(Translation of registrant's name into English)

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TELEFÓNICA GROUP

Market Size

TELEFÓNICA GROUP

Financial Highlights

The most relevant factors of Telefónica Group results during the first nine months of the year are the following:

¹ Excludes the adjustments of 300,000 inactive lines in Mexico, not longer considered in the reported customer base as of the second quarter of 2005.
² Assuming constant exchange rates and including the consolidation of the Latin American assets acquired to BellSouth in Argentina, Colombia, Chile, Ecuador, Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela in the cellular business and Atrium in the Telefónica Latinoamérica Group from January 1st 2004. Cesky Telecom has been included in the period July–September 2004.
³ All projections refer to local currency (constant exchange rates) and exclude changes in consolidation other than assets acquired to BellSouth in Argentina & Chile in 2005 (TEM), and Atrium (T.Latam).

TELEFÓNICA GROUP

Consolidated Results

The economic and financial results of the Telefónica Group corresponding to the first nine months of 2005 reflect a sharp acceleration in the growth of revenues (+24.2% year on year) and the profitability of operations (OIBDA +20.0% year–on–year and OI +24.5% year–on–year), in a quarter characterized once again by the strong commercial activity developed primarily in high growth businesses (mobile and broadband). The solid performance of operations have led to an increase in the Operating free cash flow at a double–digit rate (+13.4% year–on–year) and to record a net income of over 3,200 million euros, up 36.2% on the previous year.

As a result, Telefónica Group upgrades its revenue¹ growth target for 2005, from the initial range of 12% to 15% to a new forecast of over 15%. The remaining Group targets for 2005 are unchanged: OIBDA¹ growth +10%/+13%², OI¹ growth +12%/+18%², and CapEx¹ around 4,600 million euros.

By business lines, Telefónica de España Group upgrades its revenue growth target for 2005, from the previous +0.5%/+2% to a growth of over 4%. TPI Group upgrades its revenue³ growth target to +5.5%/+6.5% up from the prior +3%/+5% and changes its OIBDA³ growth target to +7%/+8% from +7%/+9% before. Consolidated financial targets for Telefónica Móviles Group and Telefónica Latinoamérica Group are unchanged.

¹ All projections refer to local currency (constant exchange rates) and exclude changes in consolidation other than assets acquired to BellSouth in Argentina & Chile in 2005 (TEM), and Atrium (T.Latam).
² In terms of guidance calculation, Operating Income and Operating Income before D&A exclude other exceptional revenues/expenses not foreseeable in 2005. Personnel Restructuring and Real Estate Programs are included as operating revenues/expenses.
³ Constant exchange rates as of 2004.

Once again this quarter, the results reflect the diversification of being an integrated operator. The cellular business remained the main contributor to revenues (+41.7% vs. January–September 2004), whereas the fixed operators are the main contributors to profitability, with a significant increase in OI compared with September of the previous year (Telefónica de España Group +29.9% and Telefónica Latinoamérica Group+ 34.0%, excluding the sale of CTC mobile business in July 2004).

Moreover, it´s important to highlight the positive impact of exchange rates, which is emphasized as the year progresses. Thus, to September 2005 the exchange rate effect contributed 3.0 percentage points to the growth in revenues, 3.0 percentage points to that of OIBDA and 2.3 percentage points to that of OI.

The positive evolution of revenues is based on the strong growth of its client base. As a result, on September 30th the Telefónica Group managed a total of 147.7 million accesses (fixed telephony accesses, data and internet accesses, Pay TV and cellular accesses), compared with the 107.2 million managed in September 2004 (+37.8%). The Czech operator Cesky Telecom contributed already with 8.2 million accesses.

The increase in total accesses was mainly due to growth in cellular accesses. The total number of clients managed by the Telefónica Móviles Group grew by 52.0% compared with September 2004, to a total of 89.1 million. In the third quarter, there was an intense commercial activity (net adds of 2.6 million), although below the one recorded in the previous quarter (net adds of 5.4 million) due to seasonality and the strong impact of the launch of the movistar brand last April. The highest number of additions was recorded in Latin America, due to the significant stage of development of almost all its markets, reaching 65.6 million clients in the region (+75.7% compared with September 2004), whereas Spain contributed with 19.6 million clients, up 5.0% on the previous year, which is an important growth in such a mature market as Spain. By the end of the quarter, Medi Telecom recorded 3.8 million clients (+49.2% year–on–year).

Broadband, one of the main levers of growth for the Group, continued to progress notably. By September end, retail ADSL lines in Spain, Latin America and the Czech Republic amounted to 4.4 million, up 55.7% on September of the previous year. By regions, retail ADSL connections in Spain totaled 2.4 million (+67.4% year–on–year). The number of retail ADSL accesses in Latin America grew by 60.7% to reach 1.9 million, of which 1.1 million corresponded to Telesp (0.7 million one year ago).

