against certain Transitory Kargo, Inc., ACK Ventures Holdings and
Provisions of the Income Tax Law that limits United Mobile Technologies, LLC
the deduction of interest from capitals taken Kargo, Inc. is claiming from Telefónica
in loan, under certain circumstances. Móviles México, S.A. de C.V., Pegaso PCS, S.A.
de C.V., Pegaso Telecomunicaciones, S.A. de
In January 2006, the sentence was notified C.V., Telefónica Móviles, S.A., Telefónica S.A.
in which the judgement is rejected as the the payment of damages for court costs
Judge considers that it is not the right time and lawyers’ fees and anything that the
to uphold the unconstitutionality of these Court might establish, for the presumed
precepts. The Companies will present the non-fulfilment of a licence contract for
corresponding appeal for revision as they systems and hosting negotiated by Pegaso
consider that the claimed precepts cause PCS, S.A. de C.V.
harm to the companies from the time they
come into force. The case is being processed before a federal
court, and Telefónica Móviles México, S.A. de
Annual levy for the use and operation of C.V. in January 2006 presented a motion for
frequency bands the case to be waived due to a lack of
The Federal Law of Rights contemplates the elements.

04 Customers
Brazil against this law and to ask for provision of

Universal Fund of the Telecommunications all amounts, except for the case of Celular
Service CRT, S.A., where they opted to make
The operators of the VIVO Group brought payment according to Law 9.718.
an appeal against the decision of ANATEL
to modify the income that have to make up With respect to the increase of the tax
the tax base for the calculation of the FUST base of the PIS and COFINS, two of the
(Fundo de Universizaçao de Serviços de companies of the VIVO Group (Tele Centro
Telecomunicaçaos), a fund that pays for Oeste Celular Participaçaos S.A. and
compliance with the obligations derived Telergipe Celular S.A.) have achieved
from the universalisation of the favourable final sentences. In the coming
telecommunications service operators year, the remaining companies are
(fixed and mobile). expected to receive favourable outcomes.
Lune Venezuela
Lune Projetos Especiais em Contentious Tax appeal brought by TELCAL,
Telecomunicaçaos Com has brought a C.A. in 2002 against a Resolution of the
claim against the companies of the VIVO Integrated National Service of Customs and
Group, alleging that they have the patent Tax Administration (SENIAT) that obliges
for the caller ID, and that they are the TELCAL, C.A. to pay approximately
holders of the register of the “Bina” 54,364,291 euros due to lack of checking,
trademark, requiring the interruption of expense rejection, lack of withholding of
the service and asking for compensation unrecoverable taxes from the financial
equivalent to the amount paid by the years between 01-11-94 and 31-10-95, 01-11-
consumer for its use. 95 and 31-10-96 and between 01-11-96 and
31-10-97.
Several cellular infrastructure
manufacturers, and subsidiaries of the
VIVO Group have started an administrative
process before the National Institute of
Industrial Property to annul the patent on
which the claim is based.
PIS and COFINS

The COFINS (Contribuiçao Social para o
Financiamento de la Seguridade Social) and
the PIS (Programa de Integraçao Social) are
taxes that encumber companies’ gross
income. In 1998, the calculation of the PIS
and COFINS was modified by Law 9.718,
which (i) increase the tax amount of the
COFINS from 2% to 3% and, (ii) increase the
amounts making up the tax base. The
operators of the VIVO Group opted to claim
against the Unión de Estados Brasileños

04 Customers
Credits


Investor Relations


Secretariat General







04 Customers

05 Shareholders
Shareholders and
investors:
profitability and
transparency

Contents 4
02 Identity 32
04 Customers 104
05 Shareholders 168
Profitability 170
Transparency 172
General Shareholders’ Meeting 174
06 Employees 178
07 Society 226
09 Providers 292
10 Media 304
11 ANNEX I 310

05 Shareholders
According to information obtained on April 3, 2006 from the

Spanish Securities Registration, Clearing and Settlement System,
S.A.U. (Iberclear), Telefónica has 1,570,039 shareholders.
Profitability
CASE STUDY Profitability

80 years of Telefónica in the
Stock Exchange: 1925-2005
Progress has continued in 2005 and the An investment in 100 shares in January 2003
In 2005, Telefónica completed 80 years Company is situated as one of the most at 8.53 euros involved an investment of 853
presence on the Madrid Stock Exchange. attractive in the sector, and stronger since euros which, at December 31, 2005, would be
The Compañía Telefónica Nacional de the purchase of O2. A dividend was paid in 1,372.7 euros as a result of the increase in the
España (CTNE) was set up as a limited 2005 corresponding to financial year 2004 market price, with a cash dividend received
company on April 19, 1924, with an equity of 0.5€/share, own shares of Telefónica S.A. in the past three years of 129 euros.
of one million pesetas. The following year, representing 4% of equity have been
on March 31, 1925, it was launched on the distributed in the proportion 1x25, and the A shareholder purchasing 100 shares on
Stock Exchange. share buyback programme has continued. January 1, 2005, would have obtained a
profit of -0.94% in financial year 2005.
Telefónica was the first Spanish company The increase in the dividend in 2005 –
to quote on the principal world exchanges showing Telefónica as one of the most
(Paris, Frankfurt, London and Tokyo). This attractive securities in the
happened in 1985, before the business telecommunications market in this regard
became internationalised some years later – and despite the negative trend seen in
with its entry into Latin America. In 1987, the stock market in 2005, that affected the
the security was also incorporated into the whole telecommunications sector, implies
New York Stock Exchange. a total accumulated profitability of almost
76% for a shareholder who invested in
Between 1995 and 1997, through a series of Telefónica on January 1, 2003.
IPOs, all the shares of the company Evolution of the listed value of
remaining in the hands of the Owners Telefónica shares
Data in euros
were completely privatised. Telefónica is
currently quoted on the Continuous
Market of the Spanish Exchanges (Madrid,
Barcelona, Bilbao and Valencia) and in the
13.86
12.71
Exchanges of London, Paris, Frankfurt,
11.64
Tokyo, New York, Lima, Buenos Aires, São
Paulo and the IRS of the London Stock
Exchange. 8.53
January 1 January 1 January 1 January 1

2003 2004 2005 2006

05 Shareholders
Profitability per share 2003-2005 CASE STUDY

Nº Net amount
shares euros
Value of 100 shares as at January 1 2003 100 853.0

Telefónica in the DJ Global
2 Increases in capital issued 1x50 in 2003 104 - Titans 50 and “The Global
2 Cash dividends 2003 (0.13€ July, 0.12€ Oct.) 104 26.0 Spanish Entrepreneur” Prize
Dividend in kind (1 A3 share for each 295.6 TEF shares)1 104 8.87
2 Cash dividends 2004 (0.20€ May, 0.20 € Nov.) 104 41.60 The Spain-US Chamber of Commerce gave
Cash dividend 2005 (0,23€ May) 104 23.92 the president of Telefónica, César Alierta,
Increase in capital issued 1x25 in June 2005 108 - "The Global Spanish Enterpreneur" Prize in
Cash dividendo 2005 (0.27 € November 2005) 108 29.16 recognition to the Telefónica Group for its
recent entry in the Dow Jones Global
Cast dividend (total) during 2003 - 2005 108 129.55 Titans 50 stock chart in New York.
Value of 108 shares as at January 1, 2006 108 1,372.68 Telefónica is the first Spanish and one of
Profitability 76.11% the few European companies to form part
1
(0.35 A3 shares sold at 25,2 € equivalent to value set in the settlement of the fractions) of this important index of the 50 largest
firms in the world.
As well as this recognition, César Alierta,
accompanied by the president of the New
York Stock Exchange, Marsh Carter, opened
the New York Exchange trading session
Profitability per share 2005 with the famous “Opening Bell”.
Nº Net amount
shares euros
Value of 100 shares as at January 1 2005 100 1.386
Cash dividend (May 13) 100 23

Dividend in kind (June 20) per share (1x25 shares) 104
Cash dividend (November 11) 104 28.08
Value of 104 shares as at January 1, 2006 104 1,321.8
Total portfolio value for 104 shares 1,372.9

Profitability -0.94 %

05 Shareholders
Breakdown of queries made via shareholders'

helpline 2005
Data in percentages
General
Annual Shareholders
Meeting remuneration
30.6 20.5
Transparency
Results and
stock relevants
exchange facts
news 20.9
27.8
Others1
0.2
1
Includes Bonds and promissory notes
Transparency
Shareholders The Regulations of Telefónica’s Board of

Directors devote several articles to
Shareholders’ and investors’
Toll-free shareholder Website
regulating the channels through which
information line number The number of visits to the website of
relations are established between the
Helpline Shareholders and Investors rose to
Company and its shareholders, whether
900 111 004 individual shareholders or institutional
investors, and ensures that these relations
1,182,729, an estimated increase of 150%
compared to the previous year’s figure.
are conducted with the maximum

The Shareholders’ and Investors’ website
transparency and equity.
includes specific spaces on:
In 1997, Telefónica set up its Shareholder •Dividends, results and communications to

Attention Service with a view to the markets, relevant facts or General
establishing transparent and fluid Annual Meetings, among others.
communication with individual
shareholders. Currently a total of 194,784
•Equity data, ratings, debt profile and corporate
presentations to the investment community.
shareholders are registered in this service,
and receive all the Telefónica Group •Consulting and downloading documents,
information, results and any other including the Annual Reports, the
Company news that may be important for Regulations of the General Shareholders
their investment. Meeting and of the Board Directors,
Company By-laws and the Official
In order to give personalised attention to Company Information Registers.
institutional investors, Telefónica has an
Investor Relations Area, to maintain
•The Stock Exchange section features the
online share prices of the Group, and
constant communication with national and allows users to generate interactive
international financial markets. Its main graphics, compare share prices with those
function is to explain the main of other sector companies, calculate the
organisational, operating and business profitability of Telefónica in any given
strategies of the Company, helping to form period chosen by the user, and compare it
expectations about its future performance, with the main indices.
and thus to set suitable prices for the
securities issued by the Company. •The Shareholders’ Corner offers small
investors a personalised interactive area
to make queries and receive specific
information, a configurable ticker and
an alerts service with important
Company information.
•Online audio and video webcasts of

conference calls and significant
statements by the Company´s Senior
Managers top Company executives.
05 Shareholders
Queries handled by shareholder helplines Information downloaded by Telefónica

investors
Thousands of downloads
105,963 103,255 1,224
88,251
964 963
859
2003 2004 2005 2002 2003 2004 2005
Shareholder Information Line Other channels of CASO PRÁCTICO

Helpline communication with analysts
Telefónica has a free Shareholder Helpline and investors The Website for shareholders
that answered 88,251 queries in 2005. As A high level of activity was maintained in
well as the calls to this service, it also
and investors and of the
2005 with institutional investors and
attended 3,139 email and/or postal queries. financial analysts; through presentations in
Telefónica Annual Report,
forums, meetings and conference calls, the awarded as the best in Spain.
Annual Report organisation of roadshows in the main
The main tool means of communication financial centres and the convening of the The 2005 edition of the World Awards for
with analysts and investors is the Annual Fifth Investors' Conference, held in May Investor Relations websites and Annual
Report, and its 2005 edition received more 2006. Reports Online (known as the MZ Awards)
than 20,000 queries through the web and gave first and second prize in Spain,
300,000 file downloads, as well as its print There were also important Company respectively, to the Internet pages for
edition of more than 18,000 copies. All the presentations made to minority Shareholders and Investors of Telefónica
annual reports published by Telefónica, shareholders in the 2005 Bolsalia Forum in S.A. and of Telefónica Móviles S.A. and that
since its foundation in 1924, are available Madrid (Salón de la Bolsa y Otros Mercados for Best Annual Report Online in Spain to
on its website. Financieros) and in Borsadiner (Barcelona). the latest online report of Telefónica.
The awards judged such factors as

“Acción Telefónica” magazine
content, design, technology, interactivity,
The physical means of periodically
timeliness and flexibility. The online pages
communicating with registered
of Telefónica were considered not only the
shareholders is the quarterly Telefónica
best in Spain, but also better than the
shareholders’ magazine, called “Acción
world average in the telecommunications
Telefónica”, and in 2005, 165,000 copies
sector in most of the criteria.
were sent quarterly to their homes.

05 Shareholders
Quorum at the General Proxy voting requests channelled by the

Shareholders’ Meeting Shareholders Office for the General
Data in percentages Shareholders’ Meeting
Data in units
69,467 68,816
General 56,767
Shareholders’
Meeting 59.1
41.1 43.2
2003 2004 2005 2003 2004 2005
CASO PRÁCTICO General Shareholders’ Meeting

Quarterly presentation
results and Business
The By-laws of Telefónica’s General Apart from those required by current
evolution Shareholders’ Meeting aim to offer the applicable legislation, among the specific
shareholders a framework which will measures included in the Meeting By-laws
The Investor Relations area is in charge of ensure and facilitate the exercise of their in order to ease shareholder attendance
designing and running the rights in relation to the governing board of and participation in the Meeting, are the
communications strategy for national and the Company, paying particular attention following:
international financial markets. This to the shareholders' right to information
includes particularly the quarterly and to participation in the discussions and •Everything that the Company considers
publication of Telefónica’s financial useful for these purposes, in addition to
votes, aiming to make the call and the
statements which, to meet transparency the legally required documents and
proposals presented for agreement to the
and equity requirements, uses various information, is placed on the Company
General Meeting as widely known as
distribution channels: website, the CNMV website, from the date of announcing
possible.
register, publication in Acción magazine the call. The shareholders can obtain this
and quarterly conference calls to present documentation and information directly
The 2005 General Shareholders’ Meeting
the results. from the website, or can request it to be
was held on May 31, and the quorum of
sent to them free of charge, through the
attendance was 59.163% of the equity. The
Anttendees at quarterly results mechanisms set up on the site related to
shareholders are supported by the
presentations the Meeting.
Shareholders' Office in all issues related to
Conference Call Webcast the Shareholders' General Meeting. In the •The shareholders can make suggestions.
1Q05 130 137 2005 meeting, the shareholders’ office At any moment, and after showing their
2Q05 99 101 handled 56,767 proxy voting requests. identity as shareholders, they can make
3Q05 116 153 suggestions about the organization,
4Q05 144 282 According to the provisions of the By-laws running and competency of the General
of the Company General Meeting, those Shareholders' Meeting, through the
shareholders may attend the General Shareholder Helpline. Shareholders can
Meeting who own at least a number of also request any kind of information,
shares representing a minimum nominal documentation or clarification that they
value of 300 euros. Every share present or may need about the General Meeting,
represented in the General Meeting has either through the Company website, or
the right to one vote, unless they are non- through the Shareholder Helpline.
voting shares, as stipulated by the Law. On
the other hand, no shareholder can exercise
a number of votes above 10% of the equity
with voting rights at any time, regardless of
the number of votes they may possess.

05 Shareholders
The General Shareholders’ Meeting is an

opportunity for those shareholders who CASE STUDY
wish , to be able to present their queries to
the Company Administrators, This is
Leaflets registered by Telefónica in financial year 2005
confirmed by the 24, interventions raised The Company has provided information through the various information leaflets it has
by of shareholders in the General Meeting published, either annually, which offer complete and exhaustive information about the
held in 2005. Company, or as abbreviated ones, that were registered with security market regulatory
bodies when specific operations have taken place.
At the same time, Telefónica puts all its Complying with the provisions in the legislation, Telefónica keeps each and every
communication channels at the service of regulatory body in which its securities are traded aware of the specific information about
its shareholders so that they can make any important event related to its business. During financial year 2005, a total of 51
queries about the Meeting. In financial year significant events have been registered with the CNMV.
2005, 25,293 queries were dealt with
concerning the General Shareholders Leaflet Body Date
Meeting on the free shareholder help-line. Annual Information Leaflet Securities Exchange Commission (USA) 15.04.2005
Both enquiries made by private in 20F Format
shareholders and opinions of the analysts
and institutional investors, are analysed Annual Information leaflet Japan Securities and Clearing Corporation 29.06.2005
qualitatively and quantitatively in order S.R.S Tokyo Stock Exchange
to keep the management of the Company
informed about the concerns and Annual Information Leaflet Comissão de Valores Mobiliarios (Brazil) 12.07.2005
opinions of its investors. IAN
Registry Document Comisión Nacional del 22.12.2005

about financial year 2004 Mercado de Valores (Spain)
Abbreviated information leaflet Comisión Nacional del 12.01.2006

on Telefónica’s Programme of Mercado de Valores (Spain)
Company Promissory Notes

05 Shareholders
Credits


Investor Relations


Secretariat General







05 Shareholders
Telefónica, S.A. |Corporate Responsibility Report 2005 177

06 Employees
Employees:
Clarity and
professional
development

Contents 4
02 Identity 32
04 Customers 104
05 Shareholders 168
06 Employees 178
Telefónica employees 180
Description of the workforce 180
Generation of employment 182
Workplace environment 184
Internal communication 186
Involvement of employees in strategy 187
Compensation policies 188
Compensation 188
Health plans 190
Pension plans 191
Other benefits 192
Professional development 194
Training 194
Tele-training 196
Management by skills 197
Professional career 198
Professionals and persons 200
Human rights 200
Freedom of association and collective bargaining 202
Work-life balance 206
Abolition of child labour 208
Equality of opportunities 209
Health and safety 211
Employment demands 219
Employee solidarity 220
Telefónica volunteering 220
ATAM 221
District C 222
07 Society 226
09 Providers 292
10 Media 304
11 ANNEX I 310

06 Employees
Description of the workforce

Generation of employment
Telefónica Workplace environment
employees
Internal communication
Involvement of employees
The management of Description of the workforce

personnel is one of the key
values in the new Telefónica
culture. Thus, within the five Telefónica closed the 2005 financial year The outsourced workforce of Telefónica
strategic axes of the with a physical workforce of 207,641 in Spain was estimated at 33,000
professionals, meaning an increase of 19% persons at December 2005, 25,000 of
transformation process, an
over the previous year. The most significant them corresponding to Telefónica de
axis has been defined aimed changes to affect the workforce during the España and the rest to Telefónica Móviles
at strengthening leadership financial year are the following: España. This data was estimated
according to the contractual volume of
and the commitment of • Purchase or creation of new companies:
services to third parties.
professionals to Telefónica. the workforce increased as a result of the
creation of Edinet Europa and Edinet
The main characteristics of the Telefónica
America and TPI Direct in the Directorio
Group workforce throughout the world are
Group, the purchase of the company Azeler
as follows:
Automoción and Terra Business Travel and
the creation of Terra Asociadas, and the •85.4% of the equivalent workforce has a
purchase of Cesky Telecom and the creation fixed or indefinite contract (86% in 2004).
of Sociedad de Cobros in Brazil by T The remaining amount is distributed
Gestiona. among employees with temporary
contracts (13.6%) and interns (0.9%)
•Closure of companies: The businesses
affected are Terra (Lycos Group, Terra •The employee hierarchy rate stands at
Latam, One Travel and Caribe), Telefónica 4.3% (4.2% in 2004). This indicator is the
UK, T Gestiona Mexico, Lola Films and T. percentage which represents senior
Short in Contenidos . management, administration and middle
managers over the total staff.
•Change in the workforce: due to an
increase in the workforce of Atento and •The distribution of the Telefónica
an increase in the average workforce for workforce by functions, without taking
Bell South operators in the mobiles into account the Atento workfoce,
business. indicates that 37.2% is engaged in sales
functions (33.2% in 2004), 48.3% to
•Continuity of the Employee redundancy production functions and 14.4% to
plan in Telefónica de España, approved by
support functions. Of note is the
the Department of Employment of the
increase in the sales workforce for the
Employment and Social Affairs Ministry.
second year running.
The plan is governed by voluntary
principles and those of non •47% of the workforce of the Telefónica is
discrimination, affecting 15,000 made up of women (48% in 2004), in
employees. During 2005, a total of 1,945 particular Atento, with 66% of the
employees had requested access, added workforce made up of women, and
to the 7,906 requests for separation Contenidos with just 7%.
accumulated up to 2004.
•The average employee seniority for the
Telefónica workforce is 7.3 years (8 years in
2004), the average age being 32.7 years.
06 Employees
Physical workforce of the telefónica group1
by country 2003 2004 2005
Spain 58,189 59,978 60,405

Europe - 4,322 14,326
Czech Rep. - - 10,051
Netherlands - 3,789 3,789
Germany - 533 480
Luxemburg - 3 3
Switzerland - 3 3
Latin America 80,041 94,204 131,968
Argentina 14,100 15,177 18,856
Brazil 42,496 51,741 63,743
Chile 8,795 10,060 12,375
Peru 9,422 10,733 11,548
Mexico 5,228 6,493 8,506
Colombia - - 4,487
Venezuela - - 5,983
US - - 1,166
Uruguay - - 536
Ecuador - - 747
Panamá - - 601
Nicaragua - - 285
Central America - - 3,135
Morocco - 1,075 942
Other countries 10,058 13,469 -
Telefónica 148,288 173,554 207,641
By business 2003 2004 2005

Fixed spain 38,464 36,425 35,053
Fixed latin america 25,762 25,905 28,856
Terra 2,229 1,584 -
Telefónica Móviles 13,093 19,797 22,739
Directories 2,787 2,876 2,942
Content. and Media 4,638 5,860 5,734
Atento 54,394 74,829 95,907
Cesky Telecom - - 10,051
Others 6,921 6,278 6,359
Telefónica 148,288 173,554 207,641
1
Physical workforce: number of employees who work in the company
Equivalent workforce: number of employees proportional to the number of hours
Characteristics of the Telefónica workforce

Type of contract % hierarchy % Function % Experience Diversity
Fixed Temp Interns Sales Operations Support Seniority Average Women
age
Fixed - Spain 98.5 1.0 0.6 3.3 31.4 56.5 12.1 18.7 42.3 27.4
Fixed business -latam 95.9 2.0 2.0 6.5 33.9 53.5 12.6 13.5 39.7 28.3
Mobiles 96.9 1.1 2.0 10.5 56.2 25.6 18.1 5.0 30.0 40.5
Content and Media 98.3 1.6 0.1 5.4 12.0 72.8 15.2 3.5 38.7 7.7
Directories 91.8 5.9 2.3 7.9 73.7 11.4 14.9 8.3 38.5 43.9
Atento 71.4 28.5 0.1 1.4 0.2 98.5 1.3 1.5 27.1 66.3
T-Gestiona 94.2 1.1 4.7 7.4 1.0 93.6 5.4 8.3 25.8 26.2
Çesky Telekom 95.2 4.8 0.0 5.3 38.8 49.0 12.2 12.2 37.8 34.4
Others 84.1 6.9 8.9 18.0 9.9 52.4 37.7 4.9 28.9 47.2

06 Employees
Generation of employment
The companies of the Telefónica Group •Telefónica de España and the Fundación
(excluding Atento) hired more than 10,000 SEPI, as part of the 2005 internship
employees during the 2005 financial year, program, officered 52 internships to
of which 10% were from the Telefónica young people qualified in Professional
Group itself. In relation to redundancy, 50% Training in the specialities of
was forced and another 50% voluntary. Telecommunications systems and IT,
Sales and Marketing Management,
Within this personnel rotation, there were Administration and Finances and
more than 1,600 intra-group movements: Administration of IT systems. This period
employees which left one company and of internships, over a long period of time,
joined others within the Telefónica Group. is integrated into employment creation
processes associated with the Social Plan
The Telefónica Group has launched of the Employee redundancy plan, as it is
numerous programs for the inclusion of predicted that in 2006, a large amount
young people into its workforce or the of those selected will joinTelefónica. One
employment market in general. of the aims of this incorporation is to
boost customer attention centres in the
Business and Professionals Segment.
Hiring and firing by business

Hiring Firing Change of
Total External Company Total Forced voluntary perimeter
Fixed Spain 934 725 209 2,710 2,000 710 -

Latam business 3,541 3,154 387 2,128 1,035 1,093 211
Telefónica móviles 3,427 3,231 196 3,410 1,361 2,049 886
Directories 788 633 155 710 248 462 -
Content and Media 226 225 1 212 81 131 152
Cesky business 44 44 0 179 0 179 10,186
T gestiona business 312 283 29 253 164 89 157
Others 807 757 50 671 162 509 95
Total Telefonica 10,079 9,052 1,027 10,273 5,051 5,222 13,203

(excluding Atento)
External hiring: people who had no relationship with Telefónica

Company hiring: personnel who had a prior link with Telefónica (temporary, internships)
Forced redundancies equivalent to incented redundancies (firing, incented redundancies and application of Employee redundancy plans)
Joining and departure of companies equivalent to the impact of the change in perimeter of the workforce, with the significant impact
of the acquisition of Çesky Telecom in this section.

06 Employees
•Telefónica de España has implemented a CASE STUDY

new Employment Creation process to
incorporate people from outside the
company as Diploma Level Sales Contribution of Atento to In other areas, Atento is characterised as
being a company which offers equality of
persons. These new incorporations generation of employment
opportunity to groups which have
associated with the social plan of the
traditionally had problems accessing the
ERF are framed within the Sales In 2005, Atento Group, a company made
labour market.
Motivation Model for the Meta:Cliente up of people working in the service of
program. people, again showed its capacity to •In 2005, Atento continued to hire young
generate employment. At the end of the people in its workforce (the average age
•Telefónica CTC Chile and Fundación financial year, the organisation had 96,000 of the workforce standing at 27 years),
Telefónica Chile have developed a
employees, 28 percent more than in the encouraging their access to their first
program of employment skills and the
previous year. job.
use of new technologies with the aim of
contributing to the insertion of young
This ability to create jobs and thus •At the same time, aware of their
people into the workplace, in conditions responsibility as en employer, the
continue the development of the company
of equality of opportunity to create organisation continued to develop
has been of great value in the 12 countries
productive and quality jobs. The various initiatives to employ disabled
where the Group is present:
beneficiaries - men and women persons, of note the Atento Special
between 18 and 30 years old - will carry •Atento Brasil was recognised by the Employment Centres in Spain.
out their professional practice under the economic publication Exame as the
company's employment skills model or third private company in the country in •Finally, in 2005 Atento encouraged
gender equality in the workplace. In fact,
in different contracting companies. terms of employment generation;
66 percent of Atento employees were
Training activities will be for
approximately four to six months.
•in Peru it was awarded the distinction as women.
one of the 15 “Great Places to Work”, with
•The Telefónica Group in Argentina the best employment environment, and
launched its First Program of Telefónica
Internships For Argentinean
•In Puerto Rico, the town of Caguas gave
Atento several awards in this area: best
Universities, whose aim is to encourage
employer, best newcomer and best
links between the academic and
company for hiring unemployed or
corporate sectors, supporting advanced
displaced persons.
students in degree courses, graduates
commencing post graduate studies and
professionals who, in the context of
technical specialities, are specialising in
Communications Law. The program has
a budget of 1,300,000 pesos, and will
benefit 72 students in the fourth year
of their degree courses, 54 graduates
starting their masters and 30 Legal
professionals, all with technical
orientations. It will take place from
2005 to 2007.

06 Employees
Development of workplace environment surveys1

Data in percentage
2004 2005
Overall Sat. Overall Sat.
Management 73 78
Mid management 63 64
Employees 48 57
1
Presented on the 29 standardised questions for 2004
Workplace environment
In the period from November 2005 to After the results were notified to all
February 2006, the second joint workplace employees, in 2006 design commenced on
environment survey in Telefónica was action plans to improve the workplace
carried out. This year, as well as the 7 environment. The priority lines of action on
corporate indicators measured in 2004 which the action plans for the improvement
(clarity of communication, leadership of of the workplace environment were:
Immediate Superiors, Confidence in Professional Development, Leadership,
Management, Professional Development, Innovation and Customer orientation. Or
Customer orientation, Internal goal is to continue improving to make the
Collaboration and Perception of the Group), objectives set in the strategic plan a reality,
four additional questions were included making Telefónica the best place to work.
(increasing the number from 29 to 33) to
get a new indicator to measure innovation Workplace
in Group companies.
environment observatory
During 2004 the workplace environment
66 people participated in the survey
observatory was established, comprising
(19 more than in 2004) with a participation
workplace environment representatives
of 71% (10 points more than in 2004). For
from the main Telefónica companies. Its
2005, the aim of increasing the Global
mission is to share and encourage
Satisfaction Index by 5% was set, which was
workplace environment improvement
exceeded, increasing by 7.11% (3.91 percentage
initiatives in the Group and, definitively,
points, going from 55% to 58.91%). If we
provide a space for debate and innovation
consider the 4 values introduced in 2005
to help improve employee satisfaction and
(reaching 33 questions), the resulting
their motivation in terms of the project for
satisfaction value stands at 58%.
the future of Telefónica. The workplace
environment observatory started off in
The most important improvement (average
Spain and has been repeated in Argentina,
increase of 9 points) was seen in the area of
Brazil, Chile and Peru.
perceptions of employees, especially in
aspects relating to Clarity of Communication
and Confidence in the Management. With
this progress, the gap between perceptions
of the management and the workforce has
lessened. The improvement in management
has been seen mainly in areas related to
Internal Collaboration and Professional
Development.

06 Employees
Most positive questions in workplace environment survey
t
I would recommend the products and services 2005 36 44 13 4 21 80
of this company to an acquaintance. 2004 33 46 14 4 21 79
t
I think it is a positive thing for my company to 2005 42 37 14 22 3 79
belong to the Telefonica Group 2004 37 39 16 3 2 3 76
t
I think the Telefonica Group is a solid Group 2005 37 42 15 3 21 79
which is successfully moving forward 2004 29 44 19 4 22 73
There is cooperation between the people in 2005 33 45 12 6 31 78

the group they work in 2004 31 47 13 6 3 0 78
t
Overall, I am satisfied to work in this company 2005 35 43 15 5 2 0 78
2004 30 47 16 5 2 0 77
t
I would recommend this company as a good 2005 37 37 16 6 4 0 74
place for an acquaintance of mine to work. 2004 32 40 18 6 4 0 72
t
My work is interesting and motivational 2005 30 40 16 9 5 0 70
2004 25 42 16 9 4 1 67
Overall I am satisfied with my boss 2005 30 38 16 8 7 1 68

2004 26 42 18 8 5 1 68
Very satessfied satessfied Indiferent unsatessfied Very unsatessfied
OPINIÓN
What does
society think?
Studies on corporate reputation have Results
included the WORK dimension as one of the November - December 2005
seven factors making up a person's
Spain 71.9
perception of the company. As a result, for
Telefónica not only is it important to find
Argentina 66.5
out the opinion of its employees, but also of
society. The better the perception of the
Brazil 71.1
quality of the workplace environment in
Telefónica, the more opportunities human Chile 69.2
resources representatives will have of
attracting the best professional talent for Mexico 71.2
the company.
Peru 63
Results show Telefónica in Spain as the
second ranking company in terms of
workplace environment, unlike in Latin
America, where good results in the
workplace environment survey have not
been reflected by society as a whole.

06 Employees
Internal Communication
Telefónica's transformation strategy, •Coordinating all communication

“Accelerating to strengthen our leadership” initiatives between business
developed during 2005, gave lines/countries and the corporation
communication a key role in said process.
In this context, the Internal •Make corporate policy consistent with
internal communications practices in
Communication Master Plan established
each country
for 2005 the plan to give the Group a single
dynamic which would integrate the •Design and propose to the Telefónica
requirements and specific needs of the Group actions which meet the needs
over two hundred thousand employees of and/or specific requirements of each
Telefónica. country, in an integrated manner.
The objective is to encourage their active In Spain specifically, at the end of 2005 “the
participation in achieving the company's Telefónica news” was established as an
goals and strengthening its internal integrated communication dynamic for all
cohesion under the message “Accelerating Telefónica employees, with real time
to strengthen our leadership”. To do this, updating of information. It is aimed to
specific communication campaigns in the progressively expand in all countries where
master plan were carried out, also in Telefónica operates.
coordination between the countries, as well
as bringing current objectives existing in Another of the initiatives developed over
different business and countries into line the year was the launch of the trail version
with new joint objectives. of the “Management Portal”, a new channel
for Group managers which is aimed at
Against this backdrop, the action plan becoming the communication channel par
carried out in 2005 involved the excellence for management.
implementation of numerous initiatives:
the creation of teams and new Notable advances have also been made,
communications dynamics, remodelling of throughout 2005, to the new Intranet
tools and the creation of new channels, the model, Unica, already in application in
implementation of new personal district C, with the aim of being
communication dynamics and the progressively implemented in all countries
commencement of a communication where Telefónica is present. In relation to
training plan, both for management and district C, communication actions were
professionals involved in this field. carried out around a “new space for a new
way of working”.
One of the key initiatives of the plan was
the establishment of an Advisory Board for
internal country communications in Spain,
Brazil, Mexico and Peru. The objectives of
this Advisory Board are as follows:

06 Employees
Employees involvement in the strategy
During the 2005 financial year, employees After this presentation of the Strategic
were involved in the transformation process Map, the next step is communicating same
of Telefónica, under the slogan “Accelerating to all middle management of the
to strengthen our leadership”. In this Telefónica Group.
respect, both internal communications
channels and presentations to directors Directors and middle management are the
were aimed at disseminating the five main key to communicating strategy to the
axes of transformation which have been employees of a company. Communicating
worked on since 2004. The process of and involving employees in a strategy is a
aligning all messages under the slogan task that cannot be carried out with one
“Accelerating to strengthen our leadership” way communication media, as
is significant; more specifically the professionals usually require responses to
“meta:cliente” program from Telefónica questions and a detailed explanation of
de España and “Customer Commitment” different matters.
from Telefónica Internacional.
Additionally, during the 2005 financial year,

of particular note is the dissemination
among directors of the Telefónica Strategic
Plan. This activity, lead from the President's
office in collaboration with the
Communication department, involved the
following aspects in 2005:
•Presentation of the Strategic Map in 34

Management Committees of Group
companies, located in 7 countries and
involving over 400 directors.
•Training courses for directors on the CASE STUDY

methodology of Strategic Maps,
with over 300 participants in Spain
Sharing knowledge
(15 sessions) and 750 in Latin
America (35 sessions). e-MARCO: Portal for sharing knowledge
•Cascade communication through specific and Practicing Community methodology,
with an active community of Weblogs
communication materials, such as
under way. This is a dynamic tool available
triptychs which summarise the to all companies and countries in the group
Telefónica Strategic Map, its objectives and specialises in sharing internal and
and indicators. external knowledge through documents -
currently 30,000 -, videos and weblogs on
•Publication on Intranet of the Strategic the Information Society, Expert Forums and
Map portal, which contains the latest Conferences, Sponsors, Regulation,
news on its progress, with information Marketing and Advertising among others.
on indicators.

