Telefonica Teams in Brazil

MADRID and LISBON -- TelefonicaMoviles, a subsidiary of the Telefonica Group, and Portugal Telecom haveconstituted a joint venture which will hold 100% of the shareholdings ofboth groups in mobile phone companies in Brazil, having complied withBrazilian regulatory norms.The company will be Brazil's, as well as South America's, largestcellular operator, with close to 13 million customers (of which 3.5million are contract customers) and a potential market of more than 94million people.The holding company, which will be jointly managed by Telefonica Movilesand Portugal Telecom, will have a solid capital structure and willrecord positive net earnings and cash generation growth from thebeginning.According to Cesar Alierta, President of Telefonica, "The new jointventure company starts out from a position of undisputed leadership inthe Brazilian mobile phone market. The formula for creating it, by theintegration of 100% of the mobile assets of PT and Telefonica in thecountry, is the best way to achieve the goal of creating maximumshareholder value. The decision was taken after an analysis of thelegislation regarding new authorizations for mobile telephony in Brazil,which will lead the new company to implement the migration of thecurrent cellular concessions to the new SMP authorizations."Miguel Horta e Costa, Chief Executive Officer of PT, said "We have nowcreated a company that, with 13 million subscribers, is the leadingoperator in Brazil and has a strong and sustainable lead in all themajor states. The new Company will generate operating free cash flowfrom launch and the ability to derive substantial synergies that willgenerate further value for its shareholders."Telefónica Móviles SA