In January–September 2005 the operating free cash flow (OIBDA–CapEx) grew by 13.4% to 7,613.9 million euros, driven by the cellular business (+12.2%) and the fixed telephony business (Telefónica de España Group +5.1% and Telefónica Latinoamérica Group, +14.4%, excluding the sale of CTC mobile business in July 2004).

Revenues amounted to 27,402.2 million euros during the first nine months of the year, 24.2% more than in the same period of the previous year due to the general growth of all business lines, particularly the cellular business. Growth rates clearly accelerated over the third quarter of the year (+32.3% vs. July–September 2004), driven primarily by the positive impact of exchange rates and the incorporation of Cesky Telecom (contributed with 2.3 percentage points to the growth). Hence, in the period January–September, organic growth⁴ stood at 9.9% (+10.1% in January–June 2005), with a positive contribution by the Group's main three business lines.

The cellular business recorded revenues of 12,050.0 million euros in the January-September 2005 period, 41.7% more than in the same period of the previous year. This variation is due, on one hand, to the incorporation of Latin American operators acquired to BellSouth in 2004 and early 2005, and, on the other hand, to the good evolution of operations, particularly the contribution from Spain (+8.2%), Venezuela (revenues of 993 million euros) and Argentina (revenues of 707 million euros).

⁴ Assuming constant exchange rates and including the consolidation of the Latin American assets acquired to BellSouth in Argentina, Colombia, Chile, Ecuador, Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela in the cellular business and Atrium in the Telefónica Latinoamérica Group from January 1st 2004. Cesky Telecom has been included in the period July–September 2004.

The cellular business recorded revenues of 12,050.0 million euros in the January–September 2005 period, 41.7% more than in the same period of the previous year. This variation is due, on one hand, to the incorporation of Latin American operators acquired to BellSouth in 2004 and early 2005, and, on the other hand, to the good evolution of operations, particularly the contribution from Spain (+8.2%), Venezuela (revenues of 993 million euros) and Argentina (revenues of 707 million euros).

Revenues from the Telefónica de España Group amounted to 8,728.6 million euros over the first nine months of the year ( Terra operations in Spain are contributing with 9.0 million euros) and grew 5.1% year–on–year (+5.0% excluding the effect of Terra), highlighting the performance of revenues from internet and broadband services (+29.1%). Excluding the incorporation of the Terra subsidiaries, the growth rate of revenues slowed down over the third quarter (+4.0% compared with +4.9% in the second quarter and +6.0% in the first quarter), primarily due to the elimination of the positive effect related to 2004 monthly fee increase (revenues from traditional access –2.0%) and to the decline in SIM bonuses (Comprehensive Maintenance Service).

In the first three quarters of 2005, the Telefónica Latinoamérica Group totaled revenues of 5,913.5 million euros (Terra operations in Latin American accounted for 54.4 million euros), an increase of 18.1% over the previous year in current euros, with a significant contribution from the exchange rates. It is worth to mention the growing trend in the year–on–year variation rate of revenues over the year (first quarter +4.5%, second quarter +20.6% and third quarter +29.0%). Excluding the exchange rate effect and the incorporation of Terra, the year–on–year growth would have dropped to 6.5%, the same than in the first six months of the year. This increase is explained by the contribution of Telesp, with sales increasing 7.7% in local currency (+7.3% in the first half of the year), reflecting the good performance of the broadband business and the tariff increase that took place last July.

By geographical areas, Spain remained the main contributor towards consolidated revenues with 53.6% of the total, although this was down 8.8 percentage points over the same period in 2004. This decline was due to the higher contribution from Latin America (40.8% vs. 33.0% twelve months ago) because of the geographic diversification achieved after the acquisition of the BellSouth Latin American operators .Brazil's contribution remained significant (17.8% of total revenues, up 0.3 percentage points on September 2004). In the other hand, following the acquisition of Cesky Telecom, revenues from the Chezh Republic represented 1.9%, after the consolidation of the period July–September 2005.

Changes in the consolidation perimeter following the purchase of the 10 BellSouth operators in Latin America and Cesky Telecom, together with increased commercial intensity by the Telefónica Group and the exchange rate effect, pushed operating expenses upwards to total 16,758.1 million euros by September, 26.8% higher than during the same period of the previous year (+23.2% in the first half of 2005).

By items, supplies expenses increased by 32.9% (+29.9% in constant euros vs. +29.2% in June) associated with the cellular business (higher interconnection expenses and incorporation of BellSouth Latin American operators) and with Telefónica de España Group due to the purchase of equipment (ADSL and Imagenio).

Personnel expenses recorded a year–on–year increase of 7.2% in comparison with the January–September 2004 period (+5.3% excluding the exchange rate effect). The average Group workforce at September stood at 185,763 employees, a 21.3% variation due to the increased workforce from the Atento Group and from companies included in the Group's consolidation perimeter. Excluding the Atento Group, the increase in workforce would have been reduced to 11.3%. With regard to the Telefónica de España 2003–2007 Redundancy Program, the provision related to the 1,750 applications accepted in 2005 were already accounted for in the first half of the year for 531.2 million euros.