06 Employees
Compensation
Compensation Pension Plans

Policy Health plans
Other benefits
Compensation
Personnel expenses in the Telefónica Group competitive, fair and consistent through
in 2005 totalled 5,045 million euros (4,346 the establishment of a compensation
million euros in 2004), representing around package based on the following points:
13.3% on the Group's income in 2005 (14.4%
in 2004). From this total, salary package
•Adaptation to the reality of each market
and each Business Line.
expenses (fixed and variable salary +
benefits + pension plans and commissions) •Consistency with the Telefónica Group's
came to 78%, 69.2% of which corresponded values.
to fixed and variable salary and 4.3% to
benefits. Additionally, Telefónica has
•Focus on key persons according to their
performance and contribution.
incurred workforce restructuring costs of
611.20 million euros. •Relevance of non-monetary
compensation: social and in-kind
During 2005, both for fixed and variable benefits.
salary, the Telefónica Group has drawn
up a total pay packet framework common To define this compensation system, salary
to all directors. This framework is aimed benchmarks have been established which
at achieving defined results and strategies, allow comparisons with companies of
providing the necessary flexibility similar scale and relevance. Said analysis
and transparency to maintain maximum was carried out by directors and middle
internal equality and the maximum management in Spain, Europe and Latin
external competitiveness possible, America.
with the aim of encouraging mobility,
attraction, motivation and retention For the general Telefónica workforce,
of management talent. compensation conditions for employees are
described in the different collective
Telefónica Group's compensation system is agreements in force. At the close of 2005,
aligned with the Group's global strategy over 142,700 employees in the Telefónica
and best practices of the marketplace to Group had their status regulated on the
motivate the employee while being basis of collective agreements compared to
120,000 in 2004.

06 Employees
Percentage of employees with collective agreement and variable salary by country in 2005
Data in percentage
with variable salary

with collective agreement
100 100
98 99 92
88
75 71
63
63
59
56
50 48
46
33
26
0
Spain Europe Argentina Brazil Chile Peru Mexico Colombia Venezuela
Variable salary Percentage of employees with collective agreement

and variable salary by business line in 2005
Data in percentage
For years, the Telefónica Group has been
working on designing and implementing with variable salary
with collective agreement
variable compensation policies that reward
effort and the fulfilment of its employees'
86 97
objectives. 83
80
81
These policies seek, on the one hand, a 76
greater commitment and involvement by 67
employees with company objectives, and 54
on the other, greater fairness in the
compensation system. Variable 43 39
compensation is designed to mobilize
attainment of the Group's global objectives 30
and to compensate in function of 20
according to contribution to results 14
8
based on achieving individual,
company and Group objectives. T España Latam T Móviles T Contenidos TPI Atento T Gestiona
Group Group Group Group Group Group Group
Variable salary is based on a model which,

linked to global Group results, combines
the perspective of objective achievement
(what has been done) with perception
about achievement methods (how it has
been done).
Over 147,000 employees (105,000 in 2004)

are covered by variable salary based on the
fulfilment of individual, company and
group targets.

06 Employees
Health plans
The Telefónica Group offers private In Peru, most of the companies in the
medical insurance to over 98,000 Telefónica Group have health plans that
employees throughout the world. This supplement those that other workers in
includes 100% of Telefónica de España the country generally have. The Group
employees, 76% of the Telefónica Móviles companies have agreements with Private
Group, 62% of T-Gestiona, 48% of TPI and Health Provider Companies (EPS), which
40% of Telefónica Internacional. In relation act as private insurers to look after the
to Atento, in Brazil, such plans are offered needs of the employees and their family
to over 25,000 employees, bringing the members. Similarly, at Telefónica del Perú a
figure for the company to 31%. group of employees and their families are
covered by a self-insurance system (PAMF)
In Spain, Telefónica de España and that offer services similar to private
Telefónica S.A. underwrite insurance insurance. The total number of employees
policies for their employees with the having access to this type of service is
Antares Group, consolidating the more than 2,300.
complementary health coverage from the
Social Security General Regime for active TeleSP in Brazil offers all its employees and
employees, their wives and children, early their dependents the chance to be included
retirees and those who have left the in the health and assistance plan from
company. Other employees, up to 40,000 Plamtel, which offers more comprehensive
throughout the country, have health plans services than those generally found on the
in other private institutions. market and has been recognized by
Accoesp (State of Sao Paulo Association of
In Argentina, over 6,800 employees of the Medical Clinics and Doctors'Offices). Over
Group have private health access, double 35,000 employees throughout the country
the 2004 figure. In Chile, the former health have access to health services of this type.
insurance system based on an internal
institution has been changed and has now
moved towards a private institution
(ISAPRE) that competes in the market and
provides more comprehensive health
coverage. Currently over 2,100 employees
participate in same.

06 Employees
Pension plans CASE STUDY
Fonditel
Employees of the Telefónica Group in Spain, Pension plans for employees of the Additionally, employee funds for the
Peru and Brazil participate in pension plans Telefónica Group in Spain are managed by Telefónica Group, with the knowledge of
promoted by the Group, meaning costs for Fonditel and in 2005 obtained annual their respective Control Commissions,
Telefónica of 94 million euros. In the rest of profitability of 12.38% for the Employee have strengthened their commitment to
the countries, employees participate in Plan of Telefónica de España and up to make investments in ethical, sustainable
public pension plans. 14.56% in the case of Fonditel B, which is and responsible fund until reaching 1% of
the pensions fund which groups together all assets managed. Specifically, at the
In Spain, 60% of employees of the pension plans for the other companies in close of 2005 the volume of investments
Telefónica Group participate in Group the Telefónica Group. The volume of assets of this type reached 48.1 million euros,
pensions, managed by Fonditel. 84% of managed at the close of 2005 reached meaning 1.01% of all equity in employee
employees of the Telefónica de España 4,528 million euros in the Employee plan of plans for the Telefónica Group. From this
Group are covered by plans, as are 91% of Telefónica de España and 209.5 million amount, 33.7 million euros were invested
Telefónica Móviles España (there are no euros in Fonditel B. in socially responsible investments, 10
programs of this type either in TPI or million euros in social housing
Atento). On a monthly basis the company Fonditel has continued to get public developments and 4.44 million to a
contributes 6.87% of gross salary of recognition at home and abroad due to its forestry development company.
employees to the plan and each excellent results in pension fund
contributes 2.2% of same, except management. Thus, for the fifth year
employees contributing after June 1992, running it was awarded the prestigious IPE
whose percentage is 4.51%. prize (Investment & Pensions Europe) for
Spain and reached the final three
In Brazil, 83% of TeleSP employees and 65% candidates for the overall European prize.
of Telefónica Empresas have private Also, prizes awarded by Intereconomía-
pension plans to which employees make a Morningstar gave two awards to plans
personal contribution matched by the managed by Fonditel: to the best manager
contribution of the company. of mixed fixed income. In terms of national
ranking by profitability, individual plans
Almost all employees of Telefónica del Perú managed by Fonditel continued for yet
participate in the pension programs offered another year to get excellent results and
in the country. Most do it through the reach the top positions in their categories
private pension system operated by the for three and five years.
Pension Funds Administrators (AFP).

06 Employees
Other benefits
All Telefónica employees have a package of Purchasing club for Telefónica
social benefits which complements their employees in Spain
salary package and which varies depending
on the company. It is planned, during the Telefónica de España employees may make
2006 financial year, to carry out a online purchases of various products and
comparative analysis of the different social services, with additional benefits compared
benefits existing for the management to market price, through the purchasing
group, with the aim of collecting good club. The purchasing club highlights those
practices and standardising the range of offers related to Telefónica products and
benefits, maintaining the necessary services, and which are in the
homogeneity necessary for different telefonicaonline.com employee store,
corporate realities. which can also be accessed directly.
The objective of this new channel is to

encourage online business, providing
employees with interesting offers. Also in
this space, the customer will enjoy special
attention provided directly by the service
provider. Since this initiative was
implemented, over 500 monthly
transactions have been carried out, for
the purchase of automobiles,
technological goods, food and banking
and property services

06 Employees
Additional benefits for employees of Telefónica Group1

(Datos en unidades)
N. of people who receive N. of people who receive
food tickets studies are financed
Spain 11,108 161

Europe — —
Latin América 24,491 613
Argentina 13,763 67
Brazil 9,808 108
Chile 98 296
Peru — 13
Mexico — 129
Colombia 86 —
Venezuela 736 —
1
Including Atento employees
Additional benefits for employees

of Telefónica Móviles
Guatemala
El Salvador
Nicaragua
Venezuela
Argentina
Colombia
Uruguay
Panama
Ecuador
Mexico
España
Brazil
Chile
Peru
Private medical insurance

Life insurance
Family help (children, college etc.)
Food tickets
Pension plans
Financing of studies
Stock option plans

06 Employees
Training
Tele-training
Professional
Development Management of Skills
Professional Career
CASE STUDY Training

Training to improve
sales focus In 2005, the Telefónica Group invested over Training of employees in Atento is so
70 million euros in training its employees, intensive due to the size of its workforce,
During 2005 Telefónica encouraged its an average of 380 euros per employee. its greater turnover of professionals
workforce sales focus through several Professionals in the Telefónica underwent compared with other companies in the
training programs: over nine million hours of training in 2005, Telefónica Group and the particular
meaning an absolute increase of 5% characteristics of the business it carries
•Directors' program: “Making the out. Atento employees receive both
company customer focussed”, already By business lines, for yet another year, training in recording contacts with
commenced in 2004 and attended by Atento made notable efforts with over five customers and related directly with
over 1,000 directors in all group and a half million hours training its customer service.
business, this course was given in Spain, employees. Considering the Telefónica
Argentina, Brazil, Chile, Peru and Mexico, Group without counting customer Considering the rest of the workforce
with participants having the relations, absolute growth in training hours (excluding Atento), the distribution of
opportunity to take part in different was around 15%. hours by function places training hours at
training actions going in depth into the 37 hours for employees carrying out sales
importance of making Telefónica an Annual training hours per equivalent functions, 38 for operative functions and 30
operator which creates solutions of employee exceed 48, which breaks down for support professionals.
value to its customers. into 33 hours per director, 58 for middle
•Training schedule: “Commitment to our management and 48 for the rest of the
workforce. The decline seen compared with
customers” was taken by over 5,000
middle managers from the Group in the the 60 hours for 2004 is due mainly to less
main countries where it has a presence intensive training in the Móviles and
(Argentina, Brazil, Chile and Peru), and directorios business, added to the effect of
the program has contributed to specific training actions for mid
improving the skills and know-how of management carried out by Telefónica de
participants to successfully fulfil their España in 2004. The number of individual
Number Employees with
commitment to making the company students exceeds 650,000 (600,000 in
2004), meaning an average of more than personalised training plans1
more customer focussed.
three training actions for each employee.
•Actions aimed at all Group employees: Spain 35.242
all employees have access to specific Latin America 7,441
courses to improve their sales skills Argentina 1,858
through the training Portal. Brazil 1,576
Chile N.D.
The different businesses in the group have Peru 1,060
strengthened sales skills with specific Mexico 153
actions. Of note are the Telefónica de Colombia 430
España Sales Schools and programs Venezuela 2,364
associated with the program “Compromiso Rest of America 367
Cliente de Telefónica Latam” (Telefonica Total 43,050
Latam customer commitment".
1
including Atento

194
06 Employees
In line with its ambition to be the biggest and best

integrated telecom group in the world, Telefónica has set
itself the challenge of offering the best future for all its
professionals. Telefónica aims to start up the individualised
training plan in the 2006 financial year.
Distribution of training hours by employee and business line

2004 2005
Mid Rest Mid Rest
Directors manag. workforce Directors manag. workforce
Fixed spanish business 48 187 40 46 187 44

Fixed latam business 50 48 31 29 69 32
Mobiles business 123 58 71 54 38 39
Directories 145 132 35 27 67 30
T-Gestiona Group - - - 21 57 31
Other companies 38 95 25 13 12 7
Negocio Atento - - 84 - - 64
Training hours by business line

2.003 2.004 2.005
Fixed spanish business 1,907,743 1,566,794 1,668,527

Fixed latam business 719,307 812,665 983,392
Mobile business 671,504 684,094 905,699
Directories 223,317 111,105 93,180
T-Gestiona Group - - 94,875
Other companies 390,344 168,072 98,246
Atento 2,457,017 5,567,453 5,505,098
Telefónica Group 6,369,232 8,910,183 9,349,017
Distribution of training hours by employee and country 2005

Data in hours per employee
without Atento
87,1
with Atento
63.5
61.7
54.3
50.7
40.6 42.4
34.9 26.9 31.1
23.6 18.7
22.3
10.4
Spain Brazil Argentina Chile Mexico Peru Rest of

América
Training hours by employee and function 2005 (w/o Atento)

Data in hours per employee1.
Support 29.8
Operations 84.3
Sales
74.9
56.2 51.2
50.8 19.1
23.9
37.6 36.3 36.5 37.5 34.7
31.2 28.8
11.1
1.9 3.9
Fixed spanish Fixed LATAM Mobile Directories T-Gestiona Other
business business business business Group companies
1
Without Atento.

06 Employees
Online training by business line Online training by country Breakdown of online training
Data in percentage Data in percentage1 hours by subject
Fixed
Data in percentages
Spanish
Telefónica Group Rest of
business Spain IT
excluding Atento 23.6 Chile America 25.8 15
19.8 9.1 2.9
Others
19
Other Fixed
Companies LATAM Argentina
6.4 3.6 Telfónica
business Languages
Mexico Group
12.8 16
1.5 4
Mobiles
business Company
Brazil Skills
T-Gestiona 21.5 12
25.0 19
Group Directories Peru Colombia
38.6 4.7 27.2 4.9 Telecommunications
15
CASE STUDY Tele training

Mobile learning
Mobile learning is the next generation of In 2005, professionals from the Telefónica Indicators of training use showed falls
online training, with access to content Group (excluding Atento due to the specific compared with 2004, which was unique in
through mobile devices giving characteristics of its training programs, its very intensive use of online tools. This
independence and immediacy to training. carried out 20% of their training via online indicator has encouraged us to renew
In said type of training, which is normally tools, particularly in T-Gestiona (where contents and more actively promote the
combined with standard online training, training comes to 38% of total training). portal, with the aim of increasing its use by
the structure of content should be Telefónica employees.
modular, with reduced estimated study During 2005, the a+ service offered
times per module (maximum of 10 through Educaterra consolidated its visions As a positive detail, it is important to
minutes) so the student can access them of standardising the skills and abilities of highlight the fact that the percentage of
without disrupting his normal activity. employees, ensuring flexible access to training actions passed, compared with
training and acting as catalysts in actions initiated, has increased from 60%
Telefónica, through Educaterra, has been knowledge sharing. The portal is available in 2004 to 67% in 2005.
investing throughout 2005 in the in two languages (Spanish and Portuguese)
development of a series of tools and and is accessible from Spain, Argentina, 2005 saw investment in the development
applications based around the a+ service, Brazil, Chile, Peru and other countries in of 125 new content sets, including 371
which enable mobile access to training Latin America. modules, meaning an additional offer of
resources. There are currently 98 lessons 800 new training hours. Among the most
with contents produced for “mobile The results of activity in 2005 were as notable projects are:
follows.
learning”. Typically, Telefónica Móviles España •Cisco technology training for Telefónica
is leading the Group in this type of training. •The number of students registered with companies
online training services exceeded
130,000, with a reduction of 14% •Individual training plans for para
compared to the figure of 150,000 the
previous year. •Mixed training program (attendance -
online) for management secretaries
•The number of hours used has declined
by 38%, from 650,000 hours of •Giving up smoking program
connection in 2005 to 406,000 in 2004.
•Engineering portal
•The number of simultaneous training •Portuguese for Spanish speakers
house through the virtual classroom
(centra) reached 8,460: Said tool •Environmental management course
simulates a traditional class through developed by Telefónica de España and
the computer, enabling real time Telefónica Móviles España
interactivity between the trainer and
students. This tool makes it possible to
combine voice and image, share
applications, work in a group, carry out
surveys or evaluations en vivo, etc.

06 Employees
Commitment to our Working together with customers (internal and external),

understanding and bringing forward to their needs, and offering
customers
them quality solutions with a high value added
Environment Integration Understanding and participating in the social context (society, customers, companies, employees
and shareholders), adapting adequately to new situations and encouraging change
Communication and Knowing how to use communication to create a positive environment

transparent relations
Collaboration Actively cooperate to achieve common goals
Professional development A commitment to the professional and personal development of others and yourself
Results contribution Effectively managing resources and always seeking, with initiative,
to improve the company's results
Management by skills Telefonica employees

evaluated on the basis of
their skills in 20051
Spain 38,857
All lines in the Telefónica Group share a The development of skills will boost a
Europe 10,007
system of generic skills for all employees, process of cultural development towards Latin America 27,203
strengthening the values of the group and a professional model of greater Argentina 6,711
acting as a basis for implementing strategy. employability, facilitating efficiency, the Brasil 9,313
vision of internal customers and trans- Chile 3,835
Skills are the markers which make it functional empathy. Peru 5,599
possible to know what the company Mexico 1,615
expects from each employee, also acting as All employees in the group have access Colombia 130
a personalised guide for professional to a training portal where there is a section Rest of America 2,294
development. on self-development of corporate skills Total 78,361
where numerous actions can be found 1
Without Atento
In 2005, all companies of the Telefónica to increase skill levels
Group participated in an evaluation
process which involved, at least, The human resources department is
self evaluation and the evaluation of making progress in implementing a 360º
representatives of the hierarchy. The evaluation model for group directors, which
results of this evaluation enabled to date has been completed with the
identification of areas for improvement evaluation of management talent in 2005
for each employee and the appropriate and the 180º minimum feedback process.
actions to be carried out each year. 360 º evaluation involves the evaluation of
a professional by his superiors, those
During 2005, over 78,361 employees from reporting to him, and his peers,
the Telefónica Group were evaluated on the complementing the self-evaluation process.
basis of their skills, meaning a During the next financial year a range of
consolidation of the model compared to corporate policies will be developed around
the 68,677 in 2004 and the 35,758 in 2003. this initiative.
Telefónica continues to make progress in

management by skills, integrating this
within different human resources
management systems (selection, training,
development), thanks to a corporate skills
model which facilitates horizontal and
vertical mobility between departments,
units and countries, encouraging
organisational development and improving
the suitability of personal skills.

06 Employees
The Telefónica Group is aware that its employees aspire to a

professional career which will help them develop in terms of
their functions and responsibilities.
For this reason, the Group's Human Resources departments
have developed various initiatives to encourage this objective.
Professional career
Career initiatives for directors over 350 vacancies in the Group have
been published. This tool is available for
•Rotation of directors. Telefónica has the publication of management and non
established a framework for the rotation
management vacancies.
of directors, which is determined by a
range of established criteria, among •Project interchange program between
which are aspects related to the Telefónica de España and Telefónica
potential and development of persons, Latinoamérica. The sales areas of both
succession plans, previous experience companies have encouraged a year long
and career in other companies, projects professional exchange program, with the
implemented, know-how, motivation. twin objective of transferring good
project management practices and
•Rotation of directors enables the transfer developing professionals with a vision of
of good management practices between
an integrated telecom group. During
the different units of the company, offers
2005, 25 professionals participated in
opportunities for professional
this initiative.
development to employees and helps
share existing talent within the Group, in •Participation in the Fundación Carolin
this way making it possible to reach scholarship program, in which 26
management levels when management professionals from the Telefónica Group
positions become vacant which are in Latin America have developed their
mainly to be filled internally. professional activity in companies within
the Telefónica Group in Spain at the
•During the 2005 financial year, 171 same time as taking year long post
directors have rotated internally (12% of
graduate studies.
the total) and another 54 have left
Telefonica (4% of the total) •Establishment of Project Management
professional career in Telefónica de España
Career initiatives for
other employees
•General publication of all vacant positions
on the Intranet. Through this initiative,
Telefónica aims to inform all Group
employees of the professional
opportunities which exist in the different
companies of the Group. This action is
also aimed at encouraging clarity and
transparency of procedures for filling
vacancies and the transfer of talent
within the group. The first phase of the
project started in 2005, and since then

06 Employees
The end of 2004 saw the approval of the

development of the expert career model CASE STUDY
towards a new project management
professional career. The development of the JAP (High potential youth)
previous model was aimed at adjusting the program
functions of the expert to the needs of the
company, identifying the most suitable The program's aim is to identify and
experts for each position, offering a more develop young talent at the outset of their
attractive professional outlook contributing professional careers. This program, begun
to improving satisfaction and basically in the 90s and revised in 2003, has the
positioning this group in accordance with following objectives:
the company's main strategic lines.
Project Management, Sales and Technical
•Retaining and promoting loyalty in
persons with talent from the outset of
Advisor to Customers (ATC´s) were
their professional careers.
integrated into a model for development
and professional careers involving around •Speeding up their process of
4,000 professionals in the company. development within the organisation.
•More rigorous personnel selection •Training agents who will promote

procedures at Telefónica de España. change towards the new desired culture.
Through the participation of a second
hierarchical superior alongside the
•Forming a pool of future managers for
the Telefónica Group.
person responsible for the vacancy
increases objectivity in the process of At the close of 2003 the selection process
deciding on the most suitable candidate. for the new Telefónica Group High
•Encouragement of rotation in internal Potential Youth Program began, which was
completed in 2004 with the selection of
selection processes. Telefónica de España
rotates personnel between departments 138 JAPs.
in 30% of internal selection processes
and 44% of cases within the same In 2005, JAPs carried out temporary
department. rotations (3 to 6 months) during which
they worked in other functional areas
within the same company, other Group
companies and, in some cases, other
countries. This action has contributed to
increasing their overall vision and
knowledge of the Group.
In 2006 it is planned to carry out

additional development actions, putting
the final touches to the 2004-2006
session of the JAP Program.

06 Employees
Human rights
Freedom of association and collective bargaining
Work-life balance
Professionals
and persons Abolition of child labour
Equal opportunities
Health and safety
Workplace demands
Human Rights
For Telefonica the defence and promotion March 2002 and since then has reported,
of human rights, beyond a mere obligation, through different communication
is one of the values on which our human channels, on progress in implementing
resource management is based. its 10 principles.
Express commitment Supervision mechanisms

Formally, this commitment by Telefonica to Telefonica supervises, checks and reports
guarantee human rights includes: on compliance with human rights in all its
activities through different mechanisms:
•Telefonica Group code of ethics, which
expressly refers to respect for human •Code of ethics office, which has different
rights in relation to employees and channels for consultation and complaint,
providers and whose processes are verified by the
internal audit department. This office is
•Code of ethics agreed between Telefonica fully functioning within companies in
and the Union International de
the Telefonica Moviles Group and is
Sindicatos (UNI) in 2001 and renewed
aimed for establishment within the rest
annually. This code applies to the whole
of the Group during the 2006 financial
Telefonica Group and is inspired by the
year. Among its functions are the
Global Compact and the Fundamental
drawing up of an annual report.
Agreements of the ILO. It includes joint
recognition by both parties of the •Workplace audit, in companies
fundamental rights in the community themselves, considering relationships in
and workplace, namely freedom to first and second lines of contracts.
choose employment, absence of
discrimination in the workplace, •Annual meeting with the Union
Internacional de Sindicatos to review
abolition of child labour, union freedom
compliance with the UNI-Telefonica
and the right to collective bargaining,
code.
minimum salaries, working hours,
environment, workplace health and •Report on progress in the Global
safety and improvement of community Compact, drawn up annually and
conditions through training actions, and included in corporate responsibility
stability of employment. reports and the Telefonica web site
•United Nations Global Compact.

Telefonica signed this declaration in

06 Employees
The success of a company lies in its employees.

Telefónica treat its employees as persons who join both
professional and personal challenges. That why, Telefónica wants
to become a company where its employees feel as persons.
The different departments of the Telefónica Group develop

different initiatives aimed at guaranteeing human rights,
equality of opportunity, work-life balance and maximum
protection for health and safety.
CASE STUDY
Workplace audit in Telefonica

The object is to ensure compliance with
applicable employment regulation of basic
Reporting lines •Presentation of the workplace audit human resources policies and procedures,
Compliance with and respect for human carried out in the Telefonica Group as a as well as knowing, evaluating and
rights is the responsibility of each and case study in Global Compact correcting any workplace contingencies.
every Telefonica employee. Functionally this workshops, based around points 1-3.
is the responsibility of the human
resources department with cooperation
•Participation in HCRA, Human Rights In the first phase (04/05), 26 companies
were audited in 6 countries, During 2005,
Compliance Assessment, developed by
from the corporate responsibility the Danish Human Rights Institute, with workplace audits were carried out in T-
department when it comes to detecting the collaboration of 40 Human Rights Gestiona Spain, TSoluciones, T-Móviles de
risks, promoting and encouraging experts. Venezuela, T-Móviles Colombia.
improvement and coordinating the
drafting of reports. Along the same lines as in 2004 (in the 23 As a corrective measure on a corporate
most important companies in the Group), level, in February 2005 a joint audit and
Both departments report every two all companies audited have had to draw up human resources instruction was
months to the Commission set up by the an action plan to correct any workplace approved with action criteria for the
Board of Directors in 2001 to directly contingencies. control of workplace risks in the
supervise all matters relating to human contracting of works and services. The
resources and corporate reputation, As a corrective measure on a corporate challenge for 2006 is to complete the third
including human rights (comprising four level, in February 2004 a joint audit and and final phase of the workplace audit in
independent directors). human resources instruction was approved Telefonica.
with action criteria for the control of
External collaboration workplace risks in the contracting of works This is an internal standard which
For Telefonica, the benchmark partner in and services. includes:
human rights is the UN. Its different
agencies have developed numerous specific Below are the main actions guaranteeing
•A list of pre-contractual requirements
(approval of providers and contracts)
collaborations and projects during 2005. In respect for the principles contained in the
the specific area of human rights, the Global Compact relating to Human Rights •List of the information to be provided at
following are of note: and the working environment (see the beginning of the contract
•The ongoing participation of Telefonica in chapters on environment and providers to

complete the information).
•Obligations in terms of prevention of
working groups created on an ad hoc workplace risks for the principal and the
basis by international bodies such as the contractor
ILO, the International Employers'
Organisation or the International
•Obligations in terms of information to
legal representatives of employees
Chamber of Commerce.
•Participation at the headquarters of the •Measures to adopt during the validity of

the contract
ILO in a special working session with
John Ruggie, Special UN Representative •Measures to adopt after the cancellation
for Human Rights, providing the process of the contract
with internal documentation and
comments.
•Supervision and control measures
Another of the corrective measures taken
during 2005 was the obligation of training
in human rights for employees of security
companies working for Telefonica.

06 Employees
CASE STUDY Freedom of association and

Social dialogue in the collective bargaining
Internacional Arena Search for efficiency is the cornerstone on Collective bargaining
which Telefónica's labour strategy is Likewise, labour relations as a whole have
In relation to social dialogue in the
founded. It is a strategy that takes into been very satisfactory. At the end of 2005,
international arena, it is worth mentioning
account factors that closely influence the over 142,700 employees of the Group had
that Telefónica and UNI (Union Network
transformation of the business to ensure their conditions regulated on the basis of
International) have agreed to meet
that social dialogue and negotiation collective bargaining, compared with
annually so that Telefónica management
definitively constitute key elements in our 120,000 in 2004. The breakdown of these
can inform unions of general information
development as a Group. details by country and business line is in
about the most important Group topics
which affect its position on the market, its the section on compensation.
future and priorities. Dialogue with unions
The meeting corresponding to 2005 was Social dialogue and collective bargaining Some of the achievements in this area
held in Mexico DF on 14 February 2006. are irreplaceable instruments for labour merit special consideration:
Among the topics covered was an updated relations management and governance, as
presentation on the Telefónica Group, its well as enabling collective bargaining to Spain
positioning in Latin America, with adapt to the changes occurring at the Telefónica de España and workers'
particular emphasis on the boost given, in companies. Its sound functioning is clearly representative signed the extension of the
2005, to the process of internationalising evidenced by the meetings held 2003/05 collective agreement until 31
Telefónica (Cesky telecom, alianza China periodically between all parties. December 2007. The agreement to extend
Netcom and O2). the collective agreement was adopted with
Freedom of association 12 votes in favour by the company, the
The final part of the presentation focused Freedom of association is an employee response of the Inter Centre Committee
on the company's future strategy, right at Telefónica, as shown by the more being very positive, with the votes in favour
especially the need to effectively involve all than 45,000 employees with labour union of CC.OO. (4 votes), U.G.T. (4 votes) and U.T.S.
employees and for union leaders to play a affiliation. By company, those with the (1 votes), STC (1 vote) and votes against from
leading role in reaching the objectives largest number of affiliated personnel are CGT (1 vote) and AST (1 vote).
established. Telefónica de España with 15,876, Telefónica
Latinoamérica with 13,227 and Atento with The company is committed to maintaining
7,579. By country, particularly notable are the acquisitive power of workers of
Spain, with 16,246, Argentina with 12,275 Telefónica de España, S.A.U, so at the end of
and Chile with 3,957 affiliated employees. each year, the difference is reviewed if the
real CPI is higher than the predicted CPI.
Employee participation of employees of the
Telefónica Group in the labour union
elections rose to over 106,000 employees
(95,000 in 2004), electing over 6,300 union
representatives

06 Employees
Both parties, sharing their concern about The collective agreement includes a range
the rise in absenteeism and in order to of material and content from a perspective CASE STUDY
reduce absentee rates during 2006 and of renewal and even innovation, and which
2007, have agreed that within the hope to achieve an overall improvement Evolution of the Employee
Interpretation and Supervision Committee, both in the areas of productivity of the redundancy plan of Telefónica
absenteeism rates for the last two years company and life and work conditions of de España
will be evaluated, so that an extra day's the professionals which render their
holiday will be awarded as long as a decline services in same. Thus it included measures Agreement on the Social Plan in the
in the aforementioned rate compared with seeking to make working hours more Employment redundancy plan of
the previous year is observed. flexible and compatible with improvements Telefónica de España (E.R.E.) for the
In Telefónica de España, the number of in the quality of life of workers, bringing period 2003-2007.
hours for labour disputes fell to 3,724 in about improvements to customer service
2005, showing a downwards trend and the company's productive processes. The program is based on voluntary
compared with the 15,794 in 2004 or Along these same lines, new rights were redundancies, affecting a maximum of
54,500 in 2003. incorporated aiming for a better work-life 15,000 workers, and with a commitment to
or guaranteeing, strengthening, the replace up to 10% of positions. This plan
The management of tgestiona España and principles of equality of opportunity. enables Telefónica de España to reduce the
the Works Committee (with the advice of number of employees, maintaining its
union members represented in same, CC The number of hours of labour dispute in competitiveness.
OO and UGT) have signed the first Atento España stood at 7,902 hours in
collective agreement for tgestiona, for the 2005, a tenth of the 75,918 in 2004, the The plan is non discriminatory, voluntary and
2005-2007 period. The collective agreement year in which the third collective applies to all employees of the company. At
was signed by the works committee of agreement for the sector was reached. 31 December 2005 a total of 1,945 employees
tgestiona and the company management. had asked to join the scheme, added to the
Latin America 7,906 requests for departure.
This fulfils one of the main objectives During 2005, social dialogue was
suggested in negotiations: standardising significantly improved throughout the
the working conditions of the whole region. Almost all matters raised were
workforce, especially in terms of resolved, significantly reducing
professional categories, basic salary controversies, disagreements and
conditions, right to contributions, social litigations. Likewise the matters which
benefits and working hours. The were subject to negotiation in all
aforementioned conditions differed companies have expanded both
depending on the existence of applicable in quality and quantity.
employment regulations (those for
tgestiona and TPTI), as well as prior hiring Possibly related to the above is the
conditions in different Group companies. significant improvement in working
environment surveys for the region
among T. Latam companies.

06 Employees
Chile. Peru
It is important to emphasis that collective 2005 saw satisfactory conclusions to
bargaining was carried out in line with the collective negotiations pending with the
law, respecting the times established and Federación de Trabajadores and the
without resorting to strike action. Among Sindicato de Empleados, signing the
these negotiations, of note are respective collective agreements for a
period of 3 years. Bearing in mind the fact
•Telefónica CTC Chile S.A. with Grupo that the previous year a collective
Negociador (60 persons)
agreement was signed with the Sindicato
•Telefónica Mundo S.A. with Sintelfi (33 Unitario de Trabajadores for the same
persons) period, the signing of these agreements
•Telefónica Mundo with Sindicato OITT (78 will define employment benefits for the
whole workforce up to 2006.
persons)
•Globus 120 S.A. with Sindicato OITT (9 May saw the signing of an agreement for
persons) reconversion of manpower with the
•Telefónica CTC Chile S.A. with Sindicato Sindicato Unitario, which is the majority
organisation, and in which it was agreed to
OITT (92 persons)
support the Dr. Speedy project. The aim of
There was also negotiation of this project is to train company technicians
complementary health insurance with all in integrated solutions for broadband
unions, affecting around 438 persons. customers.

06 Employees
Argentina Brazil
In Telefónica de Argentina it is important to The most significant facts in 2005 in
indicate that the number of hours lost to relation to unions were the following:
labour disputes fell to 69,715, from the
170,000 hours in 2004. At the same time, in •January ´05: Renewal of the Agreement
with Sintetel relating to the the
relation to unions in Argentina, the
Conciliation Committee, whose aim is to
following notable agreements were
settle disputes with workers and
reached:
management.
•Salary agreement Jan 06 - Mar 07 •April ´05: External and internal network
(Foeesitra - Foetra/Fatel)
companies negotiated a collective
•Reduction of potential liabilities for agreement.
claims for equal payment for equal work
(Foeesitra-Fatel) •Negotiation of regional CIPA (Internal
Commission for the Prevention of
• Reduction of working hours as of 1/3/06 Accidents) and POE (Emergency
(Foeesitra-Foetra/Fatel) Operation Program) by Telefônica/SP
together with unions and the
•Creation of category 6 (Foeesitra- Employment Ministry.
Foetra/Fatel)
•Art. 15 incorporating the basic salary •September 05: Negotiation with Sintetel
in relation to the Assist exclusion in the
(Foeesitra-Foetra/Fatel)
Collective Employment Agreement for
•Salary advance up to mid March 06, Telefônica/SP and negotiation of a new
when the holding of a new CCT will be agreement up to May 06.
discussed alongside the definitive salary
agreement (Fopstta/Upjet) It is also worth noting that TELESP and T-
Empresas negotiated together with
SINTETEL (Telecom union) and SEESP
(Engineering union) the collective
employment agreement for 2005/2006.