External services expenses recorded a 37.7% increase in relation to the first nine months of the previous year (+33.7% in constant euros, +34.7% in January–June 2005) due to intensified commercial efforts in an environment of high competition and growth in the fixed and cellular business.

In the first nine months of 2005, the Telefónica Group reported a gain on sale of fixed assets for 177.6 million euros, primarily corresponding to the items accrued in the first half of the year: capital gains from the sale of Radio Continental, Radio Estéreo (both from the ATCO Group), Infonet, the sale of 1.2% of the TPI share capital and the sale of real state.

The consolidated operating income before D&A (OIBDA) accumulated at the end of the third quarter amounted to 10,944.5 million euros, a 20.0% growth in relation to the same period in the previous year, accelerating the variation rate of the first six months of the year (+15.3%). Hence, in the July–September period, OIBDA rose significantly versus the third quarter of 2004 (+27.8%). The organic year–on–year growth⁵ accumulated to September stood at 6.7%, 0.1 percentage points more than that registered to June. Exchange rates made a positive contribution for the second consecutive quarter, adding 3.0 percentage points to the OIBDA growth (+1.4 percentage points in the first half 2005).

⁵ Assuming constant exchange rates and including the consolidation of the Latin American assets acquired to BellSouth in Argentina, Colombia, Chile, Ecuador, Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela in the cellular business and Atrium in the Telefónica Latinoamérica Group from January 1st 2004. Cesky Telecom has been included in the period July–September 2004.

In terms of profitability, the cumulative OIBDA margin reached 39.9% at September, lower than the 41.3% recorded in January–September 2004, mostly due to the fall in the cellular business OIBDA margin (–6.6 percentage points to 35.1%). However, it is important to note the improved margin as a percentage of revenues of the Telefónica Group in relation to that obtained during the first half of the year (+1.8 percentage points) also mostly due to the cellular business (+1.9 percentage points).

The cellular business OIBDA totaled 4,226.5 million euros in the January–September 2005 period, 38.6% of the total OIBDA and up 19.4% in relation to the previous year. Higher commercial costs in the markets of operations and last April's brand launch justify the lower profitability of the business over the year (OIBDA margin 35.1% vs. 41.6%). However, there was a significant improvement in the third quarter, placing the margin at 38.4% (30.9% in the second quarter of 2005) basically due to the recovery of the Telefónica Móviles España OIBDA margin (49.1% vs. 43.3% in the second quarter) and the lower commercial costs in the Latin American operators.

The Telefónica de España Group (31.9% of total OIBDA) recorded OIBDA of 3,486.2 million euros over the first nine months of the year (Terra operations contributed with 14.8 million euros), an 8.0% year–on–year increase, slowed down versus the first half growth (+10.3%). The cumulative OIBDA margin at September stood at 39.9%, 1.1 percentage points above that recorded in January–September of the previous year (45.9% versus 46.6% excluding the E.R.E provision in both periods). This margin amounted to 46.0% in the third quarter, because no provision had been accounted for in relation to 2003–2007 Redundancy Program.

At Telefónica Latinoamérica, OIBDA (24.6% of consolidated OIBDA) stood at 2,688.6 million euros (Terra's Latin American operations contributed with +6.5 million euros), representing a 1.9% increase over the first nine months of 2004. In constant euros and excluding the contribution of Terra Latam, OIBDA declined at 7.5%. This growth rate was affected by the accounting of the sale of the CTC cellular subsidiary to the Telefónica Móviles Group in July 2004. Excluding this effect, year–on–year OIBDA growth stood at 21.4% (+10.2% excluding exchange rate variations and Terra Latam). OIBDA margin, excluding the gain on sale of fixed assets for both periods, amounted to 44.2%, stable compared to the previous year.

By regions, Spain represented 60.3% of consolidated OIBDA, down 8.3 percentage points on September 2004. Latin America, however, increased its contribution to 35.6% (33.7% twelve months ago). Brazil remained practically stable with regard to the previous year (18.5% at September 2005 vs. 18.1% in September 2004). The Czech Republic after the incorporation of Cesky Telecom since July 2005, represented +2.3% of the consolidated OIBDA.

Depreciation recorded a 14.6% year–on–year growth (+9.2% in the first half 2005) to reach an absolute figure of 4,820.0 million euros in January–September 2005. It must be highlighted that the third quarter included the depreciation of Cesky Telecom. In the first nine months of the fiscal year 2005 depreciation of the cellular business increased by 51.6% year–on–year due to changes in the consolidation perimeter, including 229 million euros associated with the amortization of allocated intangible assets related to the acquisition of Telefónica Móvil Chile and BellSouth Latin American operators. As a result of the evolution of OIBDA and depreciation, operating income (OI) for the January–September 2005 period stood at 6,124.5 million euros, a year–on–year growth of 24.5% and 3.2 percentage points higher than January–June 2005. Organic growth⁶ stood at 16.6% compared with +17.0%⁷ in June.

⁶ Assuming constant exchange rates and including the consolidation of the Latin American assets acquired to BellSouth in Argentina, Colombia, Chile, Ecuador, Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela in the cellular business and Atrium in the Telefónica Latinoamérica Group from January 1st 2004. Cesky Telecom has been included in the period July–September 2004.
⁷ The organic growth published in January–June 2005 (+12.6%) was modified given that this figure did not include depreciation corresponding to the intangible assets of BellSouth Latin American operators in the cellular business.

The positive results of associated companies stood at 9.6 million euros compared with the 52.0 million euros losses accounted for in the first three quarters of 2004. This improvement was mainly due to the reduction in losses attributable to Sogecable, the positive contribution of Medi Telecom, the higher contribution made by Portugal Telecom and the lower losses of Lycos Europe and IPSE–2000.

Financial expenses amounted to 1,129.2 million euros in the first nine months, 7.7% above the same period in the year before, that is, 80.8 million euros more. 165 million euros are due to the 16% increase in the average net debt, and the remaining 87 million euros are related to the increase in the Latam debt (higher after the acquisition of the BellSouth assets and the increase in the interest rates in Brazil) with savings of 171 million euros as a consequence of better exchange and interest rates in the Group.

The net free cash flow after CapEx generated by the Telefónica Group amounted to 4,227.7 million euros for the nine months of the year, adding to this figure 84.2 million euros corresponding to net cash received from sale of real estate. Of this 4,854.6 million euros were devoted to financial investments and 2,277.9 million euros for net payment for dividends and treasury stock, totaling 2,770.6 million euros of free cash flow after dividends. Free cash flow stood at 4,517.9 million euros (according to the criteria used at the III and IV Investor Conferences) prior to payments made to amortize commitments related to headcount reduction plan and the ordinary payments to minority interests.

The Telefónica Group´s net financial debt at the end of September 2005 stood at 28,676.1 million euros. 56% of the increase in debt during the year was due to the free cash flow after dividends of 2,770.6 million euros, 25% due to the appreciation of the dollar and the Latin American currencies against the euro throughout the first nine months of the year, which accounted for 1,240.6 million euros of the increase in debt. The remaining 19% corresponds to the changes in the consolidation perimeter after the acquisition of BellSouth subsidiaries in Argentina and Chile and Cesky Telecom. Total debt (including guarantees and labor commitments for a total of 3,720.6 million euros) amounted to 32,396.7 million euros, equivalent to 2.13 times OIBDA annualized for the period, including Cesky Telecom.

The tax provision totaled in the first nine months of the year 1,455.3 million euros (29.1% tax rate), although the cash outflow for the Group will be reduced even further as negative tax bases are compensated for.

The results attributed to minority interest deducted 296.2 million euros from the net income for the January–September 2005 period, in comparison with the -220.2 million euros of the same period in 2004. This 34.5% increase is mainly due to: 1) the participation of minority interests in the net income of Cesky Telecom since July 1st 2005, 2) the positive net income of Terra Networks in January–June 2005 compared with the losses of the previous year (Telefónica S.A. merged with Terra Networks, S.A. in July 2005, by absorption of the second one by the first one) and 3) the higher net income achieved by Telesp.

As a result of all the described items on the profit and loss account, the net income for the first nine months of 2005 totaled 3,253.3 million euros, up 36.2% on January–September 2004 after recording a net income of 1,418.2 million euros in the third quarter of the year (+53.3% year–on–year).

Cumulative CapEx by the end of the third quarter of the year amounted to 3,330.6 million euros and increased by 38.3% (organic growth⁸ +19.3%) in comparison with the same period of 2004 due to the generalized growth in all business lines. The year–on–year growth of the Telefónica Latinoamérica Group (+51.0%) and the Telefónica de España Group (+16.7%) is due to the greater level of investment in the broadband business. The cellular business grew by a year–on–year 35.8% due to increased network capacity in Spain, Brazil and Mexico and the GSM network deployment in Colombia. However, it should be noted that there is a strong cyclical component to the investment, so that this performance cannot be extrapolated to the full year.

⁸ Assuming constant exchange rates and including the consolidation of the Latin American assets acquired to BellSouth in Argentina, Colombia, Chile, Ecuador, Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela in the cellular business and Atrium in the Telefónica Latinoamérica Group from January 1st 2004. Cesky Telecom has been included in the period July–September 2004.

TELEFÓNICA GROUP

Financial Data

RESULTS BY BUSINESS LINES

Fixed Line Business

TELEFÓNICA DE ESPAÑA GROUP

Telefónica de España Group results for the third quarter confirmed the positive progress recorded over the year. Hence, revenues and OIBDA grew by 5.1% and 8.0% respectively from January to September 2005, compared with the same period in 2004. Excluding the impact of the integration of Terra assets in Spain during the third quarter of 2005, these increases would reach 5.0% and 7.5%, respectively.