06 Employees
CASE STUDY Work-life balance

Work-life balance in
Telefónica Móviles España
Working hours Duration of maternity leave
The last collective agreement of Telefónica (weeks)
Móviles España (2004-2006) contained The number of hours worked by employees
Telefónica de España Group 16
new measures to improve work-life is regulated by collective agreements,
which affect over 120,000 employees, Telefónica Latinoamérica
balance of employees to complement
different in each country and business line Telefónica de Argentina 12
those already in force, such as flexible
in accordance with the requirements of the TeleSP (Brazil) 17
working hours, child assistance, better
business and legislation in each country. Telefónica CTC Chile 18
paternity leave, etc. Among the new
The collective bargaining policy of the Telefónica del Perú 12
measures are:
Telefónica Group expressly includes the Telefónica Móviles
•School help, extending child assistance limitation of extraordinary hours. Spain 16
to children between 6 and 12 (30 euros a Argentina 12
month for each child)
Work-life balance Chile 18
•Special leave of absence (2-4 years) to look The collective bargaining policy for Central America
Colombia
12
12
after children or family members, with companies in the Telefónica Group
the position in the company being held Mexico 12
identifies the needs to manage working
Panama 13
•Addition of paternity leave for time, the duration and distribution of
working hour, making them compatible
Peru 12
hospitalisation and for time spent in Venezuela 18
hospital during caesarean birth. In this with personal and family life.
Atento
case, paternity leave is 5 days.
In December 2005, 14,026 employees of Spain 16
• No minimum limit to the reduction Telefónica companies (10,263 in 2004) Argentina 12
of working hours, improving the rendered their services under a regime of Brazil 17
provisions in the Workers Statute reduced working hours. Employees claimed: Central America 12
(minimum 1/3 reduction). sickness (25%), maternity (9.8%) or studies Colombia 12
(11%). Part time contracts were not Chile 18
Morocco 14
considered, although these make up a high
Mexico 6
proportion of the Atento workforce.
Peru 12
Venezuela 18
The number of employees receiving
family assistance stands at more than
27,943 employees, particularly in Spain
(18,868), Argentina (2,694), Chile
(3,201) and Peru (1,818)
The duration of maternity leave accords in

each country with legislation in force,
ranking between 12 weeks in some
countries and 18 in others.

06 Employees
Mobile working In the first half of 2005, several Telefónica Number of hours worked
For Telefónica, mobile working is more and companies setup “pilot” schemes based on
the policies and guidelines established in Telefónica de España Group 1,658
more important, one further step in its
strategy of technological, cultural and the mobility policy, which will be evaluated Telefónica Latinoamérica
organisational change. In this way, during 2006. Among the most notable Telefónica de Argentina 1,920
experiences in this area were those of Telesp (Brazil) 1,948
Telefónica aims for factors such as trust,
Telefónica de España, which since 2002 has Telefónica CTC Chile 2,025
responsibility, commitment and innovation
been running a tele-working scheme called Telefónica del Perú 2,145
allied with efficient management of
working time targets and greater eWready! in which over 750 persons have Telefónica Móviles
autonomy in the organisation of activities participated outside the agreement and Spain 1,766
to be determinant factors in the new way 200 from within it. Argentina 1,967
of working and the consequent change in Chile 2,142
managers and employees. To achieve this, Other companies which have implemented Central América 1,761
employees have been provided with tele-working include TeleSP (126 Colombia 2,280
employees), Publiguías (36 employees), TPI Mexico -
different types of spaces and technological
España (185 employees), I+D (80 Panama 2,288
media, in such a way that their activity
employees), Telefónica Móviles España (32 Peru 2,304
does not have to be carried out solely in
employees). Venezuela 2,040
the office or work station, in the traditional
way. With the implementation of this new Atento
way of working, Telefónica aims to increase Employees taking part in this program have Spain 1,511
its employees' motivation, help them to commented on its flexibility, the Argentina 1,950
find the right balance between their opportunity to improve work-life balance Brazil 2,160
personal and professional life, while and the savings made in travelling time. Central América 1,761
improving productivity at the same time. Colombia 1,977
Chile 2,496
Morocco 2,304
To encourage this new way of working, in
Mexico 1,560
July 2005 a Corporate Policy on Mobile
Peru 1,792
Working was approved. Mobile working
Venezuela 2,184
enables professional activity to be carried
out without the physical presence of the
worker at the work station for a significant
part of the working day/week. The
aforementioned policy defined the process
for establishment of this policy and sets
targets for the 2005-2008 period.

06 Employees
CASE STUDY Abolition of Child labour

Brazil.- Empresa amiga da
criança Telefónica has a zero tolerance policy when Additionally, four companies of the Group
it comes to child labour in all countries in in Brazil were granted the “Empresa Amiga
In Brazil, four companies in the Telefónica
which it operates, A policy which extends de los Niños” certificate.
group were granted the “Empresa Amiga
to its supply chain through the contractual
de los Niños” certificate by the Fundación
requirement for strict compliance with the Proniño is the social initiative of the
Abrinq por los Derechos de los Niños y los
laws of each country. Fundación Telefónica, which seeks to help
Adolescentes (working for the rights of
Latin American child workers go to school,
children and adolescents).
In 2004 the Telefónica Group carried out a in this way contributing to the eradication
workplace audit with an external of child labour in the area and giving these
TeleSP, Telefónica Empresas, Telefónica
consultant in 23 companies of the Group, children the opportunity for development
Assist and T-Gestiona have complied with
located in six different countries and to allow them a better future. This
the ten commitments, summarised below:
representing 86.4% of the Telefónica initiative, described in the chapter on
Group. Child labour was not among the Society, is developed jointly by Telefónica
1. Rejection of child labour
risks detected and leading to corrective Móviles subsidiaries and NGOs, currently
2. Respecting young employees
measures. In the general contract award offering scholarships to over 11,000
3. Inclusion of contractual clauses for
conditions of Telefónica, respect for children. Funds are used to pay registration
providers requiring the rejection of child
employment legislation is expressly fees, school material, uniforms, transport
labour and allowing termination of the
included, as well as in the Group's Code of and food. The Proniño program also holds
contractual relationship in the event of
Ethics and the Code signed up to by workshops with families and educators,
non compliance.
Telefónica and the Unión Internacional de medical checks and cultural and sporting
4. Offering nursey services for children of
Sindicatos. activities.
employees.
5. Ensuring that employees register all
children under 18 in school and
encouraging school attendance.
6. Providing pregnant employees with pre-
partum training
7. Encouraging breast feeding, establishing
conditions where employees can breast
feed their children (under six months).
8. Raising awareness among employees to
register employees who have recently
given birth.
9. Social investment aimed at benefiting
children and adolescents.
10.Contributing to the Fund for the Rights
of Children and Adolescents with an
amount equivalent to 1% of the
company's income tax

06 Employees
Distribution of employees in the Telefónica Group by gender and business line 2005
Data in percentage:
% women
% women in management
66.3
46.8
43.9
38.5 39.6
36.2
27.4 28.4 22.6

24.8
20.8 22.0 20.8
17.9
12.2
4.2
T España LATAM T Móviles T Contenidos TPI Atento T Gestiona Others
Group Group Group Group Group Group Group
Equality of Opportunities CASE STUDY
Equal opportunities prize

Equal opportunities are, for Telefónica, one Gender equality The Telefónica I+D centre in Boecillo,
of the transversal values which governs its On average 49.3% of the workforce of the recognised as a company sensitive to
relationship with stakeholders. Thus, it is Telefónica Group is made up of women, an equality of opportunities by Valladolid
expressly included in the Telefónica Code of increase compared to the 48% for the 2004 Council. This recognition rewards
Ethics, Principles of Customer Relationships, financial year. By business line, of particular the Valladolid company with the best
agreement signed with worker note is the high level of integration in work-life balance.
representatives, the Advanced Purchasing Atento, with a female workforce of 67%, with
System Manual (providers) and many other lowest numbers being found in the fixed
regulatory documents issued by the telephone companies. Without considering
Telefónica Group. the effect of Atento, the percentage of
women in the company is 33%.
Telefónica actively manages equality of
opportunity for disabled persons within the In terms of management levels, there are
framework of its “Telefónica Accesible” over 1,700 women in superior and mid
program. The company does not have an management positions in the company,
active policy of encouraging women to join representing 21.8% of the total. Companies
the Telefónica Group and their internal with the greatest percentage of women at
promotion. Likewise, there is no program these levels are the Atento Group,
for measuring the percentages of diversity Telefónica Contenidos and Telefónica
by ethnic origin, as this is not included in Móviles. The lower proportion of women in
employee records, as any question in this fixed telephone companies is reflected in
respect could be deemed discriminatory. It the proportion of women at management
is significant that no incidents of this levels inn Telefónica de España (10.6%).
nature have been reported in the Group.
In Telefónica we consider that each new Distribution of employees by gender and country
hiring and promotion must be assessed on With Atento Without Atento
personal and professional merits, without %men %women %men %women
recourse to quotas. For this reason we feel Spain 56.3 43.7 68.6 31.4
the application of a policy of non Europe 65.6 34.4 65.6 34.4
discrimination will enable a balance to be Latin América 46.5 53.5 65.3 34.7
struck over the years in terms of gender Argentina 60.2 39.8 68.5 31.5
and ethnicity to bring Telefónica into line Brazil 38.0 62.0 65.3 34.7
with the society in which it does business . Chile 50.2 49.9 64.4 35.6
Peru 58.7 41.3 67.5 32.5
Mexico 54.6 45.4 68.5 31.5
Colombia 48.1 51.9 53.3 46.7
Venezuela 46.0 54.0 49.9 50.2
Rest of América 53.7 46.3 58.3 41.7
Rest of world 51.5 48.5 - -
Total 50.7 49.3 66.5 33.5

06 Employees
Distribution of Companies with the largest

disabled employees in disabled workforce
the Telefónica Group 2004 2005
Spain 556 Telefónica de España Group 150 166

Europe 152 TeleSP Group 363 209
Latin America 356 Telefónica Móviles España 28 28
Argentina 14 Atento España 248 345
Brazil 315 Atento Brasil 137 95
Chile 12 Other companies 58 236
Peru 5 Total 984 1,079
Mexico 3
Colombia 2
Venezuela 5
Rest of America 15
Total 1,079
CASE STUDY
Equality for the disabled •Development of training agreements to
Telefónica's commitment to the social and qualify disabled persons in Brazil, where
employment integration of disabled people the labour market does not meet the
Special Job Centres in Atento goes back to 1973, when at the initiatives of demands for qualified personnel in
the workers and their representatives the companies.
In 2004, three SIAA (Integral Help and
Assistance Services) Special Job Centres
ATAM was created, an initiative described in • Monitoring and internal audit of all the
the section on caring employees. above measures
were put into operation.
Currently, around 1,079 disabled ATAM offers support to Telefónica in
The three Centres, located in “Comunidad professionals work in the Telefónica Group, analyzing the various alternatives available
de Madrid” (Madrid and Getafe) and in 0.54% of the global workforce. The number and assessing companies in matters of
Seville, provide special customer services of employees is 9.6% higher that in 2004, compliance with the prevailing law in this
for top-level institutions and entities. At despite Brazilian regulations raising the bar respect. A collaborative system is thus
the end of the year, it had a group of 200 for the consideration of a person as generated for employment, with synergistic
employees, most (98%) of whom were disabled, meaning that figures for Brazil are effect and benefits for the companies, their
disabled persons of very different on face value lower than those for the employees and the very people with
backgrounds: over 25 taking their first job, previous year. disabilities, all born of respect for rights of
housewives, professionals retained to the disabled.
adapt to their disability, etc. Despite this positive trend in the
integration of disabled people into the ATAM offers the different companies the
As part of the SIAA project in 2004, Atento Telefónica Group, the company knows that possibility of using any of the formulas
Spain signed an agreement with the there is much to do to achieve full considered in the LISMI (Disabled Persons
Adecco Foundation for Integration into the integration. For this reason, as part of its Labour Integration Act) and other
Labour Market with a view to choosing integrated plan for support of disabled legislative developments. In addition to
people with disabilities for our Special persons (Telefónica Accesible), the company ATAM's Labour Integration Service (SILA),
Employment Centres and establishing the is developing a range of measures aimed ATAM also has several special employment
bases to achieve future training classes for at helping the integration of disabled centres staffed entirely by the disabled,
telephone operators. With an outlook persons into the workforce: operating in three sectors of activity:
towards 2005, Atento Spain's objective is industrial laundry, electronic component
to promote expansion of SIAA and open a •Corporate policy of maximum rigour in assembly and telemarketing.
Special Employment Centre in Cáceres in compliance with the LISMI (Disabled
the next few months. persons' Labour Integration Act) in Spain
through direct hiring.
•Policy of strengthening the policy of

hiring products and services through
special employment centres.
•Channelling all offers and vacancies to

the ATAM Labour Integration Service.

06 Employees
Health checks in the prevention service in Spain

Activity Number of checks
Diagnostic checks 142,156

Health campaigns 36,860
Health consultations 65,447
Vaccination 8,651
Health examinations 36,666
Prevention of risks for health

Activity Number of checks
Technical activity 5,314

Technical reports and studies 1,373
Fire prevention 1,043
Risk evaluations 323
Evaluation of psychological and social risks 20
Health and Safety
Commitment to employees of Workplace Health

the Telefónica Group in The maintenance and promotion of
workers' health is central to the daily work
matters of health and safety. of basic health units that the Common
The commitment that the Human
Workplace Risk Prevention Service runs in
Resources Department has made to all
each province and is achieved via the
employees of the Telefónica Group in the
following actions:
promotion of health is structured in Spain
around the Common Workplace Risk •Medical health checks making it possible
Prevention Service along lines of action to check changes in the health of
aimed at maintaining and increasing workers to ensure at all times the
prevention of workplace risks in all our medical APTITUDE of each of them.
companies.
•Preventative health campaigns to
improve health faced with common
Prevention of illnesses. Acting in the prevention of the
workplace risks inherent most frequent infections through
in daily work, with the aim of eliminating or vaccination campaigns.
at least minimising them with the
adoption of corrective measures, collective •Health assistance for workplace
and/or individual, preventing them from accidents. Health workers in the
affecting workers. Common Risk Prevention Service
provider, in their capacity of self insurers
•Risks and workplace re-evaluation, for accidents, the health assistance
necessary for all accidents, both in the
including psychosocial issues, as well as
workplace evaluation, base stations and workplace and when workers of
new workplace evaluation. Telefónica de España and Telefónica S.A.
are travelling
•Fire prevention - including a particular
focus on emergency simulations, as well
as frequent informative talks for
employees as well as the preparation of
action plans for emergency situations
and reports on the compliance of
buildings with current legislation.
•Technical advice for the business lines of

the different companies and in particular
relationships with public authorities.

06 Employees
Workplace accident rates in Spain

Data in percentages
2002 2004
2003 2005
7.04 7.01
6.49
4.99
0.27
0.2
0.24
0.13
Serousness Frequency
index index
Workplace accidents Coordination of business activities

Research and assessment of workplace With the aim of spreading our prevention
accidents and frequency and seriousness policies to external collaborators and
indices have allowed us to increase promoting health with the aim of reducing
corrective measures with the aim of accident rates, Inspection and Supervision
reducing not only the number of accidents Audits were carried out, as well as
but also the harm caused to workers, a Coordination meetings with the technical
target we have been meeting each year, as support of the Common Workplace Risk
can be seen by comparing annual indices, Prevention Service. Although not in the
such as those from the Communications direct ambit of this service, it should be
Sector published by the National Institute emphasised that as a complement to the
for Health and Safety in the Workplace. commitment undertaken by the Corporate
Human Resources Division to all workers,
Health and Safety Committees companies in the Telefónica Group have
Among the model agreed with the Social taken out private health insurance to
Representative, a total of 84 Health and complement the public health system,
Safety Committees have been set up in contributing to improving and speeding up
companies within the Telefónica Group. diagnosis and cure of pathological
These are peer committees, comprised in processes.
equal numbers by worker and company
representatives. All committees receive
technical advise from the Common
Prevention Service.
As well as in Spain, there are Health

and Safety Committees in Argentina,
Chile and Peru.

06 Employees
Good preventative Workplace Risk Prevention Commission

Comprises workplace risk prevention
practices in Spain
representatives from those units at
greatest risk. It is presided over by the
A commitment to prevention of
Director of the Labour Relations and
workplace risks
Employment Division. It meets every six
Telefónica de España's management to
months and its functions revolve around
comply with Law 31/1995 on the Prevention
the effective development of policies,
of Workplace Risks takes shape on an
objectives and strategies approved by the
organisational level in the operation of a
Board of Directors
range of bodies framed, in turn, within a
specific organisation which seeks to
Health and Safety Committees
develop a system of prevention which
These are peer social representation bodies
facilitates the planning, setting up and
which monitor the actions of the company
monitoring of said system, and above all its
in terms of prevention of workplace risk. In
integration into all hierarchical levels of the
Telefónica de España there are 51
company.
committees (1 for each province, plus a
central committee). The Chairman of the
The main planks of the system
Central Health and Safety Committee is
Workplace Risk Prevention Committee
also the Coordinator of the Prevention
Made up of representatives of the
Committee, thus closing the circle that
Management Committee whose skills have
interconnects the whole system.
a special impact, direct or indirect, on the
prevention of workplace risks. It is presided
Management of the Common Workplace
over by the Human Resources Director and
Risk Prevention Service
meets every six months or whenever
This unit coordinates the Prevention
deemed appropriate, and among its
System and also holds the secretariat of
functions are:
the Workplace Risk Prevention Commission.
•Approving and analysing the Its main function is to identify and assess
preventative policy in Telefónica de workplace risks implicit in all work and
España. activities carried out in the company
•Drawing up the Prevention Plan

•Incorporating preventative criteria into
management.
•Approving the Annual Preventative Plan

of Telefónica de España.

06 Employees
Coordination of business activities in Coordination meetings with providers

Telefónica de España As a complement to such supervision
To comply with RD 171/2004 of 30 January, activities, Telefónica de España has set up,
which develops article 24 of law 31/1995 of as a means of coordination, a system of
8 November on Prevention of Workplace regular meetings between companies with
Risks, in matters of coordination of the presence of the Common Workplace
business activities, Telefónica de España, as Risk Prevention Service. These reunions
principal employer, carries out activities to enable compliance with three of the
ensure compliance in relation to employees measures established as “coordination
of collaborators, and by way of coordination measures” in article 11 of the
holds regular meetings with the aforementioned royal Decree: the holding
representatives of same. of periodic meetings between competing
companies, the passing on of instructions
Monitoring external providers and the joint establishment of specific
With the aim of ensuring compliance with preventative measures or action protocols
regulation on matters of workplace risk which might affect collaborators. Meetings
prevention by external providers, discuss the following topics:
supervision is carried out during execution
of work, involving specific periodic •Review and analysis of the results of the
supervision inspections carried out.
inspections carried out "in situ" to ensure
the level of compliance with prevention •Analysis of accident rates recorded in this
regulations by said companies. period.
These actions are carried out jointly with
the interlocutor representing the external
•Prevention instructions, specific
measures and coordination, actions to
provider and representatives from the apply.
Contract Management Division and the
Common Workplace Risk Prevention Service •Relevant facts envisaged.
of Telefónica de España.
The action carried out and the deficiencies Emphasis will be placed on the most
observed are summarised in a document serious events and considerations dealt
drawn up for this effect. with in said meetings and the
corresponding document will be drawn up.
The detection of inadequate actions may
constitute an infraction which, depending All the above is to promote prevention in
on the scope and gravity of same in terms external providers.
of the physical integrity or health of
workers, may be classified as a minor,
serious or very serious infraction and may
lead to a range of penalties being applied
to the external provider

06 Employees
Evaluation and control of Stop smoking awareness campaign

psychological and social factors in Telefónica, through the Common
the Telefónica call centre Workplace Risk Prevention Service, has
Risks deriving from exposure to damaging developed a stop smoking campaign,
psychological and social factors are a anticipating the entry into force of the Law
constant source of concern, analysis and regulating the Sale, Supply, Consumption
control in companies within the Telefónica and Advertising of Tobacco (Draft Law
Group, more so in the future given that, 121/000036) which will begin the
according to experts, factors such as prohibition of smoking in all workplaces.
mental load, time pressures etc. and the This campaign, available on the health and
pathologies associated with same - safety channel, offers guidance and advice
depression, anxiety, stress and even in quitting: a course through a+, called
muscular and bone disorders will be the “quit smoking” which is given by health
illnesses of the XXI century not only in the personnel to help you give up; a mail box
workplace but in all areas of human dealt with by the Common Workplace Risk
activity. Prevention Service where you can ask any
queries you have with respect to this
As in other fields of workplace risk process, and which will be answered in a
prevention, Telefónica has been a pioneer in personalised and anonymous way, always
the identification, evaluation and proposal via e-mail. There will also be information on
of measures to correct psychological and how to get a medical appointment at
social risks, as since the beginning of the clinics of the Common Workplace Risk
century, 2001, said factors have been Prevention Service, as the campaign is of
evaluated. national scope.
Specifically, during 2005 twenty Work at height in Telefónica Móviles

psychological and social risk evaluations España and Telefónica de España
were carried out in Telefónica de España Maintenance personal in radio facilities
and Atento Teleservicios España, companies and infrastructure personnel who in
whose common denominator is that they Telefónica Móviles España and Telefónica
have the largest workforce in the Telefónica de España carry out work on towers and
group and part of their activity is focused antennae will attend course on safety and
on call centres. As an example of a series of safety practices at height.
actions, it is in Telefónica de España where
the most evaluations and re-evaluations of
this type have been carried out, reporting
on results and proposals for improvement
to both Health and Safety Committees and
The Commercial Committee, which in the
final instance must determine the most
appropriate actions, as most preventative
actions to implement are related to aspects
of workplace organisation.

06 Employees
The objective of training is for personnel Good Preventative Practices

involved to know how to handle personal
in Latin America
protective equipment for work on towers,
analyse risks of falling from a height from
Argentina
towers and high workplaces, master the
Anti tobacco: Smoke free offices were
principles of vertical movement when
launched, with expert talks on the matter.
working on towers in the framework of
individual protection, knowing the
Risk audit in all offices of the company. This
requirements for collective protection,
considers improvements to processes,
confirming knowledge of safety matters for
analyses of work stations, signposting of
work at height in general.
escape routes, etc.
These workers will carry out health

Emergency and evacuation plans. These are
checks at the beginning of their work
carried out twice a year in CABA buildings,
and subsequently, annually and on a
and once a year in others. This includes
mandatory basis, in relation to the
simulated evacuations, the make up of
pecific risks of work at height.
emergency crews, training of emergency
coordinators.
Determining each year medical aptitude
for work at height is one of the most
Training in workplace risks.
effective preventative actions to reduce
Aimed at workers with greatest exposure
workplace accidents.
to risk such as: working at height/
evacuation of buildings/ fire fighting/
Work with Biological Risks
electrical risk/ first aid/ safety in fuel
Telefónica de España has defined a specific
stores/ use of personal protection
protocol on biological risks to protect its
equipment/ defensive actions/ risks on
workers from infections, particularly from
public highways etc.
HIV. Health workers in the Common
Workplace Risk Prevention Service are
Provision of personal protective equipment.
offered blood tests and examinations when
This is protective equipment for workers in
they start their work and whenever there is
fuel stores or workers travelling around
a risk of HIV, HCV or HBV infections, as well
sites or carrying out work at height, or
as Hepatitis B vaccinations.
subject to a certain risk. Among the most
common personal protective devices are:
Likewise, there is a procedure in place in
helmet, safety boots, gloves, dielectic
the case of a specific accident by health
gloves, lumbar support, harnesses for work
workers:
at height, masks, ear defenders etc.
This includes protocols for the actions to
carry out, considering both general and
specific actions depending on the
immunological status of the victim in
terms of HBV and HIV as well as the source
of the exposure.

06 Employees
Brazil Chile
The companies have a Joint Occupational ATENTO takes part in a program called
Health and Safety Commission - “Empresa Competitiva 2.0" run by the Mutual
CIPA). de Seguridad (Chilean social security body for
workplace accidents and occupational illness).
In 2005 Atento Brazil carried out AIDS This program involves a range of activities
prevention campaigns. For one week during during the year with goals to be reached as
carnival, and also on World AIDS Day in part of the same program. The PEC program
December, Atento distributed leaflets with has been approved by the management and
guidelines as well as condoms to has been registered with the Mutual de
employees. Seguridad. It is aimed at contributing to the
improvements of member companies of the
Colombia C.Ch.C Mutual de Seguridad, seeking to
Work at height workshop for technical vice provide real protection for the physical
presidency personnel. integrity and health of workers.
Module 10 of the program deals with control
Medical examinations for executives.
of epidemiological illnesses. The program
Provision of protective equipment.
has received excellent ratings, with 97%
'Active pauses' program in different
compliance.
company divisions.
Health and Safety Week with anti-stress CTC and Móviles prepare an annual program
workshops, talks on medical care and pursuant to law 16744 and the employment
checks for employees. Cardio-vascular risk code establishing objectives signed up to
campaign. and in line with Chilean laws and the
Flu vaccine day. recommendations of the ILO. The program
includes activities to be carried out, the
Sports medicine program, sight, hearing persons responsible, the chronogram of
and voice conservation program, visits and a special section on risk prevention
ergonomics program, updated risk outlook management involving training, medical
in all company headquarters. examinations, emergency plans, internal
Unification of industrial health and safety regulations, peer committee,
procedures on a national level. telecommunications projects, environment.
Maintenance of fire fighting systems

Ecuador
(FM200, hydraulic extinguishers).
Evacuation simulations were carried out in
Meetings of Occupational Health Peer each building to update emergency plans.
Committee
Updating the safety committee and
representatives by floor in the event of
emergency.
Training of management in personal safety
matters.
Implementation of a national flu
vaccination program with the participation
of family members.
Work focussed on providing information to
06 Employees
employees in health matters, in all matters out with the participation of all personnel
relating to prevention of illness. Medical nationally. All premises have safety signage
examinations carried out, laboratory tests and certification from INDECI (Civil Defence
and eyesight checks for 88% of employees Institute). They also have health and safety
nationally. committees in all company divisions.
Summer sports programs launched so There is a chronogram of preventative and

employees can participate in various corrective maintenance for all safety teams
disciplines. in different company premises to ensure
they function correctly.
Training of floor safety representatives in
matters related to first aid. Venezuela
In 2005, the Workplace Health and Safety
Bi-annual contribution to the national Division focussed its efforts on:
blood donation program.
Installation of signage (escape routes,
electrical risk, fire extinguishers, among
El Salvador-Guatemala
others)
Workplace health and prevention courses.
Evacuation volunteers program, evacuation Improvement of the fire detection and alarm
simulations, first aid workshops, corporate system (migration to systems with
anti-smoking program, currently intelligent devices - Radionic system).
implementation of ISO 14,000 certification Installation of extinguishers.
processes, volunteer program for
reconstruction of schools. Social In health and prevention matters
contribution program (Proniño).
•Vaccination days for prevention of illness
Panama •Breast Cancer prevention day (September)
Together with the Health Ministry, a
campaign of vaccination against tetanus
•HIV prevention day (December)
and rubella for around 350 employees. •Cholesterol/ Triglycerides / Glycaemia /
Anaemia/ Obesity prevention days (July
and September)
Health fair held, where around 300 persons
benefited from medical and dental services •Design and implementation of drug
such as: vaccination, blood pressure, weight prevention program
and height, nutritional evaluation,
massage, glucose, blood examinations,
•Design of primary health care service at
Torre 42 Telefónica, S.A. 06
dental and optometry evaluation.
Peru
The company responsible for providing
health and safety services to companies in
the Telefónica Group in Peru is T-Gestiona.
In 2005 25 simulations were carried out in
different Telefónica premises in Peru. Once
a year, evacuation simulations are carried

06 Employees
Employment claims
Despite the efforts made by the company Employment claims received (2005 total)
to resolve claims brought by its employees,
Number of claims % of workforce
there are currently 3,247 claims brought by
employees against the company (2,191 Fixed Spain 306 0.9
claims in 2004). Fixed Latin America 713 2.5
Telefónica Móviles 105 0.5
The two procedures opened in relation to Directories 117 4.0
Content and Media 4 0.2
alleged mobbing cases resulted in clear
Atento 1,495 1.9
rulings in favour of Telefónica de España
T gestiona 196 9.9
and Telefónica Móviles España.
Others 2 0.9

06 Employees
Telefónica Volunteers, Notable facts in 2005.

Argentina 723 employees from the 18 business units and Group companies signed up
243 projects carried out during the year 2000 in the whole country.
Brazil 285 employees participated in the 'Incentivo Niño - Medida Legal' program.
12 Telefónica volunteer projects in the 11 Annual Project Competition.
Chile Around 500 Group employees participated directly in the program.

Employee 240 social actions to celebrate 125 years of Telefónica in Chile.
solidarity Spain Around 840 voluntary workers from different Group companies have signed up,
and 3000 collaborating in different joint campaigns and initiatives.
11 large voluntary projects.
10,000 hours a year on average dedicated to said activities.
Mexico 366 employees participating in 16 different social programs.
Peru 150 employees participating in the program.
Venezuela 300 employees participating in 13 different social projects.

8 large volunteer programs.
Telefónica Volunteering
Of note among actions developed by

The Telefónica Group corporate volunteer
Telefónica volunteers are:
program goes back to the year 2000 when
a common network of Group employees •Educational programs: children, young
was set up in Argentina. people, adults with limited resources,
Said network has been established in immigrants, the elderly etc.
other companies where Telefónica has a
presence (Venezuela in 2002, Chile
•Solidarity vacations: exchanges between
volunteers participating in the different
and Spain in 2003 and finally in Brazil, countries where Fundación has a
Mexico and Peru in 2005). presence.
The Telefónica Group corporate volunteer •Participation in events held by social

program is a trans-national initiative open to organisations: competitions and different
active, pre-retirement and retired employees, sporting activities for disabled people,
as well as family members if they wish. and sporadic initiatives aimed at children
Managed by Fundación Telefónica, its or the elderly.
objective is to encourage and strengthen
social actions, offering its members the
•Support for the Proniño program:
eradication of child labour in Latin
necessary resources to meet its objectives America.
and have a positive effect on society.
•Solidarity campaigns: collection of
economic donations, articles and
2005 saw a significant boost for the
material such as clothes, foodstuffs and
program. From a strategic viewpoint, this
other goods.
has become one of the corporate areas
which are fundamental to the social action
of the Telefónica Group. The objectives set
•Volunteer for a Day: find out more about
the work of an experienced volunteer in
for the 2006 financial year are as follows: a not for profit organisation.
•Physical and online training for •Elderly companionship program:

volunteers so they can suggest and
undertake their own joint initiatives. •'Teleoperador@s Solidari@s': joint
campaigns and telethons in which the
•Local committees as a Telefónica Group participates .
driver of the program:
Local volunteer committees are groups of •Projects for the recovery and support of
the environment:
employees, active or retired, who want to
support specific social causes in
cooperation with local not for profit
organisations.
•Development of projects implemented at

the initiative of volunteers themselves.

06 Employees
ATAM
ATAM was formed in 1973 through the ATAM is currently one of the most solid and
decided effort of a group of Telefónica palpable initiatives of the Telefónica Group
employees, together with the help of in corporate responsibility matters and the
Medical Services and Social Assistance, the principal reference for Group companies in
Telefónica Prevention Institution and matters related to disabilities, as an expert
employees' labour representatives. In 1974 and integrated association in that sector.
the institution was included in Telefónica's Details of its activity can be found at the
collective bargaining agreement, becoming website www.atam.es and in its Annual
one of the first examples in Spain of the Report, available at
creation of a legal entity between a www.telefonica/publicaciones.
company and its workers. The Bylaws of the
Association establish its own governing During 2005, Telefónica implemented a
bodies and operational mechanisms. policy to encourage the employment of
disabled people through the Telefónica
ATAM's governing bodies are comprised of accessible program, available on
company and labour union representatives www.telefonica/accesible. Framed within
(in proportion to union representation). this project, ATAM is the interlocutor
between Telefónica and the disability
The institution also has regional advisory sector. Through the Employment
groups that act by delegation of their Integration Service (SILA), ATAM provides
governing bodies throughout the country technical assistance to companies of the
and are coordinated by managers from the Group in Spain with the aim of increasing
Human Resources area of the Company in employment rates of disabled persons in
each zone. Telefónica.
ATAM is financed largely by the willing and

voluntary contributions of some 61,000
employees from 22 Telefónica Group
companies. The workers contribute 2 per
thousand of their fixed wages and the
companies double this contribution.
During 2005 the total number of

assistance actions subsidised by ATM was
more than 2000, its own centres dealt with
over 400 disabled persons, its clinical team
dealt with over 3000 consultations and its
Special Employment Centres employed 250
disabled persons.

06 Employees
District C

06 Employees
CASE STUDY
District C: a new space for a

new way of working
The campus covers an area of 200,000 Landscaping also plays an important role. Technology and a new way of managing
square metres and will house around The different shrubs and trees, personnel have made it possible to
14,000 professionals from the different together with waterfalls and a lake implement the concept of “mobile working”,
companies of the Telefónica Group, who have been designed to improve with more efficient time management as
will be arriving between autumn 2006 and humidity and freshness. well as a better work-life balance.
summer of 2007. It is located in the new
neighbourhood of Las Tablas, to the north A significant commitment has also been District C, a project for innovation
of the city of Madrid, bordering made to a paper free office and the and a factor for change.
Alcobendas. reduction and adequate treatment of waste. District C exemplifies the new working
culture at Telefónica.
It is located at the confluence of three The architecture and technology has been Spaces, technologies and new ways of
important highways: the M-40, the A-1 designed to facilitate a new way of working are the three main levers for
motorway and the M-603 from Fuencarral working which will be characterised by innovation and transformation, which are
Alcobendas. As of April 2007 it will have a more horizontal relationships, greater encouraged through policies and
station on line 10 of the Metro, referred to mobility, flexibility, team work and processes, progress being measured
as "District C". management by targets. through the corresponding indicators and
targets.
An open space and a commitment Directors and managers work alongside
to the environment their teams and have access to a wide • Different types of work stations and
spaces better suited to different needs.
District C was designed as a space open to range of space designed to facilitate
Key: the advanced workstations.
the city and its neighbours, a space to communication and collaboration.
share with our customers and our • Connectivity which favours mobility
partners. The technological resources assigned to and flexibility and enables work from
work stations are defined not according to any location and in a range of
The campus lacks barriers; it is integrated the hierarchical position but rather situations.
into its surroundings and will be a show
case for an innovative, open, transparent
professional profiles. Thus, mobile workers
use advanced work stations, laptops and
• New leadership meaning progress in
management by targets and
and close Telefónica. fixed-mobile connectivity making it performance; towards greater
possible to work in different locations autonomy in time and activity
Telefónica's commitment to the both within and outside of the campus. management.
environment means that District C was Personnel having a traditional or basic
designed ideas along the lines of profile have flat screens and a In summary, spaces and technologies to
“sustainable architecture”, facilitating the conventional computer, although encourage talent, creativity and innovation,
reduction of C02 waste, the optimisation integrated into shared use multiple development, motivation and balance,
of climatic conditions and a more efficient function systems which substitute generating efficiency and productivity.
use of resources. printers, scanners and faxes.