As a result of the above, Telefónica de España Group upgrades the announced 2005 revenue guidance from the initial range of 0.5% to 2.0% growth, to a growth target above 4.0%. The remaining 2005 financial targets remain unchanged.

From a commercial viewpoint, the third quarter of 2005 was marked by the launch of double and triple play offers by Telefónica de España and by the strengthening of the commercial offer for Imagenio. The promotion of these new products, and of other offers and promotions for broadband services that have been launched represent the main actions of the Company aimed at maintaining market leadership. Below are details of the main products and services launched during the quarter in the broadband business:

• Launch on September 11th of a commercial campaign for a new product range offering digital IP television (IP–TV), ADSL and voice services in a single bundle. The trademark for the bundle made up of these three services is Trío, Dúo being the combined client–chosen sale of two of the three services available in a bundle. In just one month of actual marketing, a total number of 345,135 packages was reached. The following must be noted among these new offers:

• Dúo 24 hrs. ADSL (1 Mbps) and flat rate for all calls to national fixed line numbers, for 39.90 euros a month.
• Dúo ADSL Mini (1 Mbps) and flat rate for all calls to national fixed line numbers, for 34.00 euros a month.
• Dúo Imagenio TV and flat rate for all calls to local fixed line numbers, for 19.90 euros a month.
• Dúo Imagenio TV and flat rate for all calls to national fixed line numbers, for 25.00 euros a month, currently on promotion for 19.00 euros a month until January 2006.
• Trío Imagenio TV, 24 hrs. ADSL (1 Mbps) and flat rate for all calls to national fixed line numbers, for 51.90 euros a month.
• Trío Imagenio TV, ADSL Mini (1 Mbps) and flat rate for all calls to national fixed line numbers, for 46.00 euros a month, currently on promotion for 38.00 euros a month until January 2006.

• Inclusion of eight new digital TV channels in Imagenio service: Factoría de Ficción, Paramount Comedy, Intereconomía TV, Nickelodeon, MTV España, VH1, Operación Triunfo and Discovery. Following the addition of these new channels, the current range includes 48 TV and 15 music channels. It is also worth highlighting the fact that, since August, Imagenio is being sold with a new decoder that additionally allows Digital Terrestrial Television (DTT) channels to be watched, and that video on demand servers' storage capacity has been doubled.

Different promotions were offered during the summer campaign to encourage the sale of Imagenio and products from the ADSL portfolio. These promotions were mainly based on the application of discounts on subscription and/or monthly fees and on the sale of modems and routers at low prices.

Telefónica de España continued to develop commercial actions aimed at defending its traditional business, the following being particularly noteworthy during the third quarter:

• July launch of Flat Rates for unlimited local and national calls between fixed line telephones, for 5.00 and 15.00 euros a month, respectively.
• Launch of the International Mini Rate that, for a monthly fee of 3.00 euros, allows international calls to be made to 55 countries at a fixed price per minute, 24 hours a day, with discounts depending on the target country of up to 80% on standard rates.
• Free connection fee campaign between September 19^th and 30^th for which 109,831 applications were received.

Targeting Corporate and SME clients, the following commercial actions were taken:

• Launching in September of a WiFi–GSM PDA handset together with a free annual subscription fee to Zona ADSL WiFi service (ADSL WiFi HotSpot).
• Renewal of promotion Tarifa Plana de Voz en Horario Comercial (Voice Flat Rate for Commercial Hours) for professional and business clients up to December 31^st, 2005, of which 194,397 flat rates have been sold up to the end of October.
• Launching in July of Tarifa Plana Plus (Plus Flat Rate) for unlimited national calls between fixed line telephones, and special rates for fixed–to–mobile calls, for a price of 16.00 euros a month.
• Summer promotion of Solución ADSL PC, including a free printer for purchases above 1,000 euros, and of "Meses de la Seguridad" (Months of Security) with the commercialisation of Solución ADSL Filtro de Correo (Anti–spam solution).

From a regulatory viewpoint, it is important to note that due to the CMT's delay in analysing the 18 relevant markets, the price–cap formula will be extended for the first quarter of forthcoming year until said analysis has been completed, the details of the formula having yet to be established.

It should also be noted the expected approval from the CMT of the commercialisation of retail services based on ADSL 2+ technology in the areas covered by those local exchanges where ULL is available (without having to launch an equivalent wholesale service), and also the communication by Telefónica de España to the CMT of 31 new Double and Triple Play offers during the quarter that, with the exception of seven of them still pending, have already been validated.

Given the heavy weight of fixed–to–mobile interconnection costs on Company supply expenses, the decision made by the CMT to establish reductions in fixed–to–mobile interconnection prices of between 10.6% and 13.4%, depending on the operator, must be underlined.

With regard to the Telefónica de España Group profit and loss account, it is worth noting that Terra business in Spain has been included in the Company management perimeter as of July 2005. The effect of this inclusion on the consolidated accounts of the Telefónica de España Group, given the significant existing intra–group relationships, is of little relevance as already indicated.