06 Employees
Crédits


Investor Relations


Secretariat General







06 Employees

07 Society
Society
contribution
y proximity

Contents 4
02 Identity 32
04 Customers 104
05 Shareholders 168
06 Employees 178
07 Society 226
Commitment with the countries 228
Digital Inclusion 230
Universal Service 231
Geographic divide 232
Economic divide 234
Education-training divide 236
Social and cultural activity 238
EducaRed 240
Proniño 242
Cooperation 244
Art and culture 245
Telefónica Accesible 246
09 Providers 292
10 Media 304
11 ANNEX I 310

07 Society
In Chapter 03 of this report it´s presented the role of Telefónica

as an engine of economic, technological and social development
in the countries in which it operates. Without wanting to
repeat the information in that chapter, Telefónica presents
its explicit commitment to the various regions and
Commitment countries where it is present.
with the
countries
Spain Latin America

In Spain, Telefónica is collaborating with In different countries of Latin America,
the National Government and with the Telefónica has also demonstrated its
various Autonomous Governments in commitment through its long-term
drawing up their respective Information investments, and its willingness to become
Society plans, and particularly the a strategic partner in their socio-economic
initiatives that are part of the Plan Avanza. development:
In addition, with the aim of responding
more directly to the demands of the •In Argentina, Telefónica celebrated its 15
years of presence in Argentina with an
different autonomous communities,
institutional campaign and organising
Telefónica has set up the Telefónica
events and meetings to thank the
Consultative Councils.
collaboration of all those who have made
it possible to reach this figure. In 2005,
If there is one service that is representative
Telefónica also celebrated the arrival of
of Telefónica’s commitment to investing in
optic fibre in Tierra del Fuego, managing
the whole territory of Spain in 2005, that
to connect one of the most distant
service is Imagenio (television by ADSL). At
regions of the planet with the future.
the end of 2004, the service was
commercially available only in Alicante, •In Brazil, Telefónica has led the setting-up
Barcelona and Madrid, but as from July of the “Alianza Brasil-España”, created to
2005 it is available in all the provincial encourage cultural, economic and social
capitals and in more than 150 cities of relations between the two countries.
Spain. Telefónica has set as its long-term
aim that 60% of households should have
•In Chile, the celebration of 15 years of
Telefónica in the country coincided with
broadband of up to 50 megas by 2010. the 125th anniversary of the company
Telefónica CTC.
•In Peru, Telefónica is taking an active part

in the “Crece Perú” programme, aimed at
the professionalisation and development
of a powerful entrepreneurial network in
the country as a key to its sustainable
development. At the same time, given
the large number of Peruvians resident
in Spain, movistar was the sponsor of
Peru Day in Madrid.
•In Mexico, Telefónica Móviles’

commitment to invest was seen in the
extension of its available coverage, by
starting up almost 1,200 base stations
during financial year 2005.

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•In Colombia, the President of Telefónica CASE STUDY

conveyed to the President of the Republic
the strategic importance of the country
for the Telefónica Group. This message Telefónica leads the “Alianza
was put into effect with the Brasil-España”
commitment of investments of over 300
million dollars during 2005 and in the Telefónica, the largest Spanish investor in
acquisition (in 2006) of Colombia Brazil, has asked more than 30
Telecom, the state operator up to that personalities from different sectors
moment. (culture, business, education, economics,
international relations, media and tourism)
Europe from the two countries to take part in this
In Europe, Telefónica’s purchase of Çesky project, with the aim of drawing up a
Telecom stands out, which received the report with working proposals about the
unanimous recommendation of the existing potential for relations between
Privatisations Commission of the Czech Spain and Brazil. Telefónica’s aim is to
Republic. The Czech Prime Minister was contribute to the building of bridges
present at the signing of the contract. between the two countries.
In addition, Telefónica’s purchase of O2 In recent years, relations between Brazil

helps it to balance its profile as both a and Spain have moved into a new phase,
European and a Latin American company. and have become broader and deeper.
Its more than 26 million customers in the This is basically due to the existence of
United Kingdom, Ireland and Germany, common interests in the area of
together with the dynamism shown by O2 international relations and to mutual trust.
in such competitive commercial markets, This has been reflected in the higher level
guarantee Telefónica’s commitment to of investments of Spanish firms in Brazil
developing the information society in these and in a huge potential for bilateral trade.
markets. A clear sign of this mutual trust is the risk
taken on by Spanish firms that, in the last
China 15 years, have invested around 30,000
Finally, an important event in the context million dollars in Brazil. Foreign investment
of Telefónica’s strategic alliance with China from Spain is thus second in volume after
Netcom was the visit of the President of that of the United States.
the Republic of China to Telefónica’s
National Supervision and Operations
Centre in Spain. He was shown the
procedures and tools for network control
and was given a practical demonstration of
how the communications networks
function between Spain and China.

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Digital inclusion
CASE STUDY Digital inclusion

Llaqt@red
The concept of the digital divide is defined The idea of the initiative is to stimulate the
Telefónica del Perú has launched the
as the existing differences in access to new development of new projects and
Llaqt@red project, to connect up rural areas
technologies. However, digital technology is collaboration between public and private
of the country and to offer them access to
not in itself the cause of the digital divide: bodies, to make it possible to bridge the
information, meeting the needs and
the main factors causing it are the digital divide. Connect the World has 22
expectations of its citizens. The first stage
provision of communications infrastructure founding partners, among which are such
of the plan linked 17 populations, providing
in all the territory, as well as income level global companies as Telefónica, the only
permanent Internet access with a flat-rate
and training in using the new technologies. integrated operator present, Alcatel, Intel
tariff.
and Microsoft, governments and other
Telefónica, as a significant operator in its organisations.
Llaqt@red is set up through alliances
markets and meeting its commitments to
between Telefónica and local entrepreneurs
proximity and trust, not only complies with As part of this commitment, Telefónica took
who can invest in the installation of a tele-
the regulatory requirements associated part in the round table on Digital Inclusion
centre as a profession and as a tool in the
with the universal service, but also takes on held in the second phase of the World
service of society.
numerous initiatives aimed at reducing the Summit on the Information Society in
digital divide in its zones of influence. Tunis.
This project was awarded a prize for
Business Creativity in Peru during 2004, in
As an example of this commitment, in
the category of Public Services and is one of
2005, Telefónica joined the Connect the
the case studies of the "Connect the world"
World initiative, launched by the
alliance.
International Telecommunications Union
(ITU). Its main objective is to give access to
For further information:
Information and Communications
http://www.telefonica.com.pe/llaqtared
Technology to the nearly 1,000 million
people in all the world who cannot yet
even make simple telephone calls.

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Main cost components of the Universal Service

in Latin America 2005
% Tef. Net amount of Universal services
revenue business figure contribution
Brasil 1% 4,853 48,527
Peru 1% 1,031 10,314
Argentina 1% 891 8,909
Total 67,750
Universal Service
Spain Latin America

In Spain, Telefónica de España is taking on In Latin America, the Telefónica companies
by itself the net cost of providing the collaborate with the various public
Universal Service, even though its initiatives for universalising the service,
estimated quota of the market for access is with a contribution of over 65 million euros
85%, that for voice traffic is 66% and for to the universalisation funds:
retail ADSL is 55%.
•In Argentina, the Universal Service Fund,
to which each operator is expected to
The net cost of the obligations of the
contribute 1% of its invoiced income, has
Universal Service in 2004 was 131 million
not yet been set up. The amount
Euros according to Telefónica de España.
provided since 2001 reaches more than
This breaks down into the net cost in
42 million euros.
unprofitable areas (65 million Euros),
special needs users (61 million Euros), and •In Brazil, the Telecommunications
the cost of the information services and Services Universalisation Funds (FUST)
directories (5 million Euros). are formed from 1% of gross operating
billing; by the end of 2005, its funds had
The Telecommunications Market not been used by the government.
Commission (CMT) has yet to pronounce
on the definitive amount of the Net Cost
•In Chile, CTC on its own account carries
out programmes promoting services and
incurred by Telefónica in the year 2004. The applications (for example, giving Internet
net cost does not incorporate the whole of access to 5,500 schools) which
the real cost involved for Telefónica de complement the programmes of the
España in meeting these obligations. Telecommunications Development Fund
(FDT) directly financed by the
For methodological reasons established by government.
the CMT, the losses are compensated
associated with the maintenance of 18,949 •In Peru, a Telecommunications
cabins in places where their use does not Investment Fund (FITEL) has been
cover maintenance costs, and this is around established, formed by the contribution
62 million euros. from the operators that is equivalent to
1% of the total gross income billed.

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Investments of Telefónica de España for migrating TRAC technology1

Data in millons of euros
Total
Copper GSM LMDS VSAT Dec 2005
Regions EU2 OBJECTIVE1 92.52 13.42 22.75 3.87 132.57

Other regions 8.97 2.73 1.18 0.78 13.67
Total 101.49 16.15 23.94 4.65 146.24
1
including dismantling costs and repercussions of multi-provincial costs
2
Telefónica recieved 31 million euros in FEDER funds
lines and 97% of households, which places

CASO PRÁCTICO Geographic divide Spain in a position ever closer to total
broadband accessibility. Financial year 2005
Geographic divide has been decisive for extending the
Spain availability of digital television to more
The geographic divide can be described as To meet its obligation to provide a than 150 cities of Spain, when it was
the barrier that prevents individuals from universal service, Telefónica must offer a available in only three of these in 2004.
accessing basic means of communication service in high-cost areas, and subsidise The long-term aim set by Telefónica is for
or broadband as a result of the physical service provision in rural zones and 60% of households to have broadband of
location from which they wish to access underpopulated provincial capitals, as the up to 50 megas by 2010.
them. This divide may be international service is available at the same price as in
(services that exist in some countries and urban areas. In terms of mobile services, Telefónica
not in others) or national (services that Móviles was one of the two operators that,
exist in some regions and not in others). At the end of 2005, the number of TRAC together with the Ministry of Industry,
access lines in operation was 169,512 signed the Mobile Telephone Extension
Development of population ADSL coverage (195,000 in 2004). This is the number of Plan, which will put national coverage at
by Telefónica1. accesses that remain in service after having
Total population coverage the head of the European countries with an
migrated a good number of them to objective value of 99%. The plan, linked to
Data in percentages
various technologies, so that service supply the concession of the contest of the 900
in rural areas should not now be associated MHz GSM frequency band (June 2005),
94.9 96.6 97.3 with only this type of access. includes a joint investment of 833 million
89.4 90.9
euros, with the following objectives:
Telefónica de España is replacing the TRAC
69.8 technology used to provide services in rural •Coverage to 2,270 population centres
with populations equal to or less than
areas with other different technologies
1,000 inhabitants that up to the present
(LMDS, GSM/GPRS, satellite or especially
do not have any.
copper), for which, up to December 2005, it
15,2
has invested 146.24 million euros. The
accesses belonging to provinces
•Improved coverage in 2,727 population
11,3 centres with populations equal to or less
established as a European Union “Objective than 1,000 inhabitants, with the
1” receive EU subsidies to help in starting starting-up of a second operator.
3,9 7,1 them up (31 million euros in FEDER funds).
0,2
1,3
•Provision of coverage in strategic areas
such as nuclear power stations or 16
2000 2001 2002 2003 2004 2005 This effort of investment by Telefónica de
petrochemical plants.
España means that the already significant
1 Calculated by municipalities, considering that a
ADSL coverage has increased to 96% of
municipality (and all its inhabitants) have coverage
when one of the exchanges attending it is open for
ADSL service. Not considering loop quality.
For all the years of the series the inhabitants are
considered as in INE (National Statistics Institute)
2001

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Broadband coverage in Latin America Mobile coverage in Latin

Data in percentages
America
TASA TeleSP CTC TdP Population coverage 2005
Digitalisation 2005 100 100 100 97 Argentina 92
ADSL Coverage 2005 90 97 96 97 Chile 95.7
ADSL Coverage 2004 88 95 90 95 Colombia 68
Ecuador 76.1
El Salvador 77.4
Guatemala 56
Mexico 69
Nicaragua 25
Panama -
Peru 61.6
Uruguay 80
Venezuela 93.3
•Improved coverage in major •After the merger with BellSouth,

communication routes (motorways, Telefónica Móviles Perú committed itself
highways, national routes, high-speed to implementing and improving the
rail infrastructure). cellular communications service in 2,000
localities in Peru over a period of 3 years,
•Priority actions for the municipalities making access to the mobile telephone
involved in the emergency measures
available to one and a half million
related to forest fires.
Peruvians. The first stage, that will take
up to June 2006, consists in expanding
Latin America coverage in 540 population centres of 17
The investment effort of Telefónica in Latin departments in the country, including
America to push forward broadband can be the department of Apurímac, thought to
seen in the digitalisation of the telephone have one of the highest levels of poverty
network that has reached 100% in in the country.
Argentina, Brazil and Chile, and 96.8% in
Peru. •The spread of GSM by Telefónica Móviles
México has been particularly significant
in rural areas, reaching a total of 49,304
This network digitalisation has made it
populations and extending the service
possible to reach high coverage of
along 60,634 kilometres of highway. In
broadband services over the fixed
urban areas, coverage was extended to
telephone network, reaching 97% in Sao
155 cities, reaching a total of 401 (60%
Paulo (Brazil, TeleSP) and Peru (TdP), 96% in
more cities than in 2004). This implies
Chile (CTC) and 89.5% in Argentina (TASA).
that practically all the important cities of
the country are covered and that 96% of
In Latin America, Telefónica Móviles has
the possible interconnection points with
strengthened its position as the main
the operator are available.
operator in the region, widening its
coverage in all the countries in which it •Telefónica Guatemala ended the year
operates: covering 147 cities, which is equivalent to
a total coverage of 63% of Guatemalan
•Telefónica Móviles Argentina has carried territory.
out an important investment plan for
extending the GSM network during •Telefónica Móviles Nicaragua, as well as
2005, giving coverage to cities and towns broadening its cellular coverage to reach
where up to then they did not have a 25% of the population of the country,
mobile telephone service. In the North, leads the market in public telephones,
GSM coverage was widened significantly, installing 7,000 units in the whole of the
from 6.8 million inhabitants in 34 national territory, and is the operator
localities to 10.5 million inhabitants in with the most public telephones
248 localities. installed in Nicaragua.

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Prepaid lines and control consumption lines in Latin America

Data in thousands
2004 2005 % of total lines5
TelesP1 1,954 2,294 18.6

TASA2 1,200 1,328 29.3
CTC3 409 534 21.9
TdP4 1,157 1,385 58.9
Total TISA 4,720 5,541 25.6
1
Includes the Linha da economia
2
Includes the Líneas Control, Cero and Recupero
3
Includes the línea económica and supereconómica, full variable, línea control, plan solución....
4
Includes the Fonofácil plus, popular, limited consumption, social lines...
5
Includes public telephones in the calculation
The characteristics of this type of services

Economic divide include:
•Control of consumption by the users,

limiting the number of calls that they
The special social rates, together with can make or restricting the kind of calls
Public terminals, to local ones.
prepaid plans, the public telephone system
Latin America.
(Thousands)
2003 2004 2005
and restricted line services, are the
fundamental pillars on which Telefónica
•The possibility of making calls to mobiles,
inter-city or international calls by buying
has based its array of services aimed at low prepaid cards (that can also be used in
Argentina 107 105 121
income groups. According to studies made phone-booths).
Sao Paulo (Brazil) 327 331 330
by the Group, such initiatives are essential
Peru
Chile
118
33
129
28
137
24 to encourage digital inclusion, since social •Debt repayment plans to avoid
classes D and E (those with the lowest customers having the service cut off if
incomes) would hardly be able to meet the they are late paying.
basic cost in any other way.
•Virtual mailboxes where messages can
be recovered from a number not
So it is vital to make products and services associated with a line.
available that match the real social and
economic situation of the countries in
Public telephones
which Telefónica operates and thus meet
The public telephone is an option instead
the needs of the sectors that, for financial
of the home telephone that eases access to
reasons, do not have access to
communications for all the population,
telecommunications services.
avoiding the need to pay a connection or
maintenance charge. Given the increase in
Rates for low income groups in the use of mobile telephones and the plans
Latin America for low-income groups, it is a service that is
The growth of the basic telephone service used only by individuals with scarce
among the lower income segments in Latin resources. However, it is critical for these
America is based on developing and people that it should work well, and this
making available products adapted to the requires a great commitment by Telefónica,
needs of the consumer and their financial due to the difficulties of dealing with
capabilities. repairs as a consequence of the acts of
vandalism that the equipment suffers out
The more than 5.5 million prepaid and on the street.
restricted consumption lines in Latin
America represent more than 25% of the In Latin America, where penetration of
total. If this proportion is compared with telephones in the households is at lower
that of income generated by the lines, but levels, Telefónica offers access to
also with the income generated from the telephones through more than 612,000
sale of prepaid cards, it can be seen that public terminals. In Spain, there are 56,065
this type of services is offering a real telephone booths in the street, without
alternative for the lower-income strata of counting the public telephones available in
society. commercial establishments.

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Mobile telephones telephones. The cost of the terminal was

Generally, the billing system based on the identified as the main barrier for people CASE STUDY
prepaid system and the reduced cost SMS with lower resources to have access to
service have been determining factors in mobile telephones. The Rentas Bajas Mundo Movistar': buy in Spain
the spread of cellular mobile telephones to project evaluated traditional and your mobile for Ecuador
all social levels, as is seen in the usage alternative financing plans, the
figures of these services. The strategy of development of new, non-traditional direct In 2005, Telefónica Móviles launched
Telefónica Móviles, anyway, has always distribution channels (door-to-door sales), ‘Mundo movistar’, a set of integrated
been to achieve the greatest client base special plans with more competitive rates mobile telecommunications services
without concentrating exclusively on the on calls originating in low-income without borders between countries, which
segments with higher purchasing power. residential areas (Plan Conos), as well as implied a new step in its policy of
the creation of virtual voice-mail boxes to transferring to its customers the
With this strategy, commercial policies receive messages and being able to acquire advantages of being part of the greater
have always been based on reducing the the terminal with special discounts, community of Spanish- and Portuguese-
cost of terminals and on making a variety keeping the same telephone number. Some speaking mobile telephone services.
of billing schemes available which have of these projects have been carried out in
enabled millions of users to choose the collaboration with financial bodies that The first commercial programme of
formula most suited to their provided micro-credits for purchasing ‘Mundo movistar’ means that any movistar
communication needs or economic level. terminals. customer in Spain will be able to buy a
There has been a significant popularisation terminal and a prepaid card with a balance
of the plans with a savings option that Abono Social (Social Plan) in more than 3,000 sales points of the
offer large discounts in calls to specific Telefónica de España offers the Special movistar network in Spain. And as from the
numbers chosen by the customers and Social Rate, in order to enable customers following day, the same terminal and card
that, in many cases, include not only calls with financial difficulties to have access to would be available in Colombia or Ecuador.
to other “movistar” mobiles but also to basic telecommunications services in
fixed and even international telephones. Spain. It consists in a discount of 70% of The mechanism of the operation is very
the current connection and installation simple: the customer resident in Spain just
The commercial offers accompanying the charge of the network terminal equipment has to choose the terminal that they want
launch of the new unified brand included a (PTR), as well as a 95% discount on the to “give” to their relative or friend in
wide variety of products, making it easy for monthly telephone line fee (free of any Ecuador or Colombia, and provide the
any customer profile to gain access to maintenance contract). The number of lines personal data and a contact telephone
mobile telephones. Many customers thus benefiting from the Social Rate in Spain in number for that person. As from the
took advantage of launch promotions or December 2005 was 327,243 (386,430 in following day, the receiving customer in
the popularisation of services to obtain 2004). Ecuador or Colombia will be able to contact
terminals with more options or to have the free telephone attention service to
additional minutes of communication free. receive the terminal and the card.
At the same time as these commercial-type

initiatives, Telefónica Móviles Perú studied
various alternatives to make it possible for
the segments with fewer resources in the
country to have access to mobile

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It is not only technological barriers that can be the reason

for the digital divide. There are skills and knowledge barriers
that can be even higher than the technological ones, especially
in developing countries and among older or disabled people.
Telefónica, together with its Foundation, has been
running programmes that aim to train people to use
the new technologies.
CASE STUDY Education-training divide

Internet Educativa in Chile
Internet Educativa began in 1998 as a Interest in the new Getting in touch with new
Telefónica project complementary to the technologies technologies in school
"Red de Enlaces" of the Chilean Ministry of In Spain, Telefónica took an active part in This is one of the strategies most used by
Education, to give Internet access to all the celebrating Internet Day, which aims to Telefónica to encourage the use of
schools. In 2003, it began migrating from popularise the Internet and make it more technology among school communities in
commuted access to broadband Internet accessible. The Day was promoted by the every country in which it operates. AS well
under preferential conditions. As a result of AUI (Internet Users’ Association) and as EducaRed and “Internet en las Escuelas”
this sustained effort, by December 2005, supported by the Secretary of State for we can point out:
Telefónica CTC Chile was making Telecommunications and by the
broadband access available to 3,435 schools Information Society. It included
•In Colombia, Telefónica Móviles
collaborates with the Programme of the
and commuted service to 2,265 schools, demonstrations of the technology, free
President of the Republic to provide
giving Internet access to 2.6 million pupils. Internet access and commercial
computers and technology to educational
promotions.
establishments for young people with
The Internet Educativa service is free for
scarce resources. In 2005 a total of 2,040
establishments that have commuted The publicity strategy adopted by the
machines were handed over.
access and its preferential cost via multi- Telefónica Group in Peru presents
user broadband (1 Mbps) was 37.5 dollars applications and concrete services that are •In Mexico, as part of the FuTuRo
(CH$19,900) in 2005. In 2005, the transforming people's lives, with the slogan programme, Internet training classrooms
contribution of Telefónica Chile to school “We didn’t notice, but life has become have been equipped in different schools
Internet access was equivalent to US$3.6 easier for us”. Through this type of around the country.
million, taking into consideration the
commuted access lines, and the price
campaign and the availability of public
booths, Peru is one of the countries with the
•In Nicaragua during 2004 and 2005, as a
result of a commitment made with the
differential of the educational broadband greatest penetration in use of the Internet. Regulatory Body and the Ministry of
compared with its commercial price.
Education, Telefónica Móviles has been
Since 1999, Fundación Telefónica Chile has running a project to install computers
The Internet Educativa programme is been running an Internet Training initiative, with Internet in 700 public schools,
enabling access to Internet and to new with the support of Fundación Vida Rural of benefiting more than 100,000 children
technologies for the young students of the Pontificia Universidad Católica de Chile. throughout the country, as well as the
Chile as well as their teachers. This is Fundación Telefónica has trained more school community.
encouraging their digital inclusion, so that than 40,000 people (6,652 in 2005)
Internet for them is an extra educational including students, educators, community •In El Salvador, Telefónica Móviles sponsors
resource within their formation and in their agents, housewives, women micro- the CyberOlimpiadas initiative, aimed at
possibilities for future development. entrepreneurs, elderly people, etc. encouraging the use of new technologies
in many of the country’s schools.
Telefónica Móviles Panamá sponsors the
Telecommunications hall of the EXPLORA
•In Peru, Telefónica is one of the
organisations financing the Huascarán
Centre for Arts and Sciences, showing the project, which aims to incorporate
advances in technology, their origin and information and communication
development, and how telephones and technologies in the Peruvian education
communications work. system.

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Difficulty of access to a Disability, age or gender CASE STUDY

computer divides
Another of the most common reasons for Disability is one of the barriers that the Schools of Information
justifying the high or low penetration of Telefónica Group is working hardest to
Technology and Citizenship in
broadband in a region is the figures about overcome. Through projects such as
the number of computers available. Since Telefónica Accesible (described below in Mexico
2004, Telefónica has made PC + ADSL this chapter) Telefónica is offering products
packages available that have enabled many and services designed specifically to Since 2004, Fundación Telefónica has been
customers to get into IT with the aid of promote equality of opportunities. providing support to the Committee for
Telefónica. the Democratisation of Information
Telefónica de España through the Elderly Technology (CDI), a non profit-making
As a complement to this initiative, in Group Association has given courses in organisation that promotes educational
Argentina, Telefónica de Argentina joined in information technology to elderly people and professional activities with the aim of
the “Mi PC Argentina” programme set up by and provides the premises, the telephone socially incorporating the members of
the government. The objective set is to lines and a subsidy. underprivileged communities, mainly
incorporate ten million PCs with the children and young people, reducing the
possibility of Internet connection within The data of new technology penetration by levels of social exclusion they are immersed
five years, and all the main companies in gender reflect its lower use by women. The in, both in Mexico and in other countries of
the technology sector, banks and service possibility that there is a gender divide, and the world. The main activity of CDI is the
companies are taking part. about the low proportion of women in the creation of Schools of Information
network high technology and Internet Technology and Citizenship (EIC), with the
In Brazil, Telefónica is collaborating with the professions, were debated in a conference aim of facilitating the access of these
Ministry of Development, Industry and devoted "Women and the New people who have low purchasing power, in
Trade of Brazil to set up 20 information and Technologies" in the headquarters of this case marginalised indigenous
business tele-centres, with the aim of Telefónica de España. communities in the state of Oaxaca, to the
encouraging digital skills training in micro- techniques and use of the new information
firms in the region. Lastly, the training sometimes concentrates and communication technologies.
not on technologies but on the
In Chile, Telefónica Móviles is collaborating development of entrepreneurial initiative In the past year Fundación Telefónica has
with the literacy programme for rural or basic training that can help to reduce continued its contribution to the program
communes in the IV Region of the National other social problems found in some of the “Systematisation of the Process of Digital
Training and Employment Service, countries in which Telefónica is operating. Inclusion in Rural and Indigenous
providing the Mobile Internet service. The Communities in the State of Oaxaca", by
project works with an inter-city bus donating 20 computers with Internet
converted into a mobile classroom. At the connection to each of the 11 EICs that the
same time, in Peru, as part of the MuniNet CDI has installed on the Costa Chica of the
programme, a bus has been going around state. Thanks to these schools or
different areas of the country presenting “technology hostels”, up to now 1,065 young
the possibilities of Internet in remote people and adults have benefited. Likewise,
localities. the project has indirectly benefited nearly
30,000 inhabitants of this community, who
use the installations to communicate with
other neighbouring towns.

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The Telefónica Group does a significant amount of social and

cultural work in all the countries in which it operates.
Social and
Cultural Activity
Telefonica’s investment in Social and cultural activity ATAM

culture and social action
Data in thousands of euros
projects of the Telefónica Group ATAM started in 1973, under the impulse of
The companies of the Telefónica Group run a group of Telefónica employees, with the
2005 collaboration of the Medical Services and
2004 various projects of social and cultural
2003 activity that complement the activities of Social Assistance, the Institución Telefónica
54,113 de Previsión and the workers' union
Fundación Telefónica (budget above 16
46,494 million euros in 2005) representatives. In 1974 the institution was
46,829 incorporated into the Telefónica collective
•Support from Telefónica Móviles to the bargaining agreement, and thus became
Proniño Project of Telefónica. one of the first experiences in Spain of
25,011
28,999 14,271
•Projects of events to raise awareness creating a legal body between a company
and its workers for social purposes.
about social problems, such as the Child
12,500 Worker Programme of Telefónica Móviles
23,447 9,111 16,045
8,983 in Ecuador or the Seminar on Terrorism ATAM is largely funded by the solidarity
9,069 and Security, Center on Law and Security, and voluntary contributions of around
New York University School of Law. 61,000 employees of 22 companies of the
Telefónica Group. The workers contribute 2
•Collaboration with the Instituto per thousand of their basic salaries and the
Fundación ATAM1
Social Total Cervantes and the Real Academia
companies double the contribution. The
Telefónica1 and cultural Española.
sponsorships amounts provided to ATAM by all the firms
1
Contribution of Telefónica to the budget of
•Sponsorship of the Elcano Royal Institute of the Telefónica Group in 2005 reached
Fundación Telefónica and ATAM for International and Strategic Relations. 9,069,072, directly benefiting around 4,000
•Activities to promote digital inclusion people.

and the progress of society such as the
This amount includes both the
Digital Cities Forum.
contribution of 4 per thousand of the
•Support to Foundations and Awards, amounts paid by the member firms of the
such as the Príncipe de Asturias Awards Association, and the contributions of the
or the Argentine Award of the World firm for pensioners, pre-pensioners and ex-
Summit on the Information Society employees of Telefónica de España as well
•Programmes in support of the as the contributions for working expenses
of the government bodies included in the
environment such as the Telefónica de
España project: 1 Invoice - 1 Tree (2005- statutes.
2007)
The details of their activity can be found in
•Promotion of theatrical events (2005 the web-page www.atam.es and in its
season of the Teatro Real in Madrid, and Annual Report, also available in
of the Artistic Culture Society in Brazil). www.telefonica/publicaciones, as well in
•Artistic and cultural shows, such as the the sub-section Employees Solidarity in the
sixth chapter of this report.
Juan Gris or Gaudí-Mompou exhibition
in Venezuela.
•Support to research activities.

•Sponsorship of town feast-days.
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Beneficiaries of Fundación Telefónica by Activity Area

Participant bodies
Collaborating Bodies1 / Beneficiaries2 Participant Persons / Beneficiaries (estimate)3
Nº of persons Nº of persons
Área of Activity Nº of bodies Nº of bodies in internet Other projects
Collaborating % Particip./ Benef. % proyects (Thousands) ( Thousands) total
Education 106 21.7 21,552 69.3 19,801 5,164 24,966

Telefónica Volunteers 38 7.8 266 0.9 0 66 66
Art, Culture and Heritage 128 26.2 2,957 9.5 7,580 4,924 12,504
Cooperation 149 30.5 4,564 14.7 833 1,180 2,013
Telemedicine,Helpline 68 13.9 1,769 5.7 493 1,556 2,049
and Disability
Total 489 100 31,108 100 28,707 12,890 41,597
1 Social and cultural activity bodies with whom a collaboration agreement has been signed.
2 Educational (school and university centres), social and cultural bodies that have had direct relationships with any of the activities offered by the Fundación Telefónica
programmes and projects during 2005
3 People who have had a direct relationship in any of the activities offered by the programmes and projects of Fundación Telefónica during 2005
Fundación Telefónica
During financial year 2005, Fundación
Telefónica has completed a process of
strategic review of its activity. With the idea
of helping to improve life in society and
bring its performance into line with the
demands and needs of society, as from
2006 it will concentrate its activities on
supporting education, the social
integration of children in Latin America, the
Total of Programmes Run by Fundación
drive towards the knowledge society and
the running of the corporate volunteer
Telefónica by Activity Area1
Activity Area Nº Programmes %
programmes.
Education 17 24.3
Fundación Telefónica spent 29 million Telefónica Volunteers 8 11.4
euros running 763 projects. These activities Art. Culture and heritage 15 21.4
have taken place with the support of 489 Cooperation 15 21.4
collaborating bodies, to the benefit of more Telemedicine, Helpline and Disability 15 21.4
than 31,000 organisations and more than Total 70 100.0
41.5 million people. 69% of these
1
Social and cultural action programmes run by Fundación Telefónica during 2005
beneficiaries are people who accessed

contents, services or social information
through Internet, which reflects the role of Total of Projects / Initiatives Run by Fundación Telefónica by
the new technologies as an engine of Activity Area1
social development. Activity Area Nº Programmes %
Education 114 14.9
As well as the descriptions of the main Telefónica Volunteers 431 56.5
projects realised in this chapter, all the Art. Culture and heritage 55 7.2
detailed information about the projects run Cooperation 107 14.0
by Fundación Telefónica can be found in Telemedicine, Helpline and Disability 56 7.3
the Fundación Telefónica Annual Report Total 763 100.0
2005 or in www.fundacion.telefonica.com. 1
Proyectos e iniciativas de acción social y cultural realizados por Fundación Telefónica durante el año 2005

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Evolution of the EducaRed project

2003 2004 2005
EducaRed España Nº de Centres Registered 11,091 11,218 11,426
Nº of visitors 2,717,975 4,733,312 9,195,516
Nº de Pages Consulted 13,091,918 16,650,829 39,500,277
EducaRed Argentina Nº of Users Registered 3,687 7,437 10,650
Nº of visitors 132,803 742,275 5,738,619
EducaRede Brazil Nº of Users Registered 13,534 28,743 51,853
Nº of visitors 469,664 739,910 1,354,670
EducaRed Peru Nº of Users Registered - - 8,884
Nº of visitors 326,000 725,268 2,338,783
EducaRed
Since it was founded in 1998, Fundación Throughout 2006, EducaRed will become
Telefónica has continuously given its firm the brand covering all the Foundation’s
support to the world of education through education programmes. From now on, the
the creation of EducaRed, the fruit of strategy of EducaRed will concentrate on
collaboration between Fundación the following objectives:
Telefónica, Telefónica and most of the
organisations in the educational world, •Concentrate the activities of Fundación
Telefónica on infant, primary, secondary
including the main professional
and high school teaching.
associations, parents’ associations and
trades unions. •Promote the educational use of the
Internet in the classroom and the home
Its principal purpose is to contribute to through the EducaRed portal.
improving the quality of education and to
encourage equality of opportunities
•Develop new activities in the EducaRed
portal that can become face-to-face
through applying the new technologies to activities with wide participation and
teaching and learning processes. In Spain, high visibility.
Argentina, Brazil, Chile and Peru, EducaRed
has made available to primary and •Increase the on-line and face-to-face
secondary education the most advanced participation of teachers, educators,
educational technology in terms of uses, pupils and parents through mass events
applications, exchange of knowledge and with considerable social projection.
intelligent information searching. These
tools have brought pupils, teachers and
•Launch mobile exhibitions on topics
within the ambit of education.
researchers from the Latin American
context together in virtual communities. •Create a network of model centres of
academic excellence.
•Develop a plan of training in the

educational use of Internet with various
levels of intensity, aimed at teachers,
educators and parents, with the aim of
improving the quality of education.