Revenues at Telefónica de España Group amounted to 8,728.6 million euros during the first nine months of the year, a year–on–year growth of 5.1%. Considering the third quarter on a stand–alone basis, revenues grew by 4.3% to total 2,925.7 million euros.

Excluding revenues from the Terra business in Spain, 9.0 million euros in the July–September 2005 period, Telefónica de España revenues corresponding to the January–September 2005 period stood at 8,719.6 million euros (2,916.7 million euros in the third quarter of 2005), with a year–on–year growth of 5.0% (+4.0% in the third quarter).

Revenues from Telefónica de España Parent Company amounted to an aggregate 8,360.8 million euros to September, presenting a year–on–year growth of 4.9%. Revenues for the third quarter of the year stood at 2,800.7 million euros, a 4.2% increase on the same period of the previous year. The slowing down trend of the quarterly revenue growth is due to the disappearance of the positive effect on the growth in revenues by the rise in fees and reductions of bonuses associated with the Comprehensive Maintenance Service (SIM): 4.2% in the third quarter, 4.3% in the second quarter and 6.4% in the first quarter of 2005.

Telyco, the sales of which kept up the good performed over the first nine months of 2005, recorded revenues of 361.9 million euros to September 2005, with a year–on–year growth of 18.8%. Telyco's contribution to the growth in Telefónica de España Group revenues stood at 0.7 percentage points in the aggregate to September.

• Revenues for Traditional Access grew by 0.4% over the first nine months of the year, as a result of the 4.35% and 2.0% rise in monthly fees in April 2004 and January 2005, respectively. Revenues for Traditional Access fell by 2.0% over the third quarter, mainly due to the following factors: i) the end of the positive effect on revenue growth by the rise in monthly fees in April 2004, ii) the end of the positive effect revenue growth by surcharges implemented by Telefónica de España since the third quarter of 2004 on calls made to toll–free numbers from public payphones, having received the appropriate authorization and iii) the fall in the number of lines.

• Revenues from Traditional Voice Services amounted to 3,863.5 million euros at September end, with a slight year–on–year reduction of 0.3%. The fall in these revenues over the third quarter stood at 0.8%, which, compared with the 1.8% drop recorded in the second quarter, shows an improvement in the revenues trend, given the 16.2% year–on–year increase in interconnection revenues due to the growth in incoming international traffic over the quarter.

• Internet and broadband services, which contributed most to Telefónica de España revenue growth, totalled an aggregate 1,388.0 million euros by September 2005, with a 29.1% increase year on year.

• Data Service revenues grew by 5.1% to total 768.9 million euros over the first nine months of the year. Retail data services maintained their level of revenues, growing by 0.1%, despite the 11.9% increase in the number of VPN connections and as a result of the migration of traditional network solutions towards cheaper IP products. More specifically, fiber connections (metrolan) amounted to 3,587, implying a 29.2% increase on those recorded in June.

• Lastly, revenues from Information Technology services recorded a 40.0% year–on–year growth during the quarter. This behaviour was due to the growth in outsourcing services of desktop positions and systems integration.

• Personnel expenses dropped by 5.2% to 2,098.3 million euros over the first nine months of the year. This fall was a result of lower provisions for the Redundancy Program (E.R.E. 2003–2007) being implemented. Excluding these provisions in the first nine months of 2004 (643.9 million euros including actuarial revision) and over the first nine months of 2005 (524.3 million euros related to all employees who have joined the Redundancy Program in 2005), personnel expenses would have grown by 0.3%.

• Supplies expenses grew by 9.1% over the first nine months of the year to stand at 2,242.8 million euros. Over the third quarter, however, the growth in these expenses was moderated considerably to stand at 4.4% as a result of the lower mobile handset sales at Telyco, as summer campaign took place in advance, and by the evolution of equipment purchases and special projects at Telefónica de España, which grew by 33.9% in the third quarter compared to their 61.1% growth in the second quarter.
• External Services expenses grew by 12.6% to total 950.1 million euros in the aggregate to September end as a result the intense commercial campaign developed by Telefónica de España to face the demanding competitive environment. In fact, Telefónica de España's commercial expenses increased by 15.1% over this period in relation to the same period of the previous year.

The combined efforts of the Company towards the growth in revenues and efficiency was seen in an operating income before depreciation and amortization (OIBDA) of 3,486.2 million euros, presenting a year–on–year growth of 8.0%, 2.3 percentage points down on the first half of the year as the effect of the lower provisions for the 2005 in comparison with those of 2004 is getting diluted, as was hinted at in the second quarter. In order to make a comparison with the guidance, excluding the effect of the inclusion of Terra assets in Spain, the OIBDA totalled 3,471.3 million euros, which represented a growth of 7.5% in relation to January–September 2004 (1,329.8 million euros in the third quarter with a growth of 3.3% in relation to the same period in 2004). This growth rate, excluding exceptional revenues/expenses not foreseeable in 2005 and in 2004, would stand at 8.5%. It is important to note that the positive impact of the lower provisions for the 2005 Redundancy Program (compared with those accounted for in 2004 together with the actuarial revision) contributed 3.8 percentage points towards said 8.5% growth; this effect is to lessen in the fourth quarter, to reach 2.7 percentage points of growth by the end of the year. This diminishing effect, together with other non–lineal effects (rise in subscription fees and reduction in SIM discount both in April 2004, and application of the 2005 price–cap on June 30^th 2005) means that growth in OIBDA for the January–September period cannot be extrapolated at the end of 2005.