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The Fundación Telefónica Report describes

•The FuTuRo Project forms a virtual
network for meeting and working of 14
the numerous initiatives that are centres that welcome street children and
specifically included within EducaRed, young people in 7 countries. Some 400
classified in the following activity areas: children and young people benefit. 22
•Innovation and Educational Use of ITC in educators are involved in the project.
the Classroom and the Home. •The Aulas Educativas en Hospitales
•Tools, Resources and Services to Facilitate project, developed in Peru, has benefited
more than 5,500 Peruvian children and
Educational Tasks.
young people in hospitals.
•Training for Teachers, Pupils and Parents
in the Educational Use of Internet. In recent months it has won the “Business
• Information and News about the Creativity” Award, and the "Peru 2021 Prize"
for Corporate Social Responsibility and
Education Sector.
Sustainable Development.
•Virtual Communities of Teachers, Pupils
and Parents.
As a complement to the EducaRed
program, Telefónica has continued its
As a complement to EducaRed, Fundación
efforts to connect the greatest possible
Telefónica has realised programmes that
number of education centres to the
have placed ICT at the service of
Internet, as is described in the sub-section
educational efforts in especially difficult
on "digital inclusion" in this report.
situations (street children, long-term
hospitalised minors, etc.). Projects such as
FuTuRo or Aulas Hospitalarias have found
information technology and Internet to be
a key element in their fight against social
isolation and exclusion, and have helped to
generate entertaining programmes for
education in such values as respect for
tolerance, fellowship and care for one’s
health.

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Proniño
According to the ILO’s International The Proniño programme was created in

Programme on the Elimination of Child 2001 by the mobile telephone operators in
Labour (IPEC), there are nowadays about Latin America, with the aim of contributing
250 million young and adolescent boys and to the elimination of child labour in the
girls in the world who are working. The region. In 2005, the programme was
situation is particularly dramatic in Latin incorporated into the strategy of Fundación
America, where it is calculated that the Telefónica, which runs the project in
figure is 19 million boys and girls between 5 collaboration with Telefónica Móviles. The
and 14 years of age, with one in three aims behind every activity of the Proniño
performing one of the worst forms of child programme are:
labour classified by the ILO.
•The progressive elimination of child
labour that goes against children’s
Proniño aims at the elimination of child
rights.
labour through quality schooling for
children and adolescents. Defined this way, •To successfully complete a basic
schooling of minors must be understood as education that meets minimum quality
their inclusion or remaining within the requirements.
basic formal education system. In its fight
against child labour, Proniño acts from the
•The opportunity to have access to and
follow middle and higher education.
certainty that only a quality educational
structure will manage to guarantee the •The improvement of social skills.
fulfilment of the programme's mission. •Access to knowledge of ICTs, generating
new opportunities and avoiding new
Population Assited in 2005

by the Proniño programe
Country Nº Persons
Argentina 1,739
Chile 405
Colombia 3,138
Ecuador 1,187
Guatemala 1,100
Nicaragua 702
Panama 400
Peru 1,923
Uruguay 600
Venezuela 346
Total 11,540

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CASE STUDY
Recognition of Proniño
forms of social exclusion by the ILO
• Selective development of income
Proniño's model of working is a
opportunities for adolescents and/or
families. comprehensive intervention in the child's
environment, thus managing to affect all
Fundación Telefónica not only provides the spheres of the life of the child
each child with the funding necessary to (individual, family, school, community). The
receive a quality education. Its contribution involvement of Fundación Telefónica and of
also covers health monitoring and food the employees of the Telefónica Group in
that, in many cases, would not otherwise the programme also provides an example
be covered. In addition, to make the of social activity shared by all levels of the
schooling of the children possible, the company.
family’s commitment must be won over.
Such a commitment presupposes a For these reasons, in 2005, Proniño received
transformation, recognising the minor’s the recognition of specialised international
rights and giving a new dimension to study bodies such as the International Labour
as a strategy for individual and social Organisation (ILO) and the Organisation of
progress. Ibero-American States (OEI).
For running the Proniño programme,

Fundación Telefónica seeks the cooperation
of educational bodies and the third sector,
whose specialisation and closeness to the
problems makes them the most
appropriate local actors for each initiative.
Fundación Telefónica has set the year 2008

as the horizon for meeting a series of
challenges in terms of quality schooling.
One of the goals set for this new stage is to
quadruple the number of beneficiaries and
achieve a coverage of around 40,000
children assisted by the programme by
2008. In 2005, Proniño covered ten
countries, but the aim is to bring it to all
those of Latin America in which Telefónica
operates by 2008. This extension will reach
Brazil, El Salvador and Mexico, and
Fundación Telefónica in Argentina, Brazil,
Chile and Peru will take part.

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Support programmes for groups in situations of risk

Pro-Direitos (Brazil).
Medida Legal (Legal Measures) (Brazil).
Information and Communication Technologies for the Street-Children Programme (Mexico).
IT classroom in the Child Education Centre of EDNICA (Mexico).
IT classroom in the I.A.P. Social Development Centre Promoting Youth Support (Mexico)
Multi-purpose hall in San Juan Ajusco (Mexico).
Family Violence Prevention Programme (Peru). Includes the “Telephone of the Aid to the Child
and Adolescent at Risk Foundation (Teléfono ANAR)”, the “Pilot Plan of Support to Battered
Women: Until When?” and “Technology within Reach of Street Children. Instituto Mundo Libre”
Cooperation
Fundación Telefónica knows that the It should be mentioned that the overall
Information and Communication activity of Fundación Telefónica in the
Technologies are a tool with great potential context of Latin America pays special
for contributing to all the different attention to groups related with childhood,
dimensions and kinds of work carried out young people, women or people with
by Third Sector organisations, and scarce financial resources whose social
therefore, from the beginning of its activity, situation makes them especially
the Foundation has worked to place the vulnerable.
ICTs at their disposition as a resource for One of the lines of activity in this context is
improving the processes and activities of development aid through education and
social cooperation and promotion. job training, using Information and
Communication Technologies to try to
The new technologies and especially reduce the knowledge divide in these
Internet are a prime instrument for groups, thus promoting equality of
obtaining resources, whether human or opportunities between people and their
financial. Internet has become more and integration in society.
more a privileged means of communication
for disseminating the organisations’ Fundación Telefónica also supports various
messages, generating and strengthening production projects that involve the
everybody’s commitment to their progress and financial independence of the
respective missions. The work of the most needy and of organisations
International Solidarity Network supporting them. Details of all the
Programme (Risolidaria) stands out in this programmes in which Fundación Telefónica
context, a transnational platform whose is participating can be found in its Social
aim is to facilitate the task of social Report 2005.
organisations by bringing them together in
a network that eases contacts and
collaboration between them.
During 2005, Fundación Telefónica has

collaborated more closely with the Third
Sector, non-profit making organisations
and all the agencies working on
cooperation, in order to help them to work
as effectively as possible, offering them
training, technology and equipment,
funding and methods for improving their
relationship networks and the
dissemination of their messages.

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Art and culture CASE STUDY

Most visited museums in the
The development of Information and historical technological heritage, made up
city of Madrid
Data in thousands of visitors
Communication Technologies (ICT) has had of pieces and equipment that have made
2004 2005
great impact in the area of contemporary telephone service provision possible over so
Museo del Prado 2,001 1,966
culture and art. many years. This history, which stretches
Reina Sofia 1.445 1,590
from the telegraph to the latest
Thyssen 683 643
In this context, Fundación Telefónica is information and communications
Arqueológico Nacional 251 159
working intensively in the area of technologies, is communicated by the
Museo Telefónica 122 132
contemporary art and culture, and the core Foundation in an entertaining and
Sorolla 85 66
of all the activities that the Foundation educational form, especially for children, in
undertakes in this area is the transmission the Telecommunications Museum in Spain
of culture and its values through the use of and the Telephone Memory Centre in Brazil.
new technologies and the most advanced
media. Fundación Telefónica supports the spread
of Spanish language and literature in
Fundación Telefónica manages and various initiatives that make known its
maintains the artistic and cultural heritage principal works and the most important
of the Company. The collections making up reference texts.
the artistic heritage of the Telefónica Group
are composed of works of various The Foundation also continues working on
prestigious artists from different art the project to place in Internet the most
movements, which the Foundation representative monuments of the art-
conserves, catalogues, increases with new historical heritage of its surroundings
pieces and shows in permanent through arsVIRTUAL, a project that carries
exhibitions. important works of architecture into
everybody’s homes through virtual reality
During 2005, Fundación Telefónica techniques that are able to pick up even
designed a programme of temporary the smallest detail.
exhibitions at international level for the
spaces and halls open to the public in such Since 1999 in Peru, Fundación Telefónica
cities as Buenos Aires, Santiago de Chile, has been promoting and maintaining the
Madrid or Lima. In this context, the “Peru Cultural“ portal that aims to bring
Foundation has established important the wealth of Peruvian culture closer to the
exchange and loan agreements with other citizen. In 2005, this portal received more
national and international bodies so that than four million visits.
these exhibitions could travel to different
cities and countries.
Since it started this activity, Fundación

Telefónica has also taken care of the
growth and conservation of the Company's

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Telefónica
Accesible
Telefónica Accesible:
close to people with disability
In 2004, Telefónica set up the Accessible govern the activities, techniques and
Telefónica programme as a comprehensive means for correcting accessibility
project for people with disability. The aim problems, as well as the lived experience
of this programme is to make Telefónica a of people with disability themselves.
Group that is fully accessible in all its
processes and to actively contribute to full
•Together with CEAPAT and coordinated
by the Economic and Social Development
equality of opportunities for people with Alliance, the guide "Ask me about
disabilities (as described in the chapter on Accessibility and Technical Aids” has been
society). written, with the aim of helping to apply
Design for All.
Alliances
Telefónica drew up the Comprehensive •In 2006 the Accessible Telefónica
Collection will start circulation, with the
Accessible Telefónica Plan in collaboration
aim of making known information of
with the Spanish Committee of
general interest related to disability, and
Representatives of People with Disabilities
which is included in the agreement
(CERMI), the platform that brings together
signed with the CERMI. The first two
the main associations of people with
titles are the “Manual of Psychological
disabilities, representing the situation of
and Teaching Practices for Special
this population of 3.5 million Spaniards and
Education Centres”, and the “University
their families.
and Disability Guide to Resources", both
drawn up by ATAM.
Awareness-raising
The Telefónica Group shows great social •In collaboration with Feaps-Madrid, the
capillarity and its channels of publication “You and me alike” has been
communication with the stakeholders issued, to better understand people with
reach a large part of the societies in which intellectual disability, and a guide to
it is present. It has thus promoted and special education has been published
written various documents for improving together with Ferececa.
people’s training, with the aim of
encouraging Design for All as a way of
•Telefónica Móviles, the Fundación
Telefónica and the University of Comillas
creating an inclusive society. have carried out the study “New
•In collaboration with the Spanish Technologies and Social Exclusion”, an in-
depth analysis of the potential of the
Committee of Representatives of Persons
with Disability (CERMI) the “Manual of ICTs in the struggle for social inclusion in
communication for all” has been Spain.
published, examining current problems
in accessibility of communication, the
guidelines that should be followed to
overcome these, the values that should

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Products and services Fixed telephony and broadband

CASE STUDY
The work done by the Telefónica Group in Under the Design for All concept, Telefónica
setting up Accessible Telefónica implies an has developed products that enable all
improvement in everyone’s quality of life, kinds of users to have access to fixed www.telefonica.es/accesible
especially those with some kind of telephone and broadband services:
disability, through telecommunications for
all. Telefónica works constantly to improve
•The Teclón is a terminal that prevents Telefónica has developed the “Telefónica
Accesible” portal,
coupling with hearing-aids, has large
the accessibility of its processes, products www.telefonica.es/accesible, as a tool
keys, rapid dialling, and lights to signal
and services, and to ensure that they are available to society which shows what the
incoming calls. This model can help
clearly an improvement in the social and Telefónica Group is doing in the area of
people over 65 and people with slight
workplace inclusion of people with disability, as well as anything that may be
visual and/or auditory disability.
disability. of interest to this sector of people and their
•The Video-telephone screen has been families, like a formation and legislation
Fundación Telefónica has published developed, that works with any centre, sector-related news, or access to
“Communication solutions for elderly conventional telephone adding images specialised publications.
people and those with disability”, to the conversations, and aiding
identifying barriers that hinder the communication between people with
existence of real equality of opportunities auditory disabilities.
for elderly people and the disabled.
•Telefónica de España offers the possibility
of delivering the telephone bill to the
Mobile telephony public in Braille, transcribed by the ONCE,
Telefónica Móviles España has also for people who have sight problems.
published the “Catalogue of mobile Invoices in Braille are also available in
services for social integration”, including Chile and Argentina.
more than 30 services already in operation
to ease social inclusion and to improve the
quality of living of people with disability,
elderly people, victims of domestic violence,
people with health problems and foreign
residents in Spain.
In addition, the Movistar Accesible portal

has been set up where information can be
found about the more accessible services
and telephones of Movistar. News about
mobile telephone services, disability and
Design for All can be found there.

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Applications and technical aids •Telefónica Soluciones also provides labels

The information and communications with magnified characters for the
technologies (ICT) are a particularly keyboard in two versions, black
suitable means to aid social and workplace characters on a white background, and
integration and to enhance the quality of white characters on a black background
life of elderly people and those with (high contrast), for people with visual
disability. Telefónica, together with disabilities.
representative organisations in the
disability sector, has developed solutions to
•Lastly, a Keyboard Sweep Emulator has
been developed, which is an IT
aid the access of people with disability to application that enables writing on any
computers and to communication. application compatible with Windows,
•This is the purpose of the SICLA and a mouse emulator (improving the
handling and writing of computer
communicator (Communicator System
for Alternative Languages), developed by programmes for people with reduced
the Fundación Telefónica, which enables mobility).
people with cerebral palsy or with motor
or reading and writing difficulties to New technology accessibility
have access to the computer and to observatories
communicate through an Alternative With the aim of analysing the development
Communication System. and state of the Information Society and of,
•Within the Framework Agreement of Information and Communication
Technologies, Telefónica Soluciones reports
collaboration with the Ministry of Work
and Social Affairs, through Imserso on the accessibility of products through its
(Institute of Migrations and Social New Technologies Accessibility Observatory.
Services), and the Fundación Telefónica,
the Adapted Equipment Demonstration Information technologies are complex and
Unit has been set up of the State Centre to understand them requires a high degree
for Personal Autonomy and Technical of specialisation, so not just one
Aids (CEAPAT), where there is equipment Observatory is offered but a set of
configured with adaptations for different Observatories, each focused on a different
kinds of disability. type of technology. Initially three
observatories are available: an Observatory
•Telefónica Soluciones is developing the of Telephone Accessibility, an Observatory
“Beethoven” artificial conversation
of Web Accessibility, and an Observatory of
system, which aims to implement and
Technical Aids.
study the feasibility of a comprehensive
telephone communication service (fixed
network, mobile and Internet) between
deaf and hearing interlocutors, working
in real time and over the conventional
telephone network.

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As well as keeping up with knowledge of the Workplace Integration

latest technology, Telefónica wants to be CASE STUDY
The Telefónica Group meets the legal
social ally, leading the debate on the social obligation established by the Lismi Sign language in the
impact of technology and transforming (Disabled Persons’ Social Integration Law)
itself from a product- and technology- Shareholders Meeting
of hiring two per cent of people with
focused Group into a Group focused on the disabilities among the personnel.
customer and on quality of life. As a result of Telefónica’s commitment to
accessibility for all its stakeholders,
•Telefónica I+D makes the manual of Firstly, through the Mercadis portal,
www.mercadis.es, advice, information and
interpretation in sign language will be
“Design of Accessible Web-pages: organised for everything that takes place in
Procedures and Tools” available to users resources are offered, related with the
the Telefónica Shareholders’ General
through the portal Telefónica Accesible. employment of people who have some
Meeting.
kind of disability, and the Workplace
•Telefónica Soluciones has taken part in Integration Service of ATAM develops
improving the draft version of the norm methodologies, activities and resources
“Guidelines for the use of Sign-language with the aim of encouraging the access to
in the Web” within the Sign Language in employment of people with disabilities.
the Web Group. The document
complements the norm UNE The Telefónica Group has Special
139803:2004, defining the specific Employment Centres of SIAA
requirements for the situation when (Comprehensive Help and Assistance
Web contents are videos with sign Services) in Atento, specialising in customer
language. A majority of deaf people, attention services through multi-canal
users of sign language, consider that platforms or contact centres (telephone,
with this language, information can be fax, internet ...), and with EEC electronic
perceived more comfortably and reliably components.
than in written language.
•Telefónica Soluciones takes an active part Servitelco devotes itself to management

and support services for firms employing
in AENOR Sub-committee 8 “Systems
and Devices for Third Age and Disability people with disabilities in special
Groups” for the “Standardisation of User employment centres. Its activities are
Interfaces of Computer Applications for mainly connected with the use of
People with Disability”, and the information technologies and
“Standardisation of Internet Accessibility telecommunications.
for Elderly People and those with
Disability”, developing the procedures Lastly, Laveco is a special employment
manual for applying the WAI (Web centre of ATAM that runs industrial
Accessibility Initiative) guidelines. cleaning activities and laundry services for
hotels, residences and hospitals, provides
industrial cleaning services for buildings
and, in general, auxiliary services for
building conservation and maintenance.
These services are directed towards the
social and workplace integration of people
with disabilities.

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Crédits


Investor Relations


Secretariat General







07 Society

08 The environment
The environment:
respect and Protecti0n

Contents 4
02 Identity 32
04 Customers 104
05 Shareholders 168
06 Employees 178
07 Society 226

Environmental commitment 254
Environmental management 256
Monitoring and follow-up of environmental aspects 260
Electromagnetic emissions 261
Impact of installations 265
Control and management of waste 268
Energy consumption 271
Emissions into the atmosphere 277
Paper consumption 280
Water consumption 284
Consumption of poles 285
Environmental impact of Telefónica’s services 286
09 Providers 292
10 Media 304
11 ANNEX I 310

08 The environment
Environmental
commitment
Telefónica views a commitment to respect companies carrying out operations in Spain

OPINION for the environment as an essential part of and by mobile telephone operators in Latin
its corporate responsibility. To this end, the America.
What do our stakeholders companies in the Telefónica Group have
think? had a public commitment to the As Telefónica is progressing in the
environment for several years. transformation process into an integrated
As part of the RepTrak study, we global group, the objective has been
investigated public opinion as to whether Various companies of the Telefónica Group established of passing a corporate
“Telefónica protects the environment". in Spain have been publishing environmental policy in 2006, so that this
environmental reports since the end of the will become the general policy of all the
The results obtained were as follows: 1990’s. These reports have been operations. This policy will provide support
transformed into corporate responsibility to the “Minimum Environmental
Spain 64.3 reports, which include the environment as Requirements” put into place by Telefónica
one of their essential elements. in 2004. The main commitments included
Argentina 54.6 in this policy would be as follows:
In 2002, the Telefónica Group signed the
1. A guarantee of compliance with current
Brazil 67.3 Global Compact of the United Nations,
legal requirements in the countries of
thereby undertaking as part of the
Chile 66.9 operation, with the adoption of
principles of this pact to: maintain an
complementary regulations and internal
environmental prevention focus, encourage
Mexico 68.6 directives in cases where no appropriate
initiatives promoting greater
legal development exists.
environmental responsibility and
Peru 58,0 2. The evaluation of the environmental
encourage the development and
dissemination of environmentally impacts resulting from our activities and
respectful technologies. from the products and services that we
develop, in order to reduce and prevent
2002 also saw the Telefónica Group join negative impacts and to promote the
GeSI (Global e-Sustainability Initiative), an creation of telecommunications services
initiative fostered by the UNEP (United that contribute to the sustainable
Nations Environment Programme) and the development of society.
ITU (International Telecommunications 3. To make sustainable use of natural
Union) aimed at promoting the sustainable resources, using energy efficiently,
development of the Information Society. In minimising the consumption of raw
addition, the Group has been a participant materials, fostering the recycling of
in the environment group of ETNO materials and the appropriate treatment
(European Telecommunications Network of waste.
Operators Association), which in 2004
launched the "Sustainability Charter", since 4. To communicate the applicable
its beginnings. environmental procedures and
requirements to the Group’s suppliers
In addition to this, various companies of and to ensure their fulfilment.
the Telefónica Group have been putting
this commitment into practice through
their environmental policies. These policies
have been implemented mainly by

08 The environment
Telefónica’s commitments to the environment

Year Company Commitment
1996 Telefónica de España ETNO environmental commitment
(European Telecommunications Operator Association)
Telefónica joins the ETNO working group on the environment
1997 Telefónica I+D Telefónica I+D environmental policy (revised 2003)

AENOR certification Environmental Management System ISO 14001
1998 Telefónica Móviles España Telefónica Móviles España environmental policy

AENOR certification Environmental Management System ISO 14001
1999 Telefónica de España Telefónica de España environmental policy
2002 Telefónica Group United Nations Global Compact
Telefónica Móviles España Sustainability Excellence Club

Founded with 15 other companies with the
aim of fostering Sustainable Development amongst companies
2002 Telefónica Group GeSI (Global e-Sustainability Initiative)

Initiative supported by the UNEP (United Nations Environment
Programme) and the ITU (International Telecommunication Union)
5. To put continuous improvement into
Groups together manufacturersand operators in the sector with
practice through the systematic and
the objective of promoting theinformation society
periodic evaluation of the environmental
aspects concerned, together with the 2004 Telefónica Group Corporate Regulations: Minimum Environmental
fostering of the implementation of Requirements that must be contemplated in the
management systems in each of the operations of the company subsidiaries
companies of the Group.
Telefónica Móviles Approval of an environmental policy applicable
6. To establish the channels necessary to to operations undertaken in Argentina, Chile, Colombia,
guarantee communication, awareness Ecuador,El Salvador, Spain, Guatemala, Mexico, Nicaragua
and training in environmental matters Panama, Peru, Uruguay and Venezuela
for all of the Group's employees.
7. To make the environmental activities Telefónica Soluciones Approval of the Company environmental policy
carried out by the company public each
Telefónica Gestión de
year and to provide information on the
Servicios Compartidos Approval of the Company Environmental Statute, as a first
objectives attained and work in progress.
step towards the implementation of an environmental
.
management system
In the majority of cases, these
commitments are manifest not only in 2005 Telefónica Group Internal standardising of environmental
internal management, but also through management processes and protocols
collaboration with different bodies
dedicated to environmental protection.
One example of this is clear in the fact that
in the financial year 2006, Telefónica is to
Collaboration with different bodies
sponsor the CONAMA (National Country Company Collaboration with
Environment Congress) to be held in Argentina Telefónica Móviles The Wildlife Foundation
Madrid, thus continuing along the path IDM (battery recycling)
begun in 2005 of collaboration with
Colombia Telefónica Móviles CECODES (Colombian Business
CONAMA in its Latin American event, which
Council for Sustainable Development)
took place in Panama. This participation in
CONAMA is particularly representative, as Spain Telefónica Móviles Fundación Entorno (since 2002)
collaboration is not only financial; the Soria 21 Forum (since 2004)
company is also involved in the working Ambientum (environmental legislation and
groups and in the organisation of round jurisprudence for town councils of Andalusia)
tables. CONAMA
Telefónica de España Nature Foundation(reforestation
linked to the promotion of electronic billing)
Mexico Telefónica Móviles Asociación Hombre-Naturaleza
(environmental awareness campaign)
Fundación Telefónica “Reforestemos México” Foundation
Nicaragua Telefónica Móviles Earth Fair

08 The environment
Environmental
management
Minimum Environmental Level of implementation of the

Requirements regulations
In the year 2004, the management of A project of diagnosis of the state of
Telefónica voluntarily approved the advancement of the implementation of
regulations for the "Minimum internal environmental regulation in each
Environmental Requirements”, the objective of the companies of the Telefónica Group
of which is to advance in environmental was carried out in 2005, in collaboration
management with a common with the Internal Audit Area.
methodology throughout the Group,
ensuring behaviour that is environmentally The level of advancement varies greatly
responsible. In addition, the requirements between the different companies and is
make it possible to standardise practices greater in the case of Spain and in the case
between the different companies in the of those companies that have attained the
Group, regardless of their activity, the objective of certification of their
geographical area in which this activity is environmental management system in
carried out and the applicable legal accordance with ISO 14001 Standard. This
requirements. With these internal analysis will be repeated in the second
regulations, Telefónica moved ahead of the semester of 2006, with the aim of having
growing regulatory requirements that have advanced at least one step in each of the
been put into place in the different companies.
countries in which the Group operates.
To guarantee the sufficient
In accordance with the principles of implementation of the Environmental
flexibility and adaptability, each company Requirements, regardless of whether the
implements the regulation depending on company has a certified environmental
the environmental impacts generated by management system, the Internal
its activities. To facilitate compliance with Corporate Audit area carries out regular
the regulations in the different companies analyses with regard to their fulfilment. In
of the Group, five broad steps for action 2005, audits were carried out in two
have been established to ensure the correct Spanish companies (Telyco and Telefónica
medium term implementation of the Telecomunicaciones Públicas), the
regulations and the external certification of companies of the TPI Group and the
the environmental management systems. activities of ATAM. These audits were
complementary to those that had been
carried out in previous years in the main
fixed and mobile phone operators in both
Spain and Latin America.

08 The environment
5 steps for implementing the Environmental Requirements regulations

Environmental Communication of the environmental
1 commitment commitment, preliminary evaluation, environmental
indicators, awareness-raising and training.
2 Identifying
legal requirements
Identification, monitoring and fulfilment of the environmental
requirements applicable to the organisation. Methodology.
3 Follow-up and
measuring
Identifying and evaluating environmental
aspects, establishing objectives and establishing
operational controls.
4 Improving
behaviour
Defining responsibilities, generating plans and registers,
documenting processes resulting from environmental
management, establishing channels of communication,
capacity to respond to emergencies.
5 ISO Audits to verify the level of implementation,

Certification management system for those aspects that are off course.
Environment Committees The Environment Committees are bodies

To encourage advances to be made in intended for the regular and periodic
implementing the Minimum Requirements consultation of Company actions
regulations, Environment Committees will concerning environmental matters and
be set up throughout 2006 in each of the they will also serve as the body responsible
main countries in which Telefónica for ensuring fulfilment of valid legal
operates, coordinated by a Corporate requirements and agreements that are
Environment Committee. These adopted on environmental questions. In
Committees will be led by the Internal addition, they should study, agree and
Audit and Corporate Responsibility areas. propose those measures that they deem
appropriate in terms of environmental
protection and the fulfilment of the
Environmental Requirements.
Level of implementation of the Minimum Environmental Requirements regulations in Telefónica

1 Environmental 2 Identifying legal 3 Follow-up and 4 Improving 5 ISO
commitment requirements measuring behaviour certification
Argentina Móviles J K L L L
TISA J K L L L
TGestiona J J J J J
Atento J J K L L
Brazil TISA J K L L L
TGestiona J K L L L
Chile Móviles J J K L L
TISA K L K L L
Colombia Móviles J J K K L
Ecuador Móviles J J J J K
Salvador Móviles J J K L L
Spain Móviles J J J J J
T España J J J J K
T I+D J J J J J
Soluciones J J J J J
TGestiona J K L L L
Guatemala Móviles J J K L L
Mexico Móviles J J J J J
Nicaragua Móviles J K K L L
Panama Móviles J K K L L
Peru Móviles J J K L L
TISA J J K L L
Venezuela Móviles J J K L L
Finalised
In progress
Not started

08 The environment
Environmental Training in Telefónica Group

Country Company Description
Argentina Telefónica Móviles Training given to 12 employees who work directly with the environmental management system
TGestiona Training given to 100 employees in the logistics centre
Chile Telefónica Group Training as Environmental Management Systems Auditors given to 9 people
with the aim of effectively developing the internal environmental audit tasks in the company.
Colombia Telefónica Móviles e-learning training

Training in ISO 14001 (25 employees)
Introduction to ISO 14001 (98 employees)
General environmental training (83 employees)
Ecuador Telefónica Móviles Environmental skills training in the management of solid waste, non-ionizing emissions and the
implementation of the Environmental Management System.
(700 people, including outsourcing personnel and suppliers)
El Salvador Telefónica Móviles Courses in implementing environmental management systems, waste

management (50 participants)
Guatemala Telefónica Móviles Courses in implementing environmental management systems,

waste management (50 participants)
Spain Telefónica Móviles e-learning training intended to allow all employees to get to know the Company’s environmental
management system and who is responsible for its application (739 employees in 2005)
Telefónica Soluciones Training in Project Leader courses

Communiqués and presentations on the Intranet (900 employees)
Telefónica de España Training courses on environmental audits, waste management andenvironmental legislation (37 employees)
Tele-learning course on environmental management (61 employees)
Telefónica I+D Environmental training (14 employees)
Mexico Telefónica Móviles Environmental themes in inductions for new employees
Self-study environmental manual on the Intranet
Audio conferences on environmental subjects (420 employees)
Nicaragua Telefónica Móviles Seminar on identifying environmental aspect (25 employees)
Panama Telefónica Móviles Training on ISO 14001 Standard and on the identification and evaluation of environmental aspects (25 people)

08 The environment
Internal Training Environmental requirements OPINION

The training and sensitisation of personnel for suppliers
is one of the necessary conditions for In addition to managing the environmental What do our stakeholders
ensuring correct environmental impact of its own operations, Telefónica
management. During the course of 2005, think?
also contributes to the promotion of
3,348 professionals in the Telefónica Group responsible practices throughout its supply
received training in environmental chain. For this reason, environmental Within the supplier satisfaction
material. clauses obliging the fulfilment of questionnaire, a question was included
environmental legislation and particularly regarding “Telefónica is a company that is
of legislation related to waste concerned about the environmental
management are now being included in performance of its suppliers”.
contracts for the purchase of goods and
some services.
63% of suppliers answered in the
affirmative, with an average mark of 3.8 out
Telefónica de España includes general
causes by which collaborating companies of 5 points.
commit to fulfilling environmental
legislation, together with specific clauses
to ensure that waste generated is
managed by authorised waste managers. It
is also anticipated that in 2006,
environmental criteria will be included in
the audits of collaborating and
maintenance companies, as until now only
documentary monitoring of the
information provided by these companies
has been carried out.
Applicable environmental legislation is

taken into account in the design of new
products and services, defining
environmental criteria in the development
of products and services, which were
provided to suppliers through the
respective marketing areas.
Special clauses are included for the

different operators of Telefónica Móviles,
depending on the activity of the supplier.

08 The environment
Most relevant environmental aspects

for telephony companies
Fixed telephony Mobile telephony
Electromagnetic emissions
Monitoring and Visual impact

Energy consumption
follow-up of Waste lead batteries
environmental Noise from electromagnetic equipment
aspects and/or air conditioning equipment
Discharges from generators
Masts consumption
Identification of relevant
environmental aspects
Throughout 2005, the majority of
Telefónica’s fixed and mobile telephony
operators carried out a preliminary
environmental diagnosis with the aim of
identifying the environmental aspects that
are relevant to their activity. The
preliminary diagnosis was based on three
aspects: the legal framework to be applied
for each line/country, an internal analysis of
company management of environmental
aspects, and the queries received from
different groups of interests. This
identification process helped to establish
specific actions and control plans.
The following sections show Telefónica’s

follow-up to the environmental impact of
each of the environmental aspects,
complemented by other aspects that are
traditionally required by analysts and
environmental reporting standards.

08 The environment
Electronic Emission Measurements

in Telefóncia Group companies
(Figures in units)
Sites Sites
measured 2004 measured 2005
Telefónica Argentina 334 519
Móviles Chile 532 2,348
Ecuador - 18
España 4,214 3,262
Panama 15 -
Peru 15 -
Colombia - 709
Telefónica Argentina - 44
Internacional
Electromagnetic
emissions
Dialogue with groups of interests showed Levels of electromagnetic
electromagnetic emissions to be the main
emissions from antennae
environmental worry for
Telefónica ensures the fulfilment of all
telecommunications companies. Society’s
regulations and the respect of all
concern for potential health risks from
international and national limits for the
electromagnetic emissions, despite the lack
countries in which it operates, with
of evidence in this regard from scientific
systematic checks, for legal reasons or on
research into this topic, originates from a
the request of interested parties, of the
general lack of knowledge concerning the
strength of emissions from its installations.
operation of equipment that operates
In 2005, a total of 6,900 mobile telephony
using electromagnetic waves.
sites and 44 radio electric infrastructure
sites for fixed telephony networks were
In response to this situation, the
measured. The number of measurements
companies of the Telefónica group take on
made showed an increase of 32% with
a double role: firstly, to ensure that the
respect to numbers for 2004. It is
levels of electromagnetic emissions from
important to highlight that in 100% of the
our installations comply with all
measurements taken, existing regulations
international regulations and
were fulfilled by a broad margin.
recommendations, and to ensure
compliance with these regulations and
It should be noted that these
recommendations in the acquisition of
measurements took place for the most part
terminals. Secondly, Telefónica is carrying
in collaboration with the regulatory bodies
out a strong campaign to inform society
of each country.
about the operation of mobile telephony
and its potential impacts on health.
In Argentina, a total of 519 sites were
measured in 2005 and of these, 436 were
measured by Telefónica Móviles Argentina
and 83 by CNC (the National
Telecommunications Commission).
In addition to this, Telefónica de Argentina
measured 44 sites. All of the procedures
were carried out in accordance with
Resolution 3690/04 of the CNC and 100%
compliance was shown.
In Chile, a total of 2,348 sites were

measured, measurements in Chile being
taken every 6 months. Measurements focus
on new stations or on those that have been
modified. The standards against which

08 The environment
measurements are taken are set by the FCC

CASE STUDY (Federal Communications Commission) and
the ICNIRP (International Commission on
what electromagnetic enough energy to generate heat, but not Non-Ionizing Radiation Protection), with
to product the ionization of matter. For
emissions are? 100% compliance obtained.
this reason, this type of radiation is
known as non-ionizing radiation (NIR). In Colombia, 100% of stations measured
To transmit sound, mobile telephony uses
radio waves, which are in fact were in compliance with the set standards,
As can be seen in the figure below, which with 709 sites measured.
electromagnetic waves of a similar nature
represents the electromagnetic spectrum,
to light rays. There are many, diverse uses
electromagnetic emissions can be classified In Ecuador, Telefónica Móviles measured
for these emissions, such as television, radio
according to their frequency. The waves 100% of stations internally, in accordance
broadcasting, microwave ovens or RADAR, to
used for mobile telephony throughout the with national regulations, which sets
cite just a few examples. The only difference
world are included among what is known permissible limits against which emissions
between them is the frequency and the
as radio waves, specifically of frequencies throughout the country are measured and
power used in each case.
between 900 and 2,000 MHz. Light is also a certified. 18 sites were certified in 2005.
form of electromagnetic radiation, but at a
There are two types of radiation within
higher frequency. Lastly comes ionizing In Spain, 100% of base stations comply
electromagnetic waves: ionizing and non-
radiation, with frequencies greater than the with the limits established by current
ionizing.
frequency of light (millions of times higher legislation. Throughout 2005, the company
•In very high frequency radiation, such as than the frequencies used by mobile took a total of 3,262 measurements for
in the case of X-rays and gamma rays, the telephony). different sites. The number of sites that
energy from the electromagnetic waves
were certified by external agents was 968
is such that it can produce what is known Mobile services at present use the following with site variations and 2,294 without
as an ionizing effect, that is, it can break frequency bands: the Global System for variation.
chemical bonds. For this reason, this type Mobile Communications (GSM), which uses
of radiation is known as ionizing digital technology and operates in the In the Environmental Country Committees,
radiation (IR). frequency bandwidth of 900 MHz and an the current annual Action Plan will be
•Lower frequency radiation, the extension of this system, the European
Digital Cordless System (DCS-1800), which
decided on depending on legislation, the
frequencies at which mobile telephony demands of groups of interests and the
works, do not have sufficient energy is very similar to GSM but which operates in internal requirements set by the company,
under any circumstances to modify the the 1,800 MHz band, and lastly the so that there are certain minimum
molecules of living cells. They have only Universal Mobile Telecommunications requirements for action that are common
System (UMTS-2000). to all the countries.
Elctromagnetic spectrum
Frequencies
0 10 100 1 10 100 1 10 100 1 10 100 1
Hz khz Mhz Ghz Thz Visble Radiation X-rays Gamma
light rays
Wavelength
10000 1000 100 10 1 100 10 1 10 1
Km m cm mm
Non-ionizing radiation Ionizing radiation

08 The environment
Informing society In Spain, Telefónica Móviles CASE STUDY

Although there is no scientific evidence to carried out the following
prove that antennae and mobile
actions throughout 2005: Agreement with the Federation
telephones, when they respect the
established emissions limits, pose any •Training of all employees concerning of Municipalities on the
health threat, the worries of some citizens electromagnetic waves and their impact development of infrastructures
suggests that it is wise to continue on society. A one-hour session, available
improving training and information on the internet or via mobile telephone. The Spanish Federation of Municipalities
available for both employees and the
general public.
•Joint initiatives with AETIC (Spanish and Provinces (FEMP) and AETIC signed a
collaboration agreement in 2005 setting the
Association of Electronics, IT and
Telecommunications Companies). criteria governing the spread of mobile
Continuing with the task of Drawing up of a Code of Good Practice as telephone antennae, which was signed by
communication undertaken in previous a tool for improvement in relations with the mobile telephony operators Amena,
years, a constant dialogue is maintained Local Administrations, reflecting the Vodafone, Xfera and Telefónica Móviles
with the different groups of interests, environmental awareness of operators in España.
providing information on the operation of developing the network “reduction of the
mobile telephony, measurements taken, visual impact of telecommunications The Government was the driving force
level of compliance, etc. Some of the infrastructures". behind this agreement between
activities carried out in 2005 in this respect administrations and operators, taking into
are listed below. •The task of providing information to account compliance with regulations
groups of interests (town councils, guaranteeing the safety of emissions from
residents’ associations, landlords) antenna, environmental protection and
The different websites of Telefónica Móviles
continued throughout 2005, as a result town planning.
in each country, along with the
of demand from the groups themselves,
institutional portals, include information
providing a response to their concerns With this agreement, the operators
concerning the operation of mobile
about the operation of mobile telephony, undertake to draw up a Code of Good
telephony networks and electromagnetic
the conclusions of official bodies in Practices for the harmonious development
emissions. Complementary to this, on the
matters of health and of infrastructures, along with the creation of
Intranets to which all the Company’s
telecommunications and the regulation a technical consultation information service.
employees have access, information,
and control of electromagnetic
studies and courses related to the theme
emissions.
are published periodically.
•The process of obtaining authorisation
before an installation is constructed is
publicised to residents' associations,
along with practical examples of
technical projects, certified and approved
by the Official Guild of
Telecommunications Engineers.