The OIBDA margin stood at 39.9% over the first nine months of 2005 compared with the 38.9% recorded in the same period of 2004. Excluding the effect of E.R.E. provisions over the first nine months of 2005, the margin for the January–September 2005 period would increase by 6.0 percentage points to reach 45.9%. Comparing this margin with the comparable margin of the same period in 2004 (excluding the E.R.E. provision for the first nine months of 2004 and the actuarial revision), a 0.7 percentage points drop is recorded at September 2005 as a result of the greater commercial and supply efforts during the year.

The OIBDA for the Telefónica de España parent company amounted to 3,454.2 million euros, up 7.7% year on year.

CapEx totalled 925.4 million euros, showing a 16.7% increase in comparison with the previous year. The CapEx to revenues ratio stood at 10.6%.

RESULTS BY BUSINESS LINES

Fixed Line Business

TELEFÓNICA LATINOAMÉRICA GROUP

Results at Telefónica Latinoamérica in the first nine months of 2005 continued to grow significantly year on year. In addition to the good progress of the fixed telephone operators, Telefónica Empresas América (TEA) and TIWS, the positive effect of exchange rates has continued to increase, mainly due to the generalized appreciation of Latin American currencies against the euro, in particular the Brazilian real (+16.2%), and except for the Argentine peso, which depreciated slightly year on year (–1.9%). Furthermore, the results of Terra's Latin American operations (Terra Latam) have been consolidated in the Telefónica Latinoamérica group since July, contributing 1.1 percentage points to revenue growth and 0.2 percentage points to OIBDA growth.

By September end, Telefónica Latinoamérica managed 28.1 million lines, 7.4% up on September 2004, after the inclusion of Terra's ISP accesses in Latin America (+3.9% excluding Terra Latam accesses). This outstanding growth rate was recorded mainly thanks to the increase in broadband lines (+97.6% year on year; +60.0% excluding Terra Latam) thanks to the commercial efforts made in general by all the operators. Fixed telephony lines increased with all operators thanks to the marketing of different products and traffic plans adapted to meet the needs of different client segments, leading to 21.7 million fixed telephony lines at Telefónica Latinoamérica (+2.6% year on year).

Over the first nine months of 2005, Telefónica Latinoamérica generated revenues of 5,913.5 million euros, an 18.1% increase in current euros (+6.5% in constant euros and excluding the effect of the inclusion of Terra Latam). This growth in constant euros is equal to that reached during the first half of the year and is basically due to greater revenues from Telesp that, with a 7.7% increase in local currency, reflected the increase in fixed telephony lines and rates, the good progress of the Broadband business and, to a relatively lesser extent, the growth in value added services and new businesses. TASA also recorded a significant increase and, despite the lack of tariff indexing, grew by 10.4% in local currency thanks to the higher number of lines and to voice traffic. CTC and TdP continued to record small revenue growth compared to September 2004 (+1.4% in local currency in both cases), despite the negative effect of the productivity factor at TdP and the strong competition in Chile. Lastly, although with lower relative weight in the group as a whole, TEA and TIWS recorded significant growth rates of 8.2% and 18.4% in constant euros, respectively.

At the end of the third quarter, Telefónica Latinoamérica's operating expenses stood at 3,174.3 million euros, +18.1% in current euros compared with the same period in 2004. This growth was reduced to 5.9% in constant euros and excluding the inclusion of Terra Latam, below the growth in revenue. A growth in expenses associated with greater commercial efforts, mostly sales commissions and customer care expenses, was maintained by all operators. However, the good progress of bad debts continued, with a slight increase of 2.7% in bad debt provision, that translates in a 9.5% fall in constant euros and excluding Terra Latam, thanks to good recovery management and the larger volume of prepaid and consumption control lines in the operators. Telefónica Latinoamérica recorded a result for the disposal of assets of 77.5 million euros, primarily corresponding to the capital gains generated by the sale of Infonet, which took place during the first quarter of the year.

As a result of the above, Telefónica Latinoamérica recorded an Operating Income before Depreciation and Amortization (OIBDA) of 2,688.6 million euros, 1.9% higher year–on–year in current euros (–7.5% in constant euros and excluding the contribution of Terra Latam). This progress was influenced by the sale of the cellular division of CTC to Telefónica Móviles in July 2004, which generated capital gains of 425.5 million euros. Excluding this effect, there was a 21.4% growth in OIBDA in current euros (+10.2% in constant euros and excluding Terra Latam). The OIBDA margin as a percentage of Revenues stood at 44.2% (excluding gains on sale of fixed assets), maintaining the level recorded in September 2004.