08 The environment
•As part of the dialogue with groups of Other initiatives of this type
interests, a 24 hour telephone hotline for
carried out in Latin America
landlords has been set up, where, among
other things, the doubts and worries of have been:
landlord or anyone else interested in Argentina:
matters of health and electromagnetic Telefónica collaborated with CICOMRA
emissions are dealt with. Documentation (Chamber of Information Technology and
is also sent to those interested with Communication in the Republic of
information concerning electromagnetic Argentina) on the publication of a book
fields, authorisations and certificates of with information on electromagnetic fields
conformity with emissions levels of and non-ionizing radiation.
mobile telephony installations. •There are initiatives of communication
with the Chilean Mobile Telephony
Association (ATELMO), an institution with
which Telefónica Móviles is affiliated.
•Through the association of companies of

the guild in Colombia (Asocel), a series of
initiatives are being designed to inform
the community on the subject, using
video, brochures, and a national
campaign about telecommunications.
Mexico
A course was given to those suppliers
responsible for obtaining permits for base
stations on negotiation and subjects relating
to health and electromagnetic fields.

08 The environment
Telefónica Móviles environmental impact studies

Impact studies Impact studies
2004 2005
Argentina 155 296

Chile 0 0
Colombia - 66
Ecuador - 236
El Salvador - 83
Spain 34 29
Guatemala 247 350
Mexico 548 4
Nicaragua - 0
Panama 5 5
Peru 15 28
Uruguay - 0
Venezuela - 1
Note: There are significant differences between the levels of development of mobile telephony networks in
different countries, and also between the definition of an environmental impact study between different
legislation.
Impact of
installations
Telefónica maintains a commitment to The planning, construction, maintenance
making the extension of its services to the and operation of these installations implies
maximum area of the territory compatible environmental aspects such as visual
with the minimisation of the impact of its impact, the occupation of land and
infrastructures on the environment. As acoustic impact, among others.
described above, the visual impact of and
the generation of noise by infrastructures The evaluation of these aspects, prior to
are two of the relevant environmental the installation of new equipment, takes
aspects identified both in terms of fixed place by carrying out an environmental
telephony services and for mobile impact study. 1,098 studies were carried
telephony activities. out in 2005, thus fulfilling the legal
requirements set by the different
Land occupation administrations or by voluntary
Mobile telephony requirements when installation is in
To offer the maximum, good quality protected areas or areas of natural interest.
coverage in the regions in which Telefónica
Móviles has a licence to operate, it is 16.8% of installations in Spain are located
imperative to develop networks of base in zones delimited by Natura 2000
stations and antennae that, although they network.
occupy a small area of land, should be
located at relatively high points in relation Fixed telephony
to their surrounding environment, usually The activities of Telefónica de España were
in towers or buildings. carried out over a network of 6,515
buildings and network infrastructures at
The Telefónica Móviles network had over the end of 2005 (this figure was 6,256 in
30,300 sites throughout the world at the 2004) and over 9,222 telecommunications
end of 2005, 27% more than at the close of antennae (8,829 in 2004). Telefónica de
2004. When it comes to developing these España carried out one environmental
networks in natural areas or urban areas of impact study in 2005.
special interest for their landscape or their
historic and artistic heritage, Telefónica
takes into account options such as
camouflage in the surroundings, the reuse
of existing infrastructures or the reduction
in size of equipment.

08 The environment
Telefónica Móviles sites throughout the world

Sites Sites
2004 2005
Argentina 1,647 2.423

Chile 950 1,398
Colombia 503 1,483
Ecuador 237 254
El Salvador 147 276
Spain 15,304 17,000
Guatemala 417 315
Mexico 2,854 5,780
Nicaragua 286 116
Panama 115 359
Peru 386 492
Uruguay 100 165
Venezuela 745 743
Telefónica de Argentina had 1,750 buildings this methodology will be adopted by all
dedicated to network infrastructures and operators.
725 telecommunications towers at the end
of 2005. It was not necessary to carry out In 2005, in Telefónica Móviles as a whole, a
any environmental impact studies in 2005. total of 456 environmental adaptations
were made to minimise visual impact, and
TeleSP had 2,043 buildings dedicated to 342 sites were shared.
network infrastructures and 1,129
telecommunications towers at the end of Acoustic impact
2005. During 2005, it was not necessary to Mobile telephony
carry out any environmental impact The noise generated by the air conditioning
studies, as no new towers were installed. equipment of the huts and buildings
However, there is still one open procedure, containing equipment is one of the aspects
due to the expansion of the network in a that Telefónica monitors most strictly and
protected area. on which it is working with its equipment
suppliers. This monitoring takes place by
At the end of 2005, Telefónica Peru had 913 means of acoustic measurements, which in
buildings dedicated to network 2005 were taken for 1,617 sites. The
infrastructures and 779 fundamental objective of carrying out
telecommunications towers, of which 4 are these measurements is to verify
in protected areas. 2 environmental impact compliance with valid legislation in
studies were carried out in protected areas matters of noise, with the aim of taking the
in 2005. appropriate corrective measures in those
cases where non-compliance is found.
Visual impact In addition to this, throughout the whole of
In addition to the above, during the phase Telefónica Móviles, 113 citizen complaints
of planning of the network, Telefónica have been received due to equipment
Móviles España and Mexico apply their noise, and 93% of these have been resolved.
own methodology to provide an objective
quantification of the visual impact of base Fixed telephony
stations. The parameter for evaluation is In Argentina, the noise of 4 sites has been
“Visual Fragility”, which measures measured following complaints received
alteration to the landscape. This value is about them and all of the complaints were
the result of the analysis of different satisfactorily resolved.
parameters, obtaining a final range of
Visual Fragility that ranges from 1 In Spain, there are 10 administrative
(minimum) to 5 (maximum). procedures open at present due to noise
pollution.
In this way, the company analyses the level
of visual incompatibility that the In Peru, the level of noise emitted has been
installation causes to the environment, measured for 40 sites, including 12 citizen
using different minimisation measures to complaints, of which 3 have been resolved.
correct this. Throughout 2006 and 2007,

08 The environment
Visual fragility of mobile

telephony base stations
Scale de 1 to 5
Urban areas
Rural areas
3 3
2.4
2.8
Spain Mexico
Spillages CASO PRÁCTICO

The fuel tanks that provide fuel for
generators, together with possible leaks
from these tanks, can imply a certain Plan for visual and acoustic impact reduction and
environmental impact related to soil minimisation of the environmental impact of infrastructures
pollution due to possible spillages, which (Telefónica de Peru)
are particularly serious, if an accident
occurs. In 2005, a new piece of environmental In addition to this, Telefónica de Peru has
legislation was passed in Peru. Telefónica taken measures to reduce the acoustic
It is therefore important to have a de Peru, as the largest company in the impact of its installations to permissible
prevention policy in this respect and this country, quickly put a plan to reduce the levels. Some of the measures taken in 2005
has been part of the objectives of the impact of infrastructures into place, which were:
Environmental Management System of has already covered the following points:
1. Investment in acoustic insulation of
both Telefónica de España and Móviles 1. Conservation Plan for metal structures electrical generators in the Camino Real
España. Actions taken resulting from this and minimisation of their visual impact 208-San Isidro site, following notification
are outlined below: by painting the antenna support towers by the Municipality.
• Identification of the situation of and the elimination of risks.
2. Investment in the modification of the
electricity generators, checking that Interventions took place on 130 towers at
composition of air conditioning
tanks comply with current legislation. a national level.
equipment in URD Las Causurinas,
• Periodic in situ visual inspection in order 2. Building Conservation Plan, through following complaints from residents.
to check the state of the site. maintenance, focusing on the external
• Implication of supplier companies in facades of technical and administrative
buildings to maintain an image that is
composition of air conditioning
putting preventative measures into equipment in URD Cedros de Villa, due to
practice. appropriate to the surroundings.
the temporary closure of the site.
• Containment measures in order to 3. Approval of paints and additives with
manufacturers’ accreditations, avoiding
control possible leaks. composition of air conditioning
the use of zinc chromates, as these are
equipment in URD Santa Patricia, due to
carcinogenic. 4 products from 4
the threatened closure of the site.
manufacturers have been certified.
5. Implementation of operating hours in
4. Control of paint losses during
centralised high capacity air conditioning
maintenance, requiring greater efficiency
(Chiller) equipment in Surquillo, Basadre
from suppliers of materials and the
and Dean Valdivia locations due to
workforce in their tasks in order not to
complaints from residents.
affect the environment.
6. Putting low capacity electricity
5. Netting of metal towers with nylon mesh
generators with sound insulation
in 4 sites nationally, following complaints
capsules for low noise levels and for
from local residents concerning perching
outdoor use into place in 22 sites where
birds, which were making noise and
spaces with solar panel systems were
depositing dangerous waste.
saturated and migration was to take
place to conventional energy due to the
growth in services.

08 The environment
Waste managed at Telefónica Group companies

2004 2005
Non- Hazardous Non- hazardous Hazardous Electrical
hazardous waste kg waste kg waste kg and electronic
waste kg waste
Telefónica Móviles Argentina ND 20,000 ND 71,682 36,000

Chile 29,400 15,500 340,379 2,510 20,000
Colombia ND ND 212,542 12,187 3,535
Ecuador ND 5,000 ND 800 ND
El Salvador ND ND 50,144 232 500
Spain 481 1,038 111,913 2,390 170,740
Guatemala ND ND 66,197 332 ND
Mexico 307,481 71,596 89,095 6,720 23,970
Nicaragua ND ND ND 1,363 ND
Peru 29,600 48,000 ND ND ND
Venezuela 20,090 ND ND ND ND
Telefónica España Spain 12,504.862 1,004.789 12,220.000 1,549.500 3,565.000
TeleSP Brazil 247,665 474,705 4,052.190 868,575 3,500
TdP Peru ND ND 245,304 90,290 ND
T-Soluciones Spain ND ND 12,107 886 2,307
I+D Spain 91,355 10,151 59,252 19,903 14,220
Atento Argentina ND ND 24,000 NA ND
T-Gestiona Argentina ND ND 143,000 150 ND
Control and management of waste
The generation of waste is one of the main Spain

environmental aspects resulting from the Once it has been selectively collected, the
activities of the Companies. Depending on hazardous and non-hazardous waste is
the activities carried out by each Company, managed in accordance to the regulations
exclusively urban waste and office waste established by valid environmental
(paper, toner cartridges, automated office legislation (delivery to authorised
equipment, etc.) may be generated, or other managers, the use of the established
specific types of waste may be generated documentation in this respect, etc.).
by the activity, such as electrical or
electronic waste. As can be seen from the Telefónica España is the company in the
figures shown, the waste associated with Telefónica Group that manages most
the activity of Telefónica is more waste, due mainly to its 80 years of history
representative by volume than the waste and to the demanding environmental
from the offices. regulations it faces in Spain. The Company
has evidence of the reuse and recycling of
The occasional generation, in greater or cable and paper waste and of a very high
lesser amounts, of waste containing certain percentage of electrical and electronic
compounds that makes it hazardous to the apparatus waste, approximately 70%. Some
environment is not uncommon. Such waste of the characteristics of the waste
is tested in order to ensure that it is management system are:
managed appropriately.
•Instructions regulating the
administrative management of
Of the waste generated, 73% corresponds
hazardous waste.
to non-hazardous waste and 11% to
hazardous waste. The rest is electrical and •Specific procedures for the management
electronic waste. of static lead-acid battery waste and
waste from the maintenance of
electricity generators.

08 The environment
CASE STUDY
Client waste
The operators of Telefónica do not only In 2005, Telefónica Móviles Argentina re-
manage waste from their networks; they launched its Battery Collection and
are also proactive in the collection and Recycling Programme, which has already
•Procedures regulating the inverse management of those terminals and items
of equipment that clients no longer use,
recycled over 1,200,000 units. This
programme, which is in collaboration with
logistics of waste (from the client to the
manufacturer). thus encouraging their correct recycling the Argentinean Wildlife Foundation, was
and minimising negative environmental of particular importance in 2005 due to the
•All those contracts involving waste impact. technological transition of many clients
management contain clauses to ensure
between CDMA and GSM standards.
that management takes place in
Telefónica Móviles España participates in
accordance with legal requirements.
initiatives such as “Tragamovil” (“Mobile The company began an adaptation process
Swallower") organised by the association of over eighty containers installed in its
Telefónica Móviles España has an
ASIMILEC, the objective of which is the commercial buildings and offices, in which
Integrated Waste Management System
recycling of disused electrical and clients and non-clients of the company
that enables the identification and removal
electronic equipment. To December 2005, could deposit their spent batteries, thus
of waste originating from both the
almost 104,287 kg of waste mobile collaborating with the conservation and
construction and installation of base
telephone items had been collected, care of the environment.
stations and of Company buildings,
reaching a total of 305,481 kg since the
complying with valid legislation at all
initiative was started in 2001. Telefónica Telefónica de Peru has recovered 1,500 kg of
times. To facilitate this activity, containers
Móviles España contributed 22% of the waste from public and home telephone
are placed in Company buildings and stores
material received by the initiative for the use. This equipment is destined for reuse in
for the management of urban/municipal
year 2005. other parts of the network, with the
waste (paper, card) and hazardous waste,
withdrawal process beginning with the
such as cells, mobile telephone batteries
Telefónica de España has recovered removal of the connection cable, the
and fluorescent lights.
1,325,000 kg of waste from clients, for the recovery of the equipment and finally the
most part telephone equipment from intervention of specialised companies to
The management of waste in Telefónica
clients’ homes. When a client wishes to get provide the treatment and recovery of the
I+D is included in the operational control
rid of a rented telephone, it is handed in to equipment.
procedure of the environmental
a Telefónica Store or sent to the Company’s
management system. Waste generated
installations. At present, all items of
that is suitable for recycling makes up
equipment removed from homes or
79.2% of total waste sent for management
businesses are taken to Telefónica’s
by TID (Madrid and Boecillo).
installations or to the installations of
collaborating companies and are managed
appropriately, in some cases repaired and in
the majority of cases delivered to an
authorised waste manager. A large
proportion of telephone equipment,
particularly metal components, is recycled.

08 The environment
Latin America In Argentina, terminal batteries are

The operators of the Telefónica Group in delivered to a supplier who deals with their
the different countries of Latin America are final disposal. Accessories and terminals
making progress in waste management in are sent to a service provider who is
accordance with the Minimum authorised to treat electronic waste and
Environmental Requirements laid down by who proceeds to export the recycled and
the Telefónica Group. Waste management recovered materials. It is estimated that
is carried out by authorised companies, 40% of waste generated is recycled.
which are controlled by public law
regulations and which have all of the In Chile, cellular equipment (excluding
certificates to guarantee that the batteries and chargers) together with
companies are in compliance with legal electronic network operation equipment, is
requirements. It is Telefónica’s objective for delivered to an electronic waste reduction
2006 to continue making progress in the company. The hazardous waste from
implementation of homogenous batteries and chargers is delivered to an
procedures for waste management in all of authorised service provider, who treats the
the different countries. waste so that it does not affect the
environment.
In Mexico, the area responsible for the

generation of waste, should manage and
dispose the waste generated by its activity
appropriately through authorised waste
managers.

08 The environment
Energy Fuel consumption in the

Telefónica Group companies
consumption (Figures in thousands of litres)
Group fuel Vehicle fuel

Fuel Company Country Thousands of litres Thousands of litres
The consumption of fossil fuels linked to 2004 2005 2004 2005
energy use is an aspect that, due to its
repercussions on the environment, is
subject to ever-greater attention in global, Telefónica Argentina - 126 - 123
European and national policies. The Móviles Chile 42 20 103 151
telecommunications sector is not a sector Colombia 1,034 522 164 156
Ecuador 100 296 140 159
that generates a great deal of direct
El Salvador 39 47 121 126
demand for fuel consumption, with these
Spain 4,868 4,735 504 378
associated mainly with tasks related to the
Guatemala 39 73 175 73
creation and maintenance of the network,
Mexico - 229 - 546
such as vehicle fleets or electricity
Nicaragua 56 134 63 166
generators. The latter are used for
Panama 101 71 54 109
emergency actions or in places where Peru 317 369 85 91
access to other sources of energy is Venezuela - 2,137 - 723
difficult.
Telefónica Spain 570 31 7,515 7,260
de España
Total fuel consumption in 2005 was
approximately 30 million litres, 20 of these TeleSP Brazil 500 258 2,813 3,441
in vehicles and 10 in electricity generators. Telefónica Chile 184 340 127 1.222
Consumption is constant with respect to CTC
the previous year if the increase in Telefónica Argentina 220 - 3,348 3,000
operations is taken into account. de Argentina
TdP Peru 134 895 - 1,992

Atento Argentina 1,200 - - 2
Tgestiona Argentina 540 - - -
Telefonica Spain - 11
I+D

08 The environment
Electrical energy consumption in the

Telefónica Group companies
(Thousands of KWh)
Company Country Electrical energy Electrical energy

consumed in operations (KWh) consumed in offices (KWh)
2004 2005 2004 2005
Telefónica Spain 648,504 554,969 235,045 231,836

de España
TeleSP Brazil 534,217 555,965 46,453 38,038
Telefónica Peru - 76,505 15,500 9,483
del Perú
TASA Argentina 140,550 158,766 -
Telefónica CTC Chile 70,253 117,191 4,436
Tsoluciones Spain 2,678
Telefónica Spain 307,003 354,632 47,766 47,420

Móviles Argentina - 113,946 6,008 22,639
Chile 29,337 41,803 1,867 1,655
Colombia 34,257 39,255 7,824 9,654
Ecuador 7,709 87,301 1,263 36,403
El Salvador 11,334 1,056 1,729 2,128
Guatemala 10,881 11,970 1,108 12,196
Mexico - 42,842 10,621 16,140
Nicaragua 2,550 3,443 1,863 2,411
Panama 6,660 6,476 4,770 4,834
Peru 21,623 43,940 5,998 4,293
Uruguay 5,600 1,400
Venezuela - 84,598 20,986 28,382
Telefónica I+D Spain - 97,778 12,401 13,151
Telefónica Spain - 699 1,100
GSC 1 Argentina - 4,481 4,539
Brazil 0,935
Atento Argentina 3,852
Terra Argentina - 164
Chile - 336
1
GSC: Gestión de Servicios Compartidos

08 The environment
Fuel consumption Electrical energy consumption

Figures in thousands of gal/year Figures in thousands of gal/year
712 8,261
549 6,589
371
305
1,556 1,815
Diesel Diesel Offices Network

electricity vehicle
generators fleet
The company that consumes most fuel for Electrical energy consumption
vehicle fleets is Telefónica de España, which The power supply to communications
consumed 7.2 million litres in 2005 for a networks involves the highest area of
fleet of 6,081 vehicles. If these figures are energy consumption for
compared to 2004, an absolute reduction telecommunications operators. Energy
can be seen of 0.3 million litres which, consumption is one of Telefónica’s main
when consumption per vehicle is environmental concerns, as its reduction
considered to have remained stable, comes has a direct effect on saving scarce natural
from the reduction in the vehicle fleet. The resources and on the reduction of
total consumption of Telefónica Móviles pollution. During 2005, Telefónica advanced
resulting from its vehicle fleet is 2.8 million notably in putting measures into place for
litres for a total mobile fleet of 1,115 the reduction of energy consumption and
vehicles. A reduction in consumption in for a greater control of energy
Spain of around 25% must be highlighted. consumption through its measurement.
The Company that consumes most fuel in Electricity consumption in network

electricity generators is Telefónica Móviles operations have increased by 8% and in
España, with 4.7 million litres, due mainly offices by 16% with respect to the
to the greater geographical spread and previous year.
greater coverage of its network, which
results in the need for alternative energy
sources to the usual energy supply for
emergencies or remote areas.
Direct energy consumption of the Telefónica Group in 2005

Calculated according to the GRI Energy Protocol
Direct consumption Indirect consumption

Fossil fuels Renewable energies/ other sources
Country Coal Natural Oil Crude Biomass Solar Wind Geothermal Hidroelectric Nuclear
Gas products oil
Spain 4.341 5,626 200 1,184 0 108 0 87 0 661 5,331
Argentina 1,080 67 1,853 200 0 8 0 5 0 387 386
Brazil 2,138 218 10 274 0 8 0 4 0 2,445 103
Chile 633 708 245 124 0 8 0 4 0 266 0
Peru 483 0 98 198 0 8 0 4 0 454 0
Other countries 1,574 199 612 505 3 8 0 4 43 1,453 95
Dates in Mega Joules

08 The environment
Relative energy efficiency indicators for Telefónica de España

Type of electricity GJ Reference Quantity Relative unit Ratio
size
Electrical TTelephony use 2,183.126 Invoicing (€) 10,695.96 GJ(network/g 204.1

energy consumption
invoiced
Electrical Administrative use 834,612 Staff 32,116 GJ(management)/employee 26

energy consumption
staff
Energy efficiency Telefónica Móviles

The operators of the Telefónica Group have Telefónica Móviles España has made major
made significant improvements in the advances in the implementation of energy
energy efficiency of their networks and efficiency measures throughout the
offices throughout 2005. network, by means of different prototypes:
•The manufacture of two prototype fuel
cells and the conditioning of two base
To reduce consumption in offices, an stations for their installation, with the
internal awareness campaign was aim of carrying out two pilot tests in
launched, which consisted of the placing of 2006.
small stickers beside switches in those
rooms where user intervention can have a •Passive cooling: the number of
prototypes has been increased to eight
more notable effect (equipment rooms,
sites.
offices, warehouses, services and small
buildings). A project was also undertaken of •Use of solar and wind power: to date
the substitution of switchboards for there are 17 base stations operating with
ferroresonant technology, manufactured in this combined energy supply system.
the 1980’s, for other high-frequency
technologies. The aim of this is to make
•Installation of 32 beacon systems based
on LED technology.
significant savings in electricity
consumption, as with the passing of time •Reduction by 11 units of the number of
generators installed to supply electricity
the yield from the rectifiers has declined,
to base stations.
resulting in noticeable energy losses. The
cost of this investment for 2005 was 1
In addition to this, Telefónica Móviles
million euros, for a total of 36 sets of
España has participated in the PNEUMA
equipment.
(Pneumatic Uninterruptible Machine)
project, which is funded by the European
Telefónica Soluciones carried out internal
Commission through the European Life
awareness-raising campaigns by means of
Project for environmental protection. The
the Intranet, posters and stickers
objective of this project is to develop a
encouraging energy saving.
product using compressed air as a source
of clean energy to supply base stations
should there be a cut in the usual power
supply. At present, acid batteries are used,
which generate an environmental impact
in their recycling. The system developed as
part of this project is intended to
eliminated these batteries and to present a
solution that is more environmentally
respectful, more economical and that
requires less maintenance and space.
In Latin America, efforts were made to
reduce the consumption of the networks
through the use of renewable energies,

08 The environment
Vehicle fleet of Telefónica de España
-17%
in 3 years
7,260
6,621
6,309 6,081
2002 2003 2004 2005
with seven solar cell systems and two wind

power systems put into place in Chile in
•Optimisation of air conditioning systems
to reduce losses (Colombia, Mexico,
2005. On the contrary, in Peru the theft of Panama, Peru).
solar panels means that this alternative is
not viable, as in addition to the financial T Gestiona
costs associated with replacement of the T-Gestiona Argentina is the most advanced
panels, there is also the cost of interruption Company of the shared centres and
to the service. Nevertheless the services, as it has ISO 14001 certification. In
consumption of these sources is 4,636 GJ. 2005, it put certain measures in place
Efforts to reduce consumption were based intended to reduce consumption that may
on the optimisation of control and of be transferred to other countries in 2006.
switchboards and the use of external These measures include the adjustment of
temperatures to set the operating demand contracted, the correction of
temperature of the rooms, thus optimising power factors, the optimisation of air
the use of air conditioning. conditioning equipment, the progressive
replacement of lighting in buildings with
In other countries, such as Colombia and low-energy lighting, restricting the
Venezuela, measures to optimise the illumination of facades and posters, the
network according to load were also taken, restriction of times for air conditioning and
through regular measurement. In Mexico, heating, and staff training.
on the other hand, efforts were focused on
the installation of 1,000 air conditioning
units with “free cooling” technology, which
uses the ambient temperature for cooling.
In addition, maintenance was scheduled
and carried out of generators, transformers,
batteries and other equipment with the
aim of reducing losses.
Different measures were taken in the

different operations of Telefónica Móviles in
order to reduce energy consumption in
offices:
•Communication campaigns to
encourage the saving of electrical energy
in offices (Chile, Mexico, Panama).
•Restriction of times in office buildings

through the electric light or air
conditioning (Chile, Peru).
•Automatic control devices for switching

lighting on and off, together with the
installation of low-energy lamps
(Colombia, Venezuela, Nicaragua,
Panama, Peru).

08 The environment
CASO PRÁCTICO
Telefónica will install the largest rooftop solar energy
production park in Europe in Distrito C
Telefónica will install the largest solar the project for Telefónica will be the
energy production park in Europe and one equivalent to the total electricity
of the largest rooftop solar energy parks in consumption of Distrito C.
the world at its new headquarters which
are under construction in Madrid (Distrito The installation of the panels will be
C), with the support of Iberdrola, the completed towards the end of 2006. The
company that will construct and maintain project will be developed in 4 phases of
the plant, as technological partner. approximately 3,520 panels per phase, plus
a fifth phase, corresponding to the part of
The park will have over 16,600 photovoltaic the project to go on the roof over the
solar panels that will run the length of the Corporate building, of approximately 2,540
entire office complex on the building panels.
rooftops. At over a kilometre in length, the
rooftop will have an area of over 57,000 Distrito C, located in the Las Tablas
square metres, if which 21,000 will be business park, to the north of Madrid, is to
occupied by solar panels. The power be Telefónica’s new operational
installed will be of approximately 3 MW headquarters. With a total area of 200,000
peak, which will generate over 3.6 GWh per square metres, it will have space for 14,000
year. The project involves an investment of employees in a space for offices and for
21.8 million euros. various services similar to a campus in
concept: an open space, with services that
The “solar roof” is the final milestone in a will be shared with the local residents. The
project that has been conceived since its complex has been designed according to
origins within the context of sustainable innovative concepts of both interior and
architecture, understanding this to be exterior space.
architecture that allows the reduction of
atmospheric emissions of CO2, the main
cause of the greenhouse effect.
The electrical energy obtained from the

solar roof will enable CO2 emissions to be
reduced by approximately 1,600 tonnes per
year, in line with the objectives established
by the Kyoto Protocol. The energy
generated by the park will be sold to
Iberdrola, which will incorporate it into its
distribution grid. The income generated by

08 The environment
Emissions into the atmosphere
The optimisation of fossil fuel consumption Some substances, used as coolants,

linked to the use of energy goes hand in solvents, propellants in fire protection
hand with a reduction in the emission of equipment, etc. damage the ozone layer.
greenhouse gases (CO2, NOx and CH4, These include CFC’s, HCFC’s and halons. The
among others), thus contributing to a Companies of Telefónica are working on
reduction in one of the main problems the progressive elimination of this type of
facing the planet today. material.
The Companies of the Telefónica group In Telefónica de España, all fixed and
have for some years been taking portable extinguishers containing halon
improvement actions to reduce 1301 and 1211 were eliminated. With regard
greenhouse gas emissions: to air conditioning equipment, it is
•Renewal and reduction of the vehicle anticipated that legislation for its
elimination will be fulfilled before January
fleet, replacing vehicles without catalytic
converters with others that fulfil current 1, 2015.
legislation on emissions.
Within the Telefónica Group, equipment
•Electrical energy saving measures, such using R22 gas will be gradually replaced
as increasing the maintenance with equipment using R-134.
temperature in equipment rooms to
23?C, disconnecting underused rectifiers,
reducing the hours of use of
management buildings, reducing
illumination in circulation areas in Total energy consumption within the
telephone centres, etc. Telefónica Group
•Optimising occupied spaces in buildings, Type of energy Quantity in (GJ/year)
isolating unoccupied areas to remove the 2004 2005
need for air conditioning in such areas.
Electricity generators 305,679 371,117
•Internal energy saving awareness Vehicle fleet 549,060 712,096
campaigns. Electrical energy 8,145,757 10,076,313
•The use of alternative energy sources to Total energy consumption 9,000,496 11,159,526
supply the networks. Of the total energy
consumed by Telefónica de España,
approximately 12,000 KWh come from
renewable energies.

08 The environment
CASESTUDY
Telefónica Internacional energy efficiency programme
EThe Telefónica Internacional Energy A multidisciplinary team identified 26 good

Efficiency Programme, launched in 2004, practices in order to transfer them from
consists of the optimisation of electrical one operation to others.
energy management (reduction in price and • Buying energy on the free market
consumption) by means of the • Self-generation of energy
identification and application of best • Adjusting the energy contracted
practices within the group. This exchange of • Tariff adjustment
good practices has a direct impact on the • Parallel measuring of demand
energy accounts of the areas of operation of • Automatic control of demand
Telefónica de Argentina, TeleSP, Telefónica • Controlling abnormal consumption
CTC Chile and Telefónica del Perú. • Correcting the power factor
• Reducing THD (Total Harmonic
Distortion)
• Compacting centres
• Optimising continuous current systems
• Optimising air conditioning equipment
• Set point of room temperatures
• Energy diagnosis
• Action in administrative buildings
• Action on external points
• Prioritising the purchase of efficient
equipment
• Substituting equipment
• Making the most of external
temperatures
• Training the workforce
• Recovering outlay for the development
of electricity networks
• Tele-measuring
• Verifying the measuring factor
• Segmentation (isolation of spaces)
• Hurrying accounts
• Obtaining preferential client status

08 The environment
Summary of emissions
by the Telefónica Group (in t/year)
Summary of emissions (mT/year)
Year 2004 Year 2005
Total Fuel Fuel Total Fuel Fuel
consumption electrical consumption consumption consumption consumption consumption
energy (a) generators vehicle electrical generators mobile vehicle
fleet Total energy (a) (b, c) fleet Total
SOx 14,426.135 4.938 8.870 14,439.944 17,845.151 5.995 11.504 17,862.650

NOx 4,439.437 261.023 154.213 4,854.674 5,491.591 316.902 200.005 6,008.497
COVNM 122.186 49.383 42.070 213.639 151.145 59.954 54.562 265.661
CO 268.810 112.875 159.662 541.347 332.518 137.038 207.072 676.628
CO2 1,403.448.739 22,151,686 39,408.664 1,465,009.088 1,736,068.184 26,893.805 51,110.539 1,814,072.528
CH4 24.437 1.411 1.521 27.369 30.229 1.713 1.972 33.914
N2O 57.020 3.527 5.652 66.199 70.534 4.282 7.330 82.146
CO2 equivalent 1,421,638.214 23,274.790 41,192.571 1,486,105.575 1,758,568.591 28,257.338 53,424.154 1,840,250.083
a)Estimates based on the pollutant atmospheric emissions inventory corresponding to the year 2002 from the Ministry of the Environment on net production of
electrical energy, printed in the Statistical Bulletin of Electrical Energy of December 2002 (Ministry of the Economy and Electrical Grid of Spain).
b)Source: Guia CORINEAIR
c) Estimate based on the sulphur content of fuel used

08 The environment
CASE STUDY Paper consumption

Paper figures for Telefónica de
España
Paper consumption is another of the main •Consolidation of photocopying and
environmental aspects related to the printing equipment as multifunction
• Only 10% of documentation that is operations of Telefónica, with consumption
for offices and billing traditionally
equipment, which enables greater
efficiency in the management of
printed is read.
•If I print, I am being highly inefficient. considered separately. equipment. This type of equipment is
contracted as an external service.
The indirect costs associated with paper
are 30 times greater than the cost of the Offices Consolidation involves the removal of
In 2005, Telefónica put the “Efficiency in the personal and networked printers. An
sheet.
Use of Paper and Electronic Information in objective was set of reducing the
•During 2005, office paper consumption the Workplace” project into practice. This number of printers in offices in Spain by
dropped by around 14% 5,000; thus from over 17,000 printers, the
was aimed at cutting the ties with paper in
•In Telefónica, 132 million A4 sheets were Telefónica offices. This had two number was to be reduced to 12,000. By
the end of the year, there were only 9,769
consumed in 2005. fundamental objectives: on the one hand,
printers.
•A Telefónica user prints an average of 14 to improve the mobility and efficiency of
sheets per day. work and on the other, to contribute to a
reduction in environmental impact. As a
•Reduction in paper consumption by less
printing (only 10% of material printed in
•51% of paper purchased in 2005 was number of areas are implicated in the the office is read) and encouraging
recycled.
subject of paper and information, the Paper double-sided printing and even the
•7,269 personal printers were eliminated Efficiency Committee was set up and met printing of 4 sides per sheet. In May
in 2005, although there are still around 14 times throughout 2005. 2005, the Companies set the objective of
4,600 left. reducing the amount of paper consumed
•85% of Telefónica’s paper consumption is The project began with the analysis of
initiatives taken by other multinationals,
in the offices by 10%. In 2005, a reduction
in the purchase of paper of 14% of the
divided between Fixed and Mobile
business in Spain reaching the conclusion that these figure for the previous year was achieved.
initiatives could not be directly transferred
•Each employee stores 0.6 m3 of paper in to Telefónica’s situation. During the first •Increased purchasing of recycled paper,
the office as the improved quality of this paper and
quarter of 2005, the report concerning the
the robust nature of new equipment
results of best practices implemented in
means that this can be used in the same
over 30 units of the Telefónica Group was
conditions as new paper. This action has
presented. This report proposed a drastic
a very positive environmental impact. At
reduction of paper consumption in the
the start of the year, only 20% of paper
office, while always maintaining efficiency
used was recycled paper, with an
of work, as with existing technology and
objective of 40% set. By the end of the
the media available, it would not be wise to
year, a figure of 51% had been reached.
eliminate paper entirely. The following
actions were taken throughout 2005:

08 The environment
•Monthly monitoring of paper CASE STUDY

consumption within the Companies, in
order to produce a report enabling the
contrast of objectives with expected The cost per sheet is not the
results. Along with the reduction of cost of the paper l
paper use, activities are encouraged to
avoid losses in productivity. It is agreed Although expenditure on paper is not a
that the 12,000 professionals working in spectacular figure (in 2005, Telefónica
Distrito C will have 17” TFT monitors. spent 600,000 euros on the purchase of
•Various communication actions were paper), it has been shown that each sheet
that is printed costs the company 30 times
taken: an article on the subject in the
extranet, a website and the preparation more than the price of the sheet of paper
of a communication campaign to be run itself. In addition to direct costs of
throughout 2006. consumable materials and filing space,
there is the proportion of indirect costs in
During 2006, the focus will be on wasted time on unnecessary activities.
encouraging the elimination of filed paper
in the office, which will make use of the The cost of the paper is only 3% of the cost
move to Distrito C as a reason to reduce generated each time an employee uses a
filed paper, to run communication sheet.
Material costs of paper (3%)
campaigns, the provision of common
Total costs from paper are 30 times more 97% of the costs:
solutions for the management of
than the cost of a sheet. Savings on printing
digitalised information and carrying out
Savings on photocopies
paperless office pilot projects.
Savings on distribution
Cost per 100 sheets Savings on storage
In other countries, isolated similar
Productivity Productivity losses
initiatives are getting underway. In Savings
Argentina, for example, the Apolo Plan has
Indirect Direct
been put into practice. This consists of
managing documentation in electronic 16€ 9€
format and using both sides of the paper in
printers and photocopiers. For 2006, the
objective is to transfer the good practices
developed in Spain to the Country
Environmental Committees.
0.6€
0.8€
0.6€
1.7€
1.2€
0.8€
1€
Total Time on Time on Time on Paper Printing Photocopying Distribution Storage

profits copies, distribution consulting costs costs costs costs costs
printing of paper filed paper

08 The environment
Billing As part of the “One bill, one tree” project,

It is clear from the figures for Telefónica de Telefónica de España intends to plant one
España that the consumption of paper tree for each client who signs up for the e-
associated with issuing bills is far greater billing service. It is important to underline
than the impact of paper in the offices. As the environmental sponsorship linked to
a complementary measure to the double- this concept, through which the saving on
sided printing of bills, in 2005 a campaign paper used for billing is redirected to the
was launched to encourage Telefónica reforestation of riverbank woodland, in
customers to contract "Paperless Billing". collaboration with the Natura Foundation.
The e-billing service enables clients to Both organisations will focus their efforts
consult, print and download their on projects for the recovery of riverbank
telephone bill on-line, with the same legal woodland of the inland basins of Catalonia,
status as paper versions currently have. Castilla la Mancha, the Basque Country and
This service is free and the only cost to the the Principality of Asturias. In all cases,
client is the internet connection. reforestation will take place with native
species, which take root easily in riverbank
By the end of 2005, this service was used areas.
by almost 150,000 clients with an increase
of 30,000 in 2005. It is therefore necessary With this initiative, Telefónica is enabling
to raise the awareness of clients of the its clients to play a special role, as the more
environmental benefits of substituting the clients sign up for e-billing, the more trees
paper format of the information with can be planted. If the almost 84 million
electronic information. paper bills that Telefónica will send to its
clients in 2005 were to convert to e-bills, it
would be possible to reforest an area
equivalent to 840,000 football pitches.
Moreover, since this is riverbank forest, the
rivers carry the seeds all along their length,
replanting them and thus maximising their
effectiveness.

08 The environment
Breakdown of paper consumption by use 2005

Country Total Paper consumption Paper consumption Paper consumption
consumption for administration for billing for advertising
and operations and leaflets
Telefónica Móviles Argentina 1,158,625 220,800 457,825 480,000

Chile 1,589,349 49,069 60,280 1,480,000
Colombia 353,889 61,218 292,671
Ecuador 6,165 2,675 3,490
El Salvador 73,423 9,166 54,257 10,000
Spain 120,086 120,086
Guatemala 42,075 30,000 2,075 10,000
Mexico 18,181 18,181
Nicaragua 101,162 14,378 86,784
Panama 28,133 18,273 4,860
Peru 3,143,760 2,896,145 47,190 200,452
Venezuela 82,440 82,440
TASA Argentina 490,000
Telefónica de España Spain 4,127,986 453,999 3,673,987
TdP Peru 144,470
TelSp Brazil 1,465,608 174,440 1,291,168
CTC Chile 547,175 99,903 447,272
Tsoluciones Spain 24,293 24,293
Telefónica I+D Spain 31,194 31,194
T-Gestiona Spain 11,111 11,111
Argentina 46,480 46,480
Atento Brazil 39,525 39,525
Argentina 12,900 10,287 13 2,600

08 The environment
Water consumption
Water consumption in the However, given the importance of water in

telecommunications sector is of little the context of the planet’s environment,
significance in comparison with other various specific awareness-raising actions
industries or the service sector. Its greatest have been developed in order to rationalise
impact consists of water consumption in water consumption and sensors have been
offices and by air conditioning systems. installed in toilets. In some cases, studies
have been carried out on the water cycle in
the buildings concerned in order to
maintain those points most prone to leaks
in perfect order.
Water consumption (thousands of litres)

Line of Business Country Water consumption Water consumption
2004 2005
Telefónica Móviles Argentina ND ND
Chile 23,019 30,393
Colombia 19,035 ND
Ecuador 1,808 ND
El Salvador 1,679 151,120
Spain 55,173 44,893
Guatemala 12,544 46,897
Mexico ND 10
Nicaragua 16,200 15,515
Panama 600 13,633
Peru 19,330 30,393
Venezuela ND 69,231
Telefónica de España Spain 906,927 913,452

TeleSP Brazil 1,165,045 1,057,225
Telefónica del Perú Peru 327,521 133,241
Telefónica CTC Chile 880,990
Telefónica de Argentina Argentina 421,241 1,280
Atento Argentina ND 29
Telefónica I+D Spain 37,404 39,213
T-Gestiona Argentina ND 480,000

08 The environment
Masts Consumption
Masts are used for aerial hanging and are

usually made from wood or concrete. At
one time the main environmental problem
associated with wooden posts was related
to their periodic re-impregnation with
creosote, in order to protect the wood from
the action of beetles and to prevent the
destructive effect of these on the Masts.
Nevertheless, at present this process is not
carried out by Telefónica de España and any
maintenance is carried out by specialised
companies in their own installations, with
precautions taken that are in line with
current legislation, and therefore there is
no negative effect on the soil. This is
considered to be a potential environmental
aspect as it could have an effect on the soil.
Masts installed
Type of post 2001 2002 2003 2004 2005 Variation 05/04
Wood 3,679,915 3,704,434 3,747,032 3,804,187 3,838,658 +0.9%

Concrete 218,300 219,754 222,281 225,672 232,029 +2.8%
Total 3,898,215 3,924,188 3,969,313 4,029,859 4,070,687 +1.0%

08 The environment
In order to encourage the debate

Environmental surrounding the role of
impact of telecommunications in the sustainable
development of the planet, Telefónica has
Telefónica’s services begun publishing a series of monthly
articles on its website that analyse the
The telecommunications sector has a relationship between the use of new
major influence on the environment. technologies and sustainability.
Nevertheless and in contrast to what is
usually the case in other business sectors, Among the different studies outlining
this impact is mainly positive. some of the positive impacts of some
Telecommunications contribute to telecommunications services on
efficiency and to savings in such valuable sustainable development and the barriers
resources as energy, to the preventing their widespread adoption by
dematerialisation of products and to the society, the following conclusions can be
optimisation of transport processes, highlighted:
making them more effective.
•New information technologies have an
influence on what is known as
Some of the services traditionally
“dematerialisation”. It is estimated that
considered to have a positive
in the best case scenario, 50% of the
environmental aspect are tele-working,
energy used in manufacturing processes
remote offices, audio and video conference,
for products within the EU of the 15
tele-education, e-commerce, personalised
would be saved by 2020, thanks to the
mobile information services, networked
possibilities offered by ICT to users of
answer machines and call identifiers. The
access a service instead of acquiring a
impact of these services is greater when
product.
transport and distribution services, energy
efficiency in buildings, paper savings from •The use of renewable energies, together
on-line catalogues and electronic billing, or with energy efficiency measures, can
dematerialisation, are taken into account. reduce the environmental impact of the
energy consumption of ICT.
In addition to these things, advanced
mobile telephony services can contribute
•Information technologies can contribute
to the more efficient use of paper in the
to reducing environmental impact. For office, resulting at the same time in
example, thanks to third generation (3G) increased productivity and lower costs.
mobile telephones, it is possible to send
environmental monitoring figures in real •Technology can help to protect and care
for nature and to prevent its more
time using UMTS mobile devices. These
harmful effects on humankind.
devices have a wide range of uses, such as
Communication between measurement
pollen measurement, noise measurement,
stations in the field, networks of
ozone level measurement, water quality
environmental sensors and
measurement or fire control. Other uses for
meteorological satellites enables the
3G in the environment are, for example,
remote monitoring of important
monitoring wildlife and the control of
parameters that can affect our health or
waste discharges.

08 The environment
Local PVR on IMAGENIO New facilities of the SG-2000

management system
A project aimed at the incorporation into
Imagenio of a system to enable viewers to This projected is aimed at improving the
“pause” the television and continue to Public Telephony System STP-2000. Among
watch it, and to record television the new applications that this incorporates
programmes. This would eliminate the is the possibility of carrying out certain
need for video recorders as it would be operations that are currently carried out
accessible as a function of the TV itself. This manually by operators, via modem and
is a clear example of dematerialisation, in with no need for human intervention.
which a specific functionality is provided by Moreover, it offers greater precision in
a software application and not by a piece of detecting alarms, which means that repair
physical equipment, which would operations can be optimised, eliminating
necessitate the use of resources for its unnecessary journeys by staff to points
manufacture, distribution and later where terminals for public use are located,
disposal as waste, with the corresponding and thanks to remote control, atmospheric
environmental consequences. emissions, the consumption of fuel and
other resources associated with the
maintenance of public telephones can be
reduced.

08 The environment
quality of life or can help to reduce the Articles published in 2005

CASE STUDY loss of human life and damage to “Energy use in the digital society"
property in the case of natural
“Will the digital household be a sustainable
MaCS (Multimedia catastrophes.
household?”
Communication Services)
The work carried out on this project has “The impact of e-administration on
The European MaCS project, in which been awarded two prizes, the AUTELSI prize sustainable development”
Telefónica I+D is participating together 2005 for the Project or Initiative for the
“Telecommunication for emergencies”
with the University of Valladolid and other care and protection of the environment
organisations (telecommunications and 2nd prize from the AHCIET Journal “An information society for all”
operators, manufacturers, etc.) aims to put 2005, specifically for the article “The
“Tele-education for development”
a new broadband telephone service into contribution of telecommunications to
sustainable development: tele-working”, “The reduction in paper consumption in
practice for the residential market,
originally published on the Telefónica the Information Society”
integrating multimedia communication
services such as video telephony, website and then in 2005 in the AHCIET “E-commerce applied to tourism"
multimedia messaging, presence and journal.
“Getting to know and watching over the
“reachability” services, etc.
earth better”
Within the framework of this project, “Do telecommunications contribute to

Telefónica I+D is developing a software business productivity?"
telephone (softphone) known as Tifon,
which allows the user to make multimedia
calls (including video and messaging). This
telephone makes videoconferences
between individuals connected to different
new generation platforms possible,
without the need for additional
equipment.
The possibilities for dematerialisation

offered by this development are clear, as it
enables improved communication between
individuals without the need to use
videoconference equipment or additional
telephone terminals. The development of
this type of software telephone is therefore
an important contribution to the reduced
consumption of resources in the "digital
household".

08 The environment
CASE STUDY
The environmental influence In 2005, 364 projects were analysed, in
comparison with 318 projects in 2004 and
of new developments
353 in 2003. The most frequent
environmental benefits were:
In January 2002, Telefónica I+D put a process
into place that aimed to systematically •The possibility of future updating or
evaluate the environmental influence of its repair of components, which has a
new developments. To do this, a periodic positive impact on the reuse of
evaluation is carried out of the equipment and therefore on the
environmental impact of the Company's reduction of mainly electronic waste. The
projects, based on a questionnaire sent to updating of components also enables
supervisors, which also approaches the the best use to be made of technological
possible social benefits. advances that on occasion improve the
energy efficiency of these elements.
In 2004, the methodology was revised in
order to be able to evaluate the
•The reduced need for equipment, which
is strongly linked to the point above
implications of projects in the most
concerning the reduction of waste.
objective way possible. To so this, an
environmental evaluation was made of an •The improved remote control of
Intranet application together with the installations, related to the reduction in
collection of bibliographical information on transport needs and therefore with the
the environmental evaluation of advantages associated with lower fuel
information and communication consumption and as a result lower
technologies. emissions into the atmosphere.
Environmental evaluation of projects 2005

Environmental advantages % of projects
Update/repair of components 50
Reduces equipment needs 32
Better remote control installations 24
Reduces transport needs 23
Reduces other raw materials 18
Reduces energy consumption (inst/equip) 17
Reduces energy consumption 16
Better access for disabled people 14
Promotional advantage 14
Better access to education 9
Better healthcare 7
Better energy efficiency 7
Other improvements 3

08 The environment
Credits


Investor Relations


Secretariat General







08 The environment

09 Suppliers
Suppliers: equality
of opportunity and
mutual benefit

Contents 4
02 Identity 32
04 Customers 104
05 Shareholders 168
06 Employees 178
07 Society 226
09 Suppliers 292
Purchasing volume 294
Telefónica purchasing model 296
Supplier satisfaction 298
Encouraging ethical standars 300
10 Media 304
11 ANNEX I 310

09 Suppliers
Distribution of purchasing volume by countries

Data in percentage of total purchases
52.3
45.8
Purchasing
volume
32.1
11.8
9.1
6.7 6.0 5.6 4.0
4,8 4.1 - 4.6 - 4.6 4.1 4.4 -
Argentina Brazil Chile Colombia Spain Mexico Peru Venezuela Other
countries
Purchasing volume1
The purchasing volume awarded by the Telefónica classifies its purchases into five
Telefónica Group in 2005 rose to over 13 major categories (network infrastructures,
billion euros (12 billion in 2004). Its services and works, market products,
distribution by country saw Spain remaining information systems and advertising
the country with the greatest volume of and marketing). Most of these are destined
purchases with Brazil in second position. for the category of market products
(including mobile terminals) which,
Said purchasing volume was awarded to together with the category of services
over 18,834 suppliers throughout the world and works, make up more than 60%
(15,539 in 2004). The ten main suppliers for of purchases. The remainder is distributed
the Telefónica Group worldwide were between network infrastructures,
(in alphabetical order) Alcatel, Brightstar, information systems and, to a lesser
Carat, Ericsson, IBM, Lucent, Motorola, extent, advertising and marketing.
Nokia, Siemens and Vitelcom.
Telefónica is a company committed to
the economic and social progress of the
companies in which it is present.
This commitment takes the form of
Distribution of purchasing a high percentage of awards to suppliers
volume by product lines in the country itself, on average 90%
Data in percentages
in 2005 (92% in 2004).
34
30
30
28
21
17
13 13
6 7
Network Services Market Informat. Publicity

infrast. and products systems and
works marketing
1 Data does not include Vivo or Telefónica companies in the Czech Republic.

09 Suppliers
Distribution of awarded suppliers by country

Data in units
3,930
1,763 4,114 4,243
3,420 1,698 1,965 2,948
2,163 2,369
1,429 1,523 1,276 594 1,102
Argentina Brazil Chile Colombia Spain Mexico Peru Venezuela Other
countries
Distribution of local purchasing by country

Data in percentages
98 99 94
93 94 96
92
83 86 83 86
79 76 74
68
53
52
38
Argentina Brazil Chile Colombia Spain Mexico Peru Venezuela Other Total
countries
Local awards by country

Data in percentages
99 96
99 91 90
95 95 93 94 92 92
90 91 89 85 90
82
Argentina Brazil Chile Colombia Spain Mexico Peru Venezuela Other Total
countries

09 Suppliers
Opinion of the supplier on the

Telefonica purchasing model
Data in percentages
Is good Is good for

for both Telefónica
47 52
Telefónica
Purchasing
model
Is good
for me
1
Advanced purchasing Model
Suppliers registered in the Telefónica Conscious of the importance of purchasing •All the areas affected by the purchase
Catalogue suppliers and relations with suppliers in business participate in the Purchasing Boards, and
Data in units results, Telefónica handles purchasing in decisions are made unanimously.
all its companies through a common
management model: the Advanced
•Telefónica has a Style Manual that
describes the general principles and
Purchasing System (SAC). The goal of this
42,142 rules of conduct to be fulfilled by all
model is to optimise purchases in its triple
those who participate in the purchase
dimension of: price, quality and service,
process. Among such principles, the most
34,688 endeavouring to reduce costs, improve
33,153 noteworthy is the equal opportunity
competitiveness and create value.
afforded to all bidding suppliers.
In December 2005, the purchases of 141 •Furthermore, the e-business applications

Group companies, distributed throughout used and developed by the Telefónica
the 19 main countries where Telefónica is Group also allow the automation and
present, were all managed through this optimisation of the processes, as well as
model. The purchase process, according to greater transparency in the
the model, centres on Purchasing Boards, management of suppliers' bids.
forums where the various areas involved
2003 2004 2005 analyse the purchase, establish their target In Brazil, specifically, in compliance with
prices for the same and finally decide resolution 155 of ANATEL, TeleSP is required
unanimously on the award. There are to publicly advertise all its purchase
currently nine Purchasing Boards located in processes for communication services and
Madrid, São Paulo, Río de Janeiro, Lima, the acquisition of equipment valued over 1
Buenos Aires, Santiago de Chile, México D.F., million reales. For this reason, all public
Bogotá and Caracas, enabling a global or tenders are posted on the website to
local management of purchases depending guarantee and encourage equal
on the most suitable model. opportunity.
The Telefónica Purchasing Model has a

series of features that facilitate objectivity
and transparency:
•The opportunity for global registration in

the Telefónica Catalogue of Suppliers is
open to all those firms interested in
working with Telefónica. This catalogue is
valid for all the Group companies and
registration is done through the Supplier
website. At the end of 2005, there were
42,142 suppliers registered as possible
bidders in the Telefónica Catalogue of
Suppliers.
09 Suppliers
Distribution of Purchasing Volume by Product Lines

e-Sourcing Auctions
Purchasing volume Nº Purchasing Purchasing volume Nº Purchasing
(million euros) processes (million euros) processes
Argentina 755 2,303 49 126

Brazil 1,527 2,661 324 229
Chile 544 1,450 60 56
Spain 4,272 10,174 193 372
Mexico 506 870 8 27
Peru 492 3,154 52 138
Total 8.099 20.612 685 948
Electronic commerce CASE STUDY

Supplier website
Telefónica uses the latest cutting-edge Electronic management of bids for certain
The Supplier Website, accessed at:
technology in its relationships with its products and services is currently a reality
www.telefonica.es/proveedores, is the main
suppliers to automate and optimise the in Spain, Brazil, Argentina, Peru, Chile and
channel of information between Telefónica
entire purchase process and to establish Mexico. The purchasing volume negotiated
and its suppliers. It furnishes potential
new and better lines of communication in 2005 through the electronic market
suppliers access to general information on
with its suppliers. amounted to 8,264 millions of euro (399 in
how to become a Telefónica Group supplier,
2004), corresponding to 20,612 purchasing
on Telefónica's purchase process and the
In this respect, through Adquira España, processes (12,675 in 2004).
main projects Telefónica is undertaking
Telefónica has already implemented a
in relation to e-business.
global ebusiness platform for the The format of purchase negotiation
management of the purchase and supply through electronic auctions used since
Furthermore, registration in the Catalogue
process. Adquira España is a leading 2004 offers greater transparency and
of Suppliers may also be handled through
company in negotiation and supply of objectivity in the purchase process and full
the Supplier Website, which also provides
solutions and services, in which four large equal opportunity to all bidding suppliers,
access to the Adquira e-business platform
Spanish corporations hold stakes: BBVA, as well as making the process more agile
(primary operational channel for relations
Iberia, Repsol-YPF and Telefónica. This e- and simplifying purchase management.
with suppliers). The website also includes
business platform enables: In 2005, 685 million euros was awarded
access to other, specific websites for
through this system, through 948
• The electronic management of bids and purchasing processes.
the Telefónica Group companies, such as
negotiation of same, as well as auctions e-Agora, from Telefónica de España.
(e-sourcing).
It is worth emphasising the significant
• The electronic preparation, approval and improvement in results obtained for
digital signature of commitments electronically negotiated purchases
(contracts and award letters). compared with conventional means.
•The electronic management of goods Also, 2005 saw a continuance of the

and services orders by the relevant areas
through catalogues previously implementation of e-procurement in
negotiated by Purchasing Departments companies of the Telefónica in Spain, Brazil
(e-procurement), dispatch of delivery and Peru. An electronic invoicing solution
notes by the supplier and acceptance of was also implemented in Spanish
the goods or services at their destination. companies. Finally, during 2005 an
electronic contracts tool was setup in
•The supplier invoicing process from the companies in Spain, Peru, Mexico,
orders placed and accepted electronically. Colombia, Venezuela and Ecuador, involving
756 million euros

09 Suppliers
Supplier
satisfaction
Satisfaction surveys
Satisfaction surveys Electronic Commerce:

Telefónica wishes to establish long term More than eight out of ten suppliers think
relationships with its suppliers, in which that Telefónica e-commerce tools have
both Telefónica and its suppliers are added dynamism to the purchasing process
satisfied. To assess the satisfaction levels of (7.8) and greater transparency (6.8) and that
suppliers with Telefónica, in 2005 the first they encourage competition and equality of
online survey was carried out, confidential opportunity between suppliers (7.4).
and sent to all providers registered
providers in the Telefónica catalogue. In relation to auctions, 51% of suppliers
feel that products and services sold could
Confidentiality of responses was be contracted through this negotiation
guaranteed by using Atento intermediary model (5.6)
suppliers and the absence of an
individualised record of each response. Most providers liked the idea of expanding
e-commerce tools for electronic
Over 2,700 response were received, forming management of invoices (93% of suppliers
a significant results base for Spain, like its implementation), for electronic
Argentina, Brazil, Mexico, and Peru management of orders (93%) and for
electronic signing of contracts (88%).
Purchasing Model
The main strengths of the Telefónica
purchasing model according to providers
can be found in the establishment of an
ethical and unambiguous purchasing
process where the divisions involved have
clearly defined roles and work in cooperation
(7.4 points on a scale of 10 points).
The time spent on each purchasing model

was seen by providers as an area which
would be improved, although it was
generally deemed adequate (6.6 points)

09 suppliers
Level of satisfaction of suppliers for the Telefónica Group

Data in units
7.9
7.3
6.9 6.9 6,7
6.4 6.5
6.1
Argentina Brazil Chile Colombia Spain Mexico Peru Total
The Purchaser Compliance with payment terms for

Purchasers had a high opinion of the third party bills
suppliers' ethics and honesty (8.6) and its
2004
defence of the interests of Telefónica (8.8). 2005
Training as an interlocutor in the technical 96.9
aspects of purchasing also received positive Percentage
of total bills
assessments (7.6) 98.1
An area which could be improved (a mark 88.2

Percentage
of 6.6) is the purchaser's concern as to the of amount
quality of the product and not just the 96.5
price, as well as a greater understanding of
Data corresponding to over 700,000 bills of
the situation of the suppliers in the Telefónica de España and Telefónica Móviles España
negotiation (6.8 out of 10). for an amount over 9,389 million euros
Administrative Processes
Fulfilment of Scheduled payment
conditions to suppliers received positive
assessments (7.8 out of 10)
Suppliers consider that there is a suitable

communication process about purchasing
outcome (7.8), although they request more
information regarding the reasons in case
of not being selected (5.6). Order placing in
time and form received also positive
assesment (6.6)

09 Suppliers
Encouraging
ethical
standards
The Telefónica Group endeavours to Said working group has been collaborating
OPINION contribute to the encouragement of since 2004 with a range of American
responsible business practises throughout companies, signatories to the EICC,
What do suppliers its entire supply chain by its collaboration “Electronic Industry Code of Conduct”, with
think about Corporate with other companies and in initiatives the aim of cooperating with a wider range
Responsibility? that go far beyond the legal requirements. of companies and thus ensuring more
effective action.
(from 0 to 5) • In the case of suppliers from the telecom The main achievements of this working
sector (typically “market product”,
It is important for companies to exercise group in 2005 were:
“network infrastructure” and
corporate responsibility 4,6 “information systems” product lines”), of • Drawing up a methodology for the
note is the company's work with the identification of risks associated with the
Generally, I would be very pleased to see GeSI supply chain working group. RSC in the supply chain, based on
Telefónica establish a purchasing code 4,5 products and services, size and location
• In the case of local and smaller suppliers of supplier facilities.
(typically suppliers of “services and
I consider the activity the suppliers carry out
should be considered 4,4
works”), Telefónica directly draws up • Development of a self assessment
specific conditions with its suppliers to questionnaire for suppliers, so that they
ensure responsible behaviour by same. can indicate their level of compliance
I consider that Telefónica requires compliance
with employment, ethical, health and
of minimum employment standards at an
As part of the supplier satisfaction study, safety standards. Said questionnaire was
international level 4,2
they were asked about the appropriateness published in English, Spanish and
of introducing corporate responsibility Mandarin in 2005.
codes and standards, a proposal which
received a high level of acceptance among • Design of an etool so that different
industry suppliers and purchasers can fill
Telefónica suppliers.
in questionnaires, with clear savings of
time and effort for the whole sector. Said
GeSI Supply Chain tool should be implemented in 2006.
Working Group
Many companies in the ICT sector • Establishment of tools to audit the
performance of companies, with respect
(Information and Communications
to the declarations made in their self
Technology) share the same suppliers
assessment questionnaires.
throughout the world. Aware of the fact that
joint actions carried out by several
companies are more effective than the same Requirements of suppliers
carried out individually, in 2003 GeSI in employment and human
(www.gesi.org) established a working group rights matters
on the supply chain. This was unique in that In the General Conditions for the Supply of
both Telefónica and O2 participated in same. Goods to Telefónica SA, Telefónica requires
compliance of legislation in force in
relation to employment conditions, health
and safety at the workplace and the
environmental impact of its suppliers.

09 Suppliers
Criteria are of general application, Another of the corrective measures taken

notwithstanding the possibility of during 2005 was the obligation of training in
additional criteria in some countries Human Rights for employees of the security
or companies. Likewise, in the case companies that work for Telefónica.
of specific products and services,
contracts may include additional Requirements of suppliers in
aspects more directly related to the
environmental matters
product or service being purchased.
The most notable initiatives in
environmental matters are described in
Additionally, as a measurement of
chapter 08 of this report. They include
improvement deriving from the
training activities for employees of
employment audit in the Telefónica Group
collaborating companies, the positive
and the risks detected in same, in 2005
weighting given to environmental
Joint Corporate Action Criteria for the
management certificates in the contract
Control of Employment risks in the
award phase or activities of evaluation and
Contracting of Works and Services were
control of suppliers having an
drawn up and approved.
environmental impact.
This is an internal regulation which

includes: Requirements of suppliers
in matters of equality of
• A list of pre-contract requirements opportunities
(standardisation of suppliers and
contracts) As a notable initiative in terms of
integration, Telefónica requires compliance
• A list of the information to be provided with the Law on Integration of Disabled
at the beginning of the contract persons of all suppliers who render services
• Obligations in matters of prevention of in District C. For those companies which do
not comply with requirements, the ATAM
employment risk for the main company
and the contracting company. Employment Integration Service is offered.
• Obligations in matters of information to In 2006, Telefónica aims to establish a policy

be given to legal representatives of of purchasing from “social or minority”
workers. suppliers which may involve groups which
• Measures to be adopted during the have traditionally had difficulty accessing
the employment market.
contractual period
• Measures to be adopted after the

termination of the contract
• Supervision and control mechanisms

09 Suppliers
Credits


Investor Relations


Secretariat General







09 Suppliers

10 Media
Media: Information
and transparency

Contents 4
02 Identity 32
03 Driving progres 66
04 Customers 104
05 Shareholders 168
06 Employees 178
07 Society 226
09 Suppliers 292
10 Media 304
Information and Transparency 306
Investment in publicity 307
11 ANNEX I 310
292

10 Media
Press Coverage of the

Telefónica Group in Spain
Letters tol
Year News Reports Opinion Interviews the Editor
2005 92.7 3.1 3.1 0.2 0.9

2004 87.4 7 1.8 0.5 1.7
2003 79 15 2 2 1
Media Distribution of Telefónica Group Press

releases in Spain by Topics 2004 2005
Telefónica S.A. 55 71
Telefónica de España 206 53
Telefónica Móviles 1,313 1,747
Telefónica Latinoamérica 765 1,045
Fundación Telefónica 65 70
TPI 25 21
Cesky Telecom* - 130
Eurotel* - 53
* Both Cesky Telecom and Eurotel became part of the Telefónica Group in June 2005.
CASE STUDY Information and Transparency

Online Press Room
The Telefónica Group encourages a policy Noteworthy among the more than 3,000
In order to foster transparency and make
of communication based on truthfulness press releases issued by the Telefónica
information more accessible, the Telefónica
and transparency, with constant interaction Group to the media in 2005 is the
Group offers journalists and the media an
with the media. Its relationship with the dissemination of information about the
Online Press Room
media is an important tool for the products and services offered by the
(www.telefonica.es/saladeprensa) with the
Telefónica Group as a means of open Company (42.2%), followed by financial
following services available:
communication with all its audiences: information (20.1%) and strategic and
•Publication of all the press releases customers, shareholders, professional team related to the Company’s investment
since 1997. and society in general. Telefónica, aware of capacity (10.8%). Agreements with third
•Press release search, classified by its corporate responsibility, thus maintains

a communications policy based on
parties, whether suppliers or technology
partners, among others, are also the
country, business line and dates,
including a direct search service. closeness to the media, and on rigour and subject of press releases.
transparency in information.
•Download of more than 300 Regarding the journalistic treatment of the
photographs, management organigram, The Corporate Communications area has information from the Telefónica Group in
graphs and results. the task of coordination in order to ensure Spain by the media, a 92.7% of the press
•Real-time consultation of Telefónica the coherence of the strategic, financial
and operations messages. It works closely
coverage of the information issued by the
Telefónica Group in Spain is in the form of
share prices.
with the Communications areas of all the news. Other forms such as reports (3.1%)
•Link to websites of the Telefónica Group subsidiaries, and all together maintain a and opinion (3.1%) occur at similar levels,
companies. policy of continuous, planned and agreed but far from that of news.
•Contact list for journalists. communication, that means that
information flows regularly and constantly
This channel received 176,052 visits from between the Company and the media. As a
users in 2005 (82,073 in 2004) which fruit of this close communication strategy,
shows the increasing interest. the Telefónica Group in Spain has held
more than 300 meetings with the media,
including news conferences, breakfast
briefings, and social events -organised
through Fundación Telefónica.

10 Media
Investment in CASE STUDY

publicity The Telefónica website as a means
Telefónica is a company that has intense
of communication with society
publicity activity, making it one of the main
The telefonica.country model of portal has become the single point of access to the
investors in the media. All the investment
Company in each country, offering the visitor a broad view of the Company, not only
activity is channelled through the
commercially, but in its economic, social and technological impact.
corporate media area, following criteria of
maximum publicity effectiveness.
To develop this model, more than 200 projects have been carried out in the past three
years in 13 countries under the "Alquimia" project. This portal model is currently set up in
For this a unified policy of negotiation and
Germany, Argentina, Brazil, Chile, Colombia, El Salvador, Spain, United States, Guatemala,
hiring of publicity media has been
Morocco, Mexico, Peru and Puerto Rico.
established in the Group, with the
technical area of the Departments of
The end result is that it makes a range of products and services available to customers
Marketing and of Purchases in each
suited to their needs, and offers specific solutions aimed at private individuals,
country working together on this.
professionals and companies. At the same time the portal helps interaction with other
groups such as shareholders, investors, suppliers, partners, employees and
By media type, television is the means
communications media. The model has now become a benchmark for the sector.
most used with 47% of the Group’s
investment in publicity, followed by the
press (19%), external support (18%) and
•The Telefónica S.A. website won the prize of websites for Investor Relations and Online
Annual Reports (known as the MZ Awards) in February 2005: First prize in Spain for the
radio (10%). By country, given the highly Shareholders and Investors page of Telefónica S.A. and that for Best Annual Report
commercial character of publicity, Spain Online in Spain for the Telefónica online report.
concentrates 56.5% of the publicity
investment, followed by Brazil with 10.2%, •In October, 2005, www.telefonica.es was the website that won the highest points for its
handling of its social impact, in the report "Social action in the websites of large
Mexico with 8.9%, Argentina with 5.6% and
companies and savings banks", written by Empresa y Sociedad based on a comparative
Chile and Venezuela with 4.6% each. The
analysis of 65 large companies and 10 savings banks.
chapter on customers contains more
information about the intense publicity
The telefonica.country websites have become the means by which citizens consult
activity of Telefónica.
information of interest about Telefónica, as seen in the fact that the number of visits
(single sessions) received in 2005 was over sixty million in Latin America and three million
per month in Spain.

10 Media
Credits


Investor Relations


Secretariat General







10 Medios

Annex 1 About the Report
Telefónica is firmly
committed to
transparency, in
accordance with the
demands of its
stakeholders and the
main international
guidelines

Contents 4
02 Identity 32
04 Customers 104
05 Shareholders 168
06 Employees 178
07 Society 226
09 Suppliers 292
10 Media
11 ANNEX I 310
About the Report
Dialogue with Stakeholders 312
Reporting Principles 316
Boundary of Consolidation of Included Information 320
Information Consolidation Process 322
United Nations Global Compact 324
Independent Assurance

11 Acerca del informe
Dialogue with Stakeholders

Annex 1:
Reporting Principles
About the
Report Boundary of Consolidation of Included Information
Information Consolidation Process
Participating organisations in the panels Dialogue with

on Telefónica's CR Report
1. UN (United Nations) Stakeholders
Employees
2. CCOO, (Comisiones Obreras Trade Union)
Participants in the dialogue
3. Asociación Mayores de Telefónica
In March 2006, Telefónica called meetings
(Association for Telefónica's Elderly)
of two panels of corporate responsibility
4. Federación Española de Hostelería
experts representing Telefónica's different
(Spanish Hotels and Catering Federation)
5. Fundación + Familia,
stakeholder groups in order to find out
6. Conexión Social (Auditor) their opinion with regard to the “Corporate
Consumers Responsibility Annual Report 2004”, and
7. CECU, (Spanish Confederation of Consumers and Users) gather any suggestions and comments.
8. Federación de Consumidores y Usuarios Independientes
(Federation of Independent Consumers and Users) Over 40 experts in corporate responsibility
9. Federación Española de Hostelería took part in this dialogue process, from
(Spanish Hotels and Catering Federation) almost thirty relevant organisations and
People with Disabilities institutions within Telefónica de España's
10. CERMI, (Spanish Committee of Disability Representatives) stakeholder groups. This dialogue was
11. Fundación ONCE organised by CR experts from the Noós
NGOs for Development Institute, an organisation that had already
12. Fundación CODESPA worked with Telefónica on the adaptation
13. Red Cross into Spanish of the “Good Practice Guide
14. Fundación Carolina for Relations with Stakeholders”.
NGOs for the Environment
15. Fundación CONAMA, The participants in the panels expressed
(National Environment Commission)
high regard for the transparency of the
16. ECODES, (Ecology and Development Foundation)
company, who subjects itself openly to the
17. Fundación Entorno
criticism and opinion of its stakeholders.
Finance Sector
18. FTSE
Telefónica thanked all the panel participants
19. Triodos Bank
Corporate Responsibility Analysts
for their collaboration, especially for their
20. Observatory of Social Responsibility careful analysis of the reports and the spirit
21. AECA (Spanish Business Accounting of constructive criticism underlying all the
and Management Association), comments made.
Academia
22. Fundación Social Universidad Francisco de Vitoria,
23. ICADE
24. IESE
25. Instituto de Empresa
26. UNED
27. Universidad Complutense de Madrid
Business Organisations
28. AETIC (Spanish Association of ICT Companies)
29. CEOE, (Spanish Confederation
of Business Organisations)

11 About the Report
According to the stakeholders, the CR Reports should

achieve a balance betwee
Thoroughness and Conciseness Clarity of the information

Degree of specialisation of the report Access to the general public
Positive aspects Areas for improvement
Local information Global information
(main country of operations)
Results Goals
Main conclusions regarding Telefónica's CR Reports Telefónica seeks to adapt the

content of its Corporate
Structure and Format of the Report
Opinion Comment
Responsibility Report to the
Quality, completeness, structure and degree of detail provided in report. The report expectations of its
appears to offer a good general view of Telefónica and its stakeholders stakeholders. For this reason, it
The stakeholders valued the case studies because of their anecdotal value and also
because they specifically reflect more or less widely recognised complaints, as well as holds an open dialogue with
the reality of the countries of Latin America them and has tried to address
The report is excessively long and not easy to read for the non-specialised public
most of the demands
The report lacks transversality in those horizontal issues that go beyond one single
stakeholder (the way in which Telefónica is positioning itself, both internally expressed by its stakeholders.
and externally with regard to different Social Responsibility aspects,
or which are its key values)
Scarce use of new multimedia technologies that would allow a higher degree of
flexibility and speed in reading and handling with the report
The report does not have a numbered contents page
General Contents of the Report

Opinion Comment
The report includes data and degree of performance of CR policy in all countries
where it operates, in spite of which there is still room for improvement
The “executive summary” of the infography “You Come First
External verification of the report
Comparatively, the Report is one of the best in its business sector
Selection of stakeholders of the annual report. While some participants considered
that the Report adequately reflected the reality of Telefónica, other participants
requested that more stakeholders be included (e.g. governments, competitors...)
or others be excluded (e.g. media).
Inclusion in the report of aspects where improvements should be made,
as well as addressing the “myths” that society has about Telefónica.
This way the company would present itself as a more “human” company
The report should include a table of achievements of Telefónica within the field of CR,
as well as its future aims. These aims should also appear in the course of the text of
the report and should better reflect what Telefónica intends to achieve with the Report
Criticism was voiced with regard to a certain self-congratulating tone of the Report
and a unilateral vision of the company. Lack of transparency with regard to the points
of view of the stakeholders and little attention paid to the more conflictive issues
Include more historical results data, in order to gain better insight into the
company's performance over time, as well as data regarding the degree
of fulfilment of the aims established the previous year
Accompany the company information with information regarding the sector

11 About the Report
In the meetings with the stakeholders, the content of each of

the chapters was analysed. What follows is a summary of the
main criticisms and requests expressed, without including
positive aspects for conciseness purposes. Telefónica's
commitment was to try to apply the recommendations in
its 2005 Report, and the fulfilment of this commitment
is presented in these pages. Demands that have not been
include for reasons of time constraints in the preparation of the
report have been set as goals for 2006.
Criticism to the content of the different chapters

General Aspects of Sustainable Development
Opinion Comment page
Information regarding the impact on results of Telefónica's sustainable development strategy 15, 34-35
Higher degree of classification into sectors of the different collectives in society (senior citizens, people with disabilities, etc.) 234-237
References to the role of the company as a “global citizen” with regard to the great world
problems / challenges (e.g. Millenium Development Goals, Climate change...) 40, 100-101
Reference to ethics and practices against corruption and bribes 54-55
Corporate Government
Response to the main information demands from readers (e.g. Board Member's remuneration) 26
More emphasis on the way in which information transparency is achieved from the
Company to the Board, and from the Board to the shareholders 28
Identity
Clarify whether the values that Telefónica claims to abide by are the same ones as those perceived by society 38
Innovation
Information regarding Telefónica's alliances for joint innovation 88-89, 92-95, 98-99
Information regarding R&D activities outside Spain 84
Clients
Telefónica's customers do not identify with the content of the Report 106, 112
More specific information regarding Telefónica's policies for customer relations 106, 110-111
More specific information regarding service quality and fulfilment,
customer rights and customer service (claims) 118-119, 126-129
More information on customer satisfaction 108-109
Information regarding the degree of compliance with the goals established by the regulating authorities 154-165
Address excessive use of automatic response systems, rather than personal customer service 127
Reflect the efforts in terms of dialogue that Telefónica is developing with users and consumers associations 110-111
Information regarding Telefónica's efforts to improve quality and solve conflicts with other operators 132-135
Information about competitive and regulatory situation of Telefónica in the markets where it operates 150-165
Information on evolution of rates 74-75
Information on data protection 142-143

11 About the Report
Employees
A debate arose as to whether a company should include voluntary work activitie
of its employees as part of its CR Report 220
Include case studies of those groups of employees with highest turnover rates (e.g. call centres)
or who work in conflictive countries (e.g. Morocco, Colombia...) 182-183
Specific information regarding complaints, claims, fines, strikes... 219
Information regarding the reconciliation between private and professional life,
as well as models for compensating and avoiding extra hours 206
Breakdown of results of work climate by level, company... 184-185
Include more information on diversity (gender, disabilities, age...) 209-210
Information regarding generation of indirect employment by Telefónica 87, 180
Goals for improvement following the employment audit carried out in previous years 201
Global health and safety statistics 211-212
Information on degree of implementation of telecommuting 207
Information on the way Telefónica manages its staff reduction plan and on the relationship it holds with former employees 39, 182
Subcontracting of activities to third parties 180
Society
Telefónica's relationship with NGOs (Despite this information being available in the Fundación Telefónica Report)
It would be desirable for there to be a higher degree of interrelation between both reports 244
Information about Telefónica's contribution to the promotion of access to telecommunications among
all social classes, especially in Latin America (e.g. phone line fee before, and phone line fee now) 234-235
Information about the contribution of Telefónica (and its services) to the social integration of people with disabilities 237, 246-249
More information about how Telefónica works to bridge the digital divide affecting the elderly 236-237
Information about how Telefónica helps to solve the immigration phenomenon from Latin America to Spain 235
Environment
Establish a priority of issues dealt with in the chapter on the basis of their actual impact on the environment 260
More emphasis on the development of specific policies and degree of compliance with environmental goals of the Company 257
More emphasis on the design of products and services with a positive effect on the environment,
as well as Telefónica's activities with its customers to this regard 286
nformation on the degree of progress in environmental management in the company 257
Suppliers
More emphasis on the implementation of codes of ethics and requirements regarding suppliers,
as well as mechanisms to prevent corruption and bribery 300-301
Include more information about control of compliance with the terms and conditions of supply established for its suppliers 296
Include further information about how the information regarding compliance with human rights
and environment criteria is used in the preparation of the report 300-301
Information regarding the degree of fulfilment by Telefónica of its payment commitments 299
Media
Include information regarding Telefónica's activities as an advertising investor 307

11 About the Report
In the drafting of its 2005 Corporate Responsibility Report,

Telefónica has applied the principles proposed by the GRI for
decisions regarding the contents and structure of the report.
Reporting Principles
Principles for Defining Report Content
Inclusivity
The reporting organisation should identify its stakeholders and explain how it has responded to their issues in the report.
Tests recommended by GRI G3 Telefónica's Response Fulfilment1

The organisation can describe the stakeholders to whom All the report structure is based on the main
it considers itself to be accountable, and identifies the stakeholders of Telefónica
stake-holders that it expects to use the report
The report content draws upon the outcomes The report includes the results from different studies,
of stakeholder engagement processes used surveys and focus groups carried out by Telefónica
by the organisation to manage its activities regarding their stakeholders
The report content draws upon the outcomes Dialogue with stakeholders for the preparation of the report
of any stakeholder engagement process undertaken
specifically for the report
The stakeholder engagement processes that The dialogue processes with regard to the Report
inform decisions about the report are consistent have been carried out with Spanish stakeholders
with the scope and boundary of the report (there are specific reports in each country)
Relevance and Materiality

The information in a report should cover issues and indicators that would substantively influence the decisions
of the stakeholders using the report.
Major sustainability interests/ Dialogue with stakeholders for the preparation of the report
issues raised by stakeholders
Principales problemas del sector, tal como informan las Use of GRI sector supplement for telecommunications
by peers and competitors
Reasonably estimable sustainability risks identified Communication for progress of the United Nations
by people with recognised expertise or by expert Global Compact Information regarding compliance
bodies with recognized credentials in the field with legal aspects in different countries
Reasonably estimable sustainability risks identified Analysis of corporate responsibility opportunities and risks,
by people with recognised expertise or by expert as a first phase of the corporate responsibility project
bodies with recognized credentials in the field
Internal Factors Chapter 02 describes Telefónica's identity and Corporate
-Key organisational values, policies, strategies, operational Responsibility strategy.
management systems, goals and targets Each chapter associates Telefónica's values with the stakeholders
-Major risks
-Critical factors for success
-The organisation's core competencies and the manner in
which they contribute to sustainable development
The report prioritises material issues and indicators Executive Summary
Report Data
The assesment include in this section,column "Fulfilment" ,is exclusively from Telefónica and it hasn´t being include in the independent verification section of this Report.
Very High High Medium Low Not applied

11 About the Report
Sustainability Context
The reporting organisation should present its performance in the wider context of sustainability,
where such context has significant interpretative value.

The organisation presents its understanding of Presentation of the role of Telefónica as a driving force behind
sustainable development and draws on the best economic, technological and social progress
available information and measures of sustainable Articles of telecommunications and sustainable development
development for the issues covered in the report
The organisation presents its performance with The key issues in sustainable development are included
reference to broader sustainable development (GRI, sector supplement, dialogue with stakeholders...)
conditions and goals as reflected in recognised but no objective and quantitative data
local, regional and/or global publications.
The organisation presents its performance in Data regarding the influence of Telefónica on the local
a manner that attempts to communicate the economies, as well as the influence of the company on the
magnitude of its impact and contribution in local telecommunication markets
appropriate geographical contexts
The report describes how major sustainability issues Corporate Responsibility at Telefónica
relate to long-term organisational strategy, risks, an Suppliers
opportunities, including supply-chain issues
Completeness
An organisation should make public its performance with sufficient detail as to allow stakeholders to evaluate the information.
Completeness covers mainly its scope, boundaries and time period.

The report covers issues and indicators prioritised on The report covers the entire value chain (chapter by chapter)
the basis of materiality, sustainability context, and but does not establish a priority of some aspects over others
stakeholder engagement, and was developed taking into
account taking into account the whole value chain.
The report includes all entities controlled or significantly Boundary of information included
influenced by the organisation unless otherwise declared
The information in the report includes all significant The report includes historical quantitative impact data,
actions or events in the period reported on, and but does not include projections of said data.
reasonable estimates of significant future impacts of
past events when those impacts are reasonably
foreseeable and may become unavoidable or irreversible
The report does not omit relevant information that As with Dialogue with Stakeholders, there were some
would affect stakeholders' decisions stakeholders who demanded further information with regard
to the 2004 report. The same could occur in 2005.

11 Acerca del informe
Quality of Reported Information

Balance
The report should provide a balanced and reasonable presentation of the reporting organisation's performance.

The report discloses both favourable The 2004 report was criticised in this sense. We believe
and unfavourable results that the 2005 report offers a much more balanced view.
The information in the report is presented in a The report includes many data charts and tables
format that allows the user to see positive
and negative trends in performance.
The emphasis on different contents of the The report includes more material issues,
report is proportionate to the relative materiality in spite of there being no direct proportionality
of the issues or information. between emphasis and materiality
Comparability
The information reported should remain consistent and be compiled and presented in a manner that enables stakeholders using the report to
analyse the changes in the organisation's performance over time, as well as relative to other organisations.

The report and the information contained within it The structure followed in the 2005 report is the same
can be compared on year-to-year basis structure of reports since 2002
The organisation's performance can be compared with The benchmarks are not included in the report. The report
appropriate benchmarks (comparative analysis). contains the indicators of the main international standards.
Toda variación significativa en los contenidos básicos de la All the data included in the report has a clear
respect to boundary, cope, length of reporting period, reference to its reference boundary.
or information covered year-to-year, can be
identified and explained.
Where they are available, the reporting organisation The report has used the technical protocols recommended
applies generally accepted protocols for compiling for the GRI G3, although not in an exhaustive manner
information, including the GRI Technical Protocols for
indicators contained in the Guidelines.
The report uses GRI Sector Supplements, A sector supplement of the telecommunications
where available sector has been used
Accuracy
The reported information should be accurate and sufficiently detailed for stakeholders using
the report to make decisions with a high degree of confidence.
The report indicates what data has been measured GRI Tables of the Corporate Responsibility Report
The report indicates what data has been measured. Explanation of processes of consolidation of information.
for calculations are adequately described, and
can be replicated with similar results.
The margin of error for quantitative data is not sufficient Decisions regarding the boundary and processes ofconsolidation
to substantially influence conclusions on performance of information have been made to ensure this
The report indicates what data has been Explanation of the processes of consolidation of information
estimated and what assumptions and techniques
have been used to produce the estimates.
The qualitative statements in the report are The report has been verified by Ernst&Young,
valid on the basis of other reported information with the scope detailed in their report.
and other available evidence.

11 About the Report
Timeliness
The information is presented in time, and on a regular schedule, for stakeholders using the report to be able to make informed decisions.

Information in the report has been disclosed while The report is published in the semester following
it is recent relative to the reporting period the end of the financial year
The sustainability reporting schedule is aligned The Annual Report covers the same period
with the financial reporting cycle
The collection and availability of key performance information Data collection is carried out once the financial
is aligned with the sustainability reporting schedule year subject of the report has concluded
The information in the web-based reports clearly indicates All corporate responsibility reports
the time period to which it relates, when it will be are available on the website
updated and when the last updates were made
Clarity
Information should be made available in a manner that is understandable by and accessible to stakeholders using the report.

The report contains the necessary level of The report includes an executive report, and is presented
information for the needs of report users, in extended format in the online and CD version
but avoids excessive and unnecessary detail.
Report users can find the specific information that The preparation of the report has taken into account
they want without unreasonable effort through the recommendations for the presentation
tables of contents, maps, links, or other aids., of the information expressed by their stakeholders
The report includes a glossary or explanation for There is a glossary available on Telefónica's website
technical terms, acronyms, jargon or other content
that is likely to be unfamiliar to report users
The data and information in the report is available to major The report is published on paper in an executive version,
stakeholders including those with special accessibility in three languages. The electronic format is published
needs (differing abilities, languages, technology...) in two languages in the extended version
Assurability
Information and processes used in the preparation of a report should be recorded, compiled,
analysed and disclosed in a way that can be subject to review and assurance.

There is a statement from management The Report credits state that the Subdirectorate General
taking responsibility for the content and of Reputation, Brand a CSR is the unit responsible
process of preparing the report for the content and and preparation of the report
The scope and extent of assurance, and the stakeholders Information about the boundary of the report, and
expected to use the report are identified dialogue with stakeholders with regard to the report
The original source of all the information in the report Traceability of all the information has been confirmed in
can be identified by the organisation the preparation and verification process of the report
The organisation can attest to the reliability of the In some cases, it is necessary to improve the
original source, and, if not, this fact is disclosed definition of indicators to ensure their homogeneity
Representation is available for the original data or The statements of reliability of the sources of
information owners, attesting to its reliability information are implicit in the inclusion of
or accuracy within acceptable margins of error all the information in the report
There is external evidence available from reliable The reliability of the calculation methods is externally
sources for supporting assumptions or approaches verified by the external auditor, in accordance
to technically complex calculations with the scope detailed in their report

11 About the Report
Telefónica considers itself to be a global company, with

presence in Spain, Europe and Latin America. The 2005
Corporate Responsibility Report includes the performance
of the fixed and mobile telephony operators in
Spain and Latin America under Telefónica's control.
Consolidation Boundary of
the Information Included
Multinational Company Definition of consolidation
Since the publication of its first corporate boundaries
responsibility report in 2002, Telefónica has In order to define the scope of Telefónica's
strived to present itself before its report, the following decisions were made.
stakeholder groups as a multinational
company. This is why, since this first report, Impact of companies on
it has always included data of its their environment
operations outside Spain. The analysis of the impact of the different
business lines on their stakeholders
This commitment to transparency was a concludes that the fixed telephony and
determining factor in the application of the mobile telephony business units have the
same corporate responsibility criteria in all highest impact on the Group's stakeholders.
countries, thereby avoiding double
standards. According to this criterion, the Telefónica
de Contenidos Units (Endemol, Telefe,
Telefónica's interest in accurately reflecting Telefónica Servicios de Música or Telefónica
its impact on society has led to taking Servicios Audiovisuales), Atento, TPI,
three actions in the last financial years: Telefónica I+D or t-gestiona are not
•Participation in the GRI work group included in the scope of this report, unless
explicitly mentioned.
devoted to the study of information
boundaries of companies (Boundaries
Working Group). However, for each stakeholder group, there
has been an analysis as to whether any
•Preparation of local corporate units within the Telefónica Group could
responsibility reports in Latin America have a significant impact on them,
(Argentina, Brazil, Chile and Peru).These concluding that this is the case with the
reports constitute a tool for closer following:
communication with local communities
and allow Telefónica to share the •Telefonica I+D in the innovation section.
responsibility regarding information
provision and consolidation.
•Atento in the chapter on employees.
•T-gestiona in the chapter on the
•Use of corporate information environment.
consolidation tools, available throughout
the Telefónica Group, where and when •Telefonica SA as the corporate centre in the
possible. This applies to financial, chapters on shareholders and the media.
customer, employee, shareholder,
supplier and innovation information. The
rest of information regarding society, the
environment or the media is compiled by
means of specific tools.

11 About the Report
Control over activities Lastly, it is important to mention that in

Telefónica's corporate responsibility report spite of the fact that in 2005 TPI was a
includes the units where a high level of Telefónica Group company; the divestiture
impact has been identified, and over which of this business unit has since been
the Group has control, being companies announced. For this reason, it is believed
where Telefónica holds a share of over 50%. that the degree of control over the unit in
future will be lower than that at present.
The only exception in this sense is the
European companies. Cesky Telecom is the Unless explicitly mentioned in the Report,
company that provides Telefónica does not include the above-
telecommunications services in the Czech mentioned companies in its 2005 report.
Republic and was acquired by Telefónica in Other companies Telefónica does not report
2005. After the acquisition of O2 at the on are Sogecable (23.83% share), Lycos Europa
beginning of 2006, Cesky Telecom and (32.1% share) or Amper (6.10% share).
Telefónica Deutschland will be managed by
O2, and the performance of these Influence on activities
companies will be included in the 2006 Telefónica can have influence on the
report. O2 will publish its own report behaviour of its suppliers and clients with
corresponding to FY 2005, as it has done in regard to certain sustainable development
recent years, without including the aspects. That is why its 2005 Corporate
activities of Cesky Telecom and Telefónica Responsibility Report reports in a
Deutschland qualitative manner on:
There are some telephony operators whose

•The establishment of environmental,
employment and human rights
information is not included in the report requirements for Telefónica suppliers.
due to the fact that Telefónica's
shareholding percentage is under 50%: •Recommendations to clients as to how to
use Telefónica's products and services
•Vivo: mobile telephony company in Brazil, correctly.
managed as a “joint venture” with
Portugal Telecom, on a 50% share basis. •Adoption of corporate responsibility
This company has been publishing its criteria in the investment of pension
own Corporate Social Responsibility funds of Telefónica employees.
Report since 2004.
•Meditel: joint venture with Portugal

Telecom, in which Telefónica holds a
32.18% share.
•China Netcom, company where

Telefónica holds a strategic 5% share.
•Portugal Telecom, with which Telefónica

holds an alliance that has led to it
holding a stable share of 9.84 percent
of its capital.

11 About the Report
With a view to encouraging Consolidation Process of the Information

maximum transparency,
Telefónica explains the way
in which the information is The economic and financial information Telefónica Internacional and Telefónica
consolidated in the different included in the report is taken from the same Móviles.
chapters and aspects sources used for the preparation of the
Annual Report for shareholders and investors. The information regarding social and cultural
included in the report. In this information, the boundary corresponds action is taken from Fundación Telefónica,
to all the companies of the Group, as is ATAM and the sponsorship unit of Telefónica
specified in the financial information. SA. The only consolidated data are the
financial data, which are aggregated by
The information regarding innovation is simple sum.
consolidated through the corporate
department of Innovation of Telefónica SA, in The information on the environment is taken
collaboration with Telefónica I+D. The from the department of environment or
investment data for innovation are taken quality of each of the operators. This
from the purchasing systems and are information is gathered by means of forms
consolidated without applying any that are distributed electronically to the
proportionality criterion. Given that they are different companies and is consolidated by
financial data, the boundary corresponds means of simple sum.
exactly to that of the financial information.
The information regarding suppliers is taken
The information regarding customers is directly from the contract awarding system
taken from the quality control and through the purchasing department. The
operational systems of Telefónica de España, consolidation of the information is carried
Telefónica Internacional and Telefónica out without applying any criterion as a
Móviles. The information is presented proportionality factor, presenting the
individually for each operation, and where information broken down by country or line
there is consolidation, it is carried out using of business. As in the previous cases, this
revenue as a proportionality factor. chapter includes all the financial boundary of
the Telefónica Group.
The information on employees is taken from
the Human Resources management systems, The information on media is from the
and in this Report, the concept of “person” is departments of communication of the
used, rather than the equivalent concept of different lines of business.
“employee” that is normally used in the
financial reports. Where the information is In the preparation of the report, news items
presented in a consolidated manner, the published across the internal communication
number of employees is used as the media of the company have been used. It is
proportionality factor. considered that all sensitive information
liable to be included in corporate
The information regarding digital inclusion is responsibility reports must have been
taken from the management and regulation communicated to the employees, as a
control systems of Telefónica de España, guarantee that the information is relevant.
11 About the Report
Independent Assurance In order to guarantee

stakeholders the exactness
of the information,
The Audit and Control Committee of the The verification work was commissioned
Ernst&Young was asked
Board of Directors of Telefónica SA from Ernst&Young, following the criteria to verify the report.
approved the verification of the 2005 that the corporate responsibility
Report on Corporate Responsibility of the information should be verified by the same
Telefónica Group. This process includes the Firm that is in charge of the financial
following: information audit. In selecting this Firm,
the fact that it used the international
•Verification under standard AA1000/AS standard ISAE3000 and that it is the
of the Telefónica Groups's behaviour
checker of O2, the company acquired by
towards its stakeholders in Spain and on
Telefónica. in 2006 and selected “best-in-
a corporate scale.
class” in the DJSI Evaluation carried out in
•Verification of GRI indicators included in 2005, were factors that influenced the
the report for all the boundary of data decision to choose Ernst&Young.
included (Spain and Latin America)
•Verification of GRI indicators included in This commitment to external verification

of the Reports on Corporate Responsibility
the report on corporate responsibility of
Argentina, Brazil, Chile and Peru. reflects Telefónica's commitment to
continue increasing the transparency and
veracity of the information included in the
reports.
Evolution of the verification of Reports of Corporate Responsibility

2002 2003 2004 2005
Telefónica CR
Report Not verified Verification by Verification by Audit by E&Y AA1000/AS
AENOR of the Deloitte de of data for Spain
GRI report datos GRI Verification by E&Y of GRI data
Country CR
Report - -
Not verified Verification by
E&Y of GRI data

11 About the Report
United Nations Global Compact

Table of Communications on Progress
Telefónica signed the Global Compact Letter from the Chairman
Principles in 2002. Since it joined, the
Company has reported annually on its •A description of the practical measures
adopted by the participants in order to
commitment to this initiative, on the
apply the principles of the Global
application of its 10 Principles, and on the
Compact during the previous FY.
evaluation of the results obtained in the
policies implemented for its compliance. •A quantification of the results obtained
or projected, using, where possible,
In 2004, the United Nations Global indicators or systems like those
Compact Office published the Integrity developed by the GRI (Global Reporting
Measures. The aim of these measures is to Initiative).
safeguard the credibility of the initiative
and of the signing companies. Thus, the This section includes the main milestones
signing companies are requested to in the progress of the implementation of
publish the “Communications on Progress”, the Global Compact Principles in 2005. For
that is, to make public through their more detailed information and details of
annual reports, websites or other means, the indicators associated to the compliance
the progress of the implementation of the with the Principles, please refer to the GRI
Principles in their company strategy. tables and their verification.
The Communications on Progress must

include the following three elements:
•A declaration of the continuity of support

to the Global Compact in the opening
letter, statement or message from the
CEO, Chairman, or other senior executive.

11 About the Report
Communication on progress in the United Nations Global Compact

Aspect
GC Principle Most relevant
Principles 1-2 GRI indicator Milestone in 2005 Challenge for 2006
Human
Rights 1-2
HR1, HR2, HR3,
HR4, HR8
•communication
Manual for non-discriminatory
with disabled people .
•Definition and Approval of Corporate Integration
Policy for people with disabilities (Spain)
Q1.1, Q1.2, Q3.4, derivadas de auditoría laboral.
Q3.17, PA1, PA2,
PA3,PA4, PA5,
• Increase in number of products and
services accessible to disabled people
•for
Definition and Approval of Internal Regulations
minimum Requirements for Accessibility (Group)
PA6, PA7 • Increased number of services aimed at
people with low income
•ofGeSIactivities
Supply Chain Work Group: extension
to suppliers.
• Human Rights training in companies
providing security services
•Policy with regard
Definition and Approval of Purchasing
to Suppliers who work
• New social responsibility requirem ents towards social integration.
for suppliers: corrective measures
derived from labour audit
• Definition of a Global Plan of Digital
Inclusion (Latin America)
Labour
standars
HR5, HR6,HR7, HR8
HR9, HR10, HR11,
•Group's
An average of 49.32% of Telefónica
employees are women
•Regulations
Definition and Approval of Internal
of Minimum Requirements
Principles 3-6 LA3, LA4, LA5, •middle
21.83% of women are in management and regarding Health and Safety at Work
LA6, LA7, LA8, LA10, management in the Company. •Regulations
Definition and Approval of Internal
LA11, LA14, LA15,
IO3, IO4, IO5,I
•child
Schooling of over 11,000 children, victims of
labour, through the Proniño Programme
of Minimum Requirements
Life Environment
O6, IO7, IO8 •hours
Decrease in rate of accidents per million
worked (4.99 vs. 7.01)
•disabilities
10% increase in number of people with
employed by the Telefónica Group in
2005, with over 1,000 disabled employees
• Over 45,000 employees of the Telefónica
Group are Trade Union members
Environment EN1, EN2, EN3, EN4, •IImplementation and Internal Audit of •Common Environmental Policy (Group)
Principles 7-9 EN5, EN6, EN7, Minimum Environmental Requirements •Country Environmental Committees
EN8,EN9, EN10,
EN11, EN12,
•Efficiency Programme in paper
and energy consumption
•Definition and Approval of Management and
Control Regulations regarding the Environment
EN13, EN14, EN15,
EN16,EN17, PA8
Q1.1, Q3.13
Anti-corruption SO2, SO3, SO5, •Approval
Implementation of Telefónica Móviles Code of Ethics •Implementation across the Group
Principles 10 SO6, SO7 of Telefónica Group's Code of Ethics •Alignment with O2's Business Principles
•Definition and Approval of Policy
regarding responsible use of Internet
•Implementation of Responsible
Use of Internet Policy
Responsable de Internet •Management
Implementation of Adult Content
•on Adult Content Management
Definition and Approval of Regulations Regulations

11 About the Report

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Telefónica, S.A. | Corporate Responsability Report 2005 327

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Annual Corporate

Telefónica For all

Letter from the Chairman 4 04 Customers 104

To conclude, I would like to reaffirm our commitment to permanent improvement in this

Telefónica, the power behind progress for all

Customers Shareholders Employees

Customer satisfaction Investment Employment

Innovation Shareholder Training

Digital inclusion Responsible Working practices

Telefónica, S.A. | Corporate Responsibility Report 2005 6

Society Suppliers Environment Media

Economic impact Purchases Investments Advertising

Digital inclusion Online purchasing Environmental Online press room

Social action Ethical standards Global environmental Transparency

Telefónica Accessible *Fundación Empresa

Telefónica, S.A. | Corporate Responsibility Report 2005 7

Telefónica, S.A. | Corporate Responsibility Report 2005

Telefónica, motor de progreso for all 6

08 The Enviroment 252

Telefónica, S.A. | Corporate Responsibility Report 2005

World leader in the telecommunications sector

Telefónica in International Presence

Telefónica is the world

More than 207,000 Investment Employees

Telefónica, S.A. | Corporate Responsibility Report 2005 10

Transformation of the Telefónica Group

Before 1990 1995 1999 2004 20051

Accelerating to strengthen our leadership

Telefónica, S.A. | Corporate Responsibility Report 2005 11

Geographic Distribution of Revenue1

Europe and others Latin America Spain

Global presence, local focus As from April 2006, Telefónica is a strategic

Telefónica, S.A. | Corporate Responsibility Report 2005 12

Telefónica: Market size (2005)

Mexico Guatemala El Salvador Nicaragua Venezuela Germany Czech Republic

Telefónica, S.A. | Corporate Responsibility Report 2005 13

Telefónica Telefónica O2 Telefónica

Throughout recent years, Telefónica has O2

Telefónica Internacional Telefónica I+D

Telefónica Móviles Fundación Telefónica

Telefónica, S.A. | Corporate Responsibility Report 2005 14

Telefónica is an important driving force for Driving Social Development

Implementation of Telefónica Group’s Code

Telefónica further increased its investment Presence of Telefónica in the main

Telefónica, S.A. | Corporate Responsibility Report 2005 15

2004 2005 2004 2005 2004 2005

2004 2005 2004 2005 4Q´04 4Q´05

2004 2005 2006

Telefónica, S.A. | Corporate Responsibility Report 2005 16

Driving Progress Divestiture Shareholders

154 Million accesses (not incl. O2) Total Income

207,000 Employees Total Payments

2004 2005 2004 2005 2004 2005

Departments that collaborated in the preparation of the report

Capitulo Areas implicadas

01 Corporate Governance Secretariat General / Internal Auditing Department

02 Identity Communication (Brand, Reputation and CSR) /

03 Driving Force for Progress Finance (Consolidation, Management Control),

04 Customers Corporate Marketing Development /

05 Shareholders Shareholders’ Office / Investor Relations /

06 Employees Corporate Human Resources / Human Resources

07 Society Main lines of business (Telefónica de España, Telefónica

08 Environment Internal Auditing / Reputation and Corporate Social

09 Suppliers Purchasing / Internal Auditing /