Telefónica Latinoamérica obtained operating income (OI) of 1,380.0 million euros, 34.0% above that of 2004 having excluded the Telefonica Móvil Chile sale (+20.8% in constant euros and excluding Terra Latam).

Financial results stood at –238.8 million euros, 18.2% down on September 2004, mostly due to the reduction of operator debt. In addition, the negative result due to exchange rate differences was reduced (–78.9%), reflecting the improvement of Latin American currencies.

Greater investment in broadband, which was necessary for the expansion of this business in the region, placed Telefónica Latinoamérica's CapEx at 643.7 million euros, a year–on–year growth of 51.0% (+24.8% in constant terms and excluding Terra Latam). Despite this growth, the significant volume of OIBDA obtained led to an operating free cash flow (OIBDA–CapEx) of 2,045.0 million euros, a 14.4% increase without the effect of the sale of the cellular subsidiary in July 2004 (+6.8% in constant euros and excluding Terra Latam).

The Group's workforce stood at 28,423 permanent employees at the end of September, an 9.2% increase compared with September 2004, due basically to the acquisition of Atrium in Brazil, the inclusion of Terra Latam (around 1,000 employees) and the insourcing of employees by Telesp and TASA.

On July 4^th 2005, the new tariffs approved by Anatel came into force, leading to a 7.27% rise in Local Telephony, 2.94% in DLD and 7.37% in the public payphone business.

By September 30^th, Telesp managed 15.7 million lines, which was a year–on–year growth of 2.8%, driven by the increase in its retail ADSL plant that, with a year–on–year growth of 51.5% and a net gain of over 100,000 lines during the third quarter of the year, totalled 1.1 million retail accesses. Total fixed telephony lines remained almost at the same level as in June, with a recorded net gain over the quarter of 11,506 lines, to stand at 12.4 million.

Voice traffic (42,889 million minutes) decreased 3.6% year on year, in line with the drop recorded at June. This evolution was affected by the greater use of mobile telephony, a drop in the Intrastate Long Distance market and the change to the lines mix (by September, 18% of fixed telephony lines corresponded to prepaid or consumption control lines), which affected fixed–to–mobile and long distance traffic. Note, however, the increase of local fixed–to–fixed traffic, which grew by 1.5% thanks to the higher number of lines. Internet traffic, despite slightly improving in relation to June, continued to shrink (-15.8% year on year) due to the continued migration of the best clients to ADSL and the greater use of off–peak rates.

Revenues in September stood at 3,441.0 million euros, a 7.7% increase in local currency in relation to the same period in the previous year, thanks primarily to the increase in revenues from the traditional business (+6.5% in local currency) and also to the increase in revenues from the internet business (+25.9% year on year) that contributed towards 7.4% of Telesp revenues (compared with 6.3% in the same period of 2004). The good progress of revenues from the traditional business reflects the greater number of lines in service, the increase in fixed–to–fixed and fixed–to–mobile tariffs, the increase in value–added services and the good progress of the public payphone business.

Telesp operating expenses remain under control, with a 6.2% increase in local currency that is below the growth of revenues. This increase is associated with i) higher personnel expenses (+6.4% in local currency) due to the increased workforce following the acquisition of ATRIUM and the insourcing of employees by some subsidiaries and areas of the Telefónica Group, leading to savings on outsourced services, ii) interconnection through the increase in fixed–to–mobile tariffs, linked to greater revenues, iii) outsourced services (+10.6% in local currency) due to the increase in prices of contracts, higher ADSL and family lines sales, and an improvement in customer care.

The positive evolution of bad debt provision is maintained, with a drop of 14.1% in relation to last year, thanks to good recovery management and to new products aimed at spending power and at client needs.

Telesp's operating income before depreciation and amortization (OIBDA) at September amounted to 1,567.4 million euros, a 9.7% increase in local currency thanks to the growth in revenues. The OIBDA margin stood at 45.5%, 0.3 percentage points up on the first half of the year and 0.8 percentage points up on the same period of 2004.

CapEx accumulated to September amounted to 354.4 million euros, a 20.9% growth with regard to the previous year in local currency. This increase was primarily due to the launch of new products and to ADSL. The operating free cash flow (OIBDA-CapEx) stood at 1,213.0 million euros (+7.3% in local currency with regard to the same period of the previous year).

In a context with frozen tariffs, TASA management efforts adapted to an environment of increasing activity and consumption enabled the growth in fixed telephone lines and voice traffic to continue (3.8% and 8.6% respectively), contributing towards the 10.4% increase in revenues.

By September 2005, TASA managed 5.4 million lines, 3.5% up on September 2004, thanks to the year–on–year increase in fixed telephony lines (+3.8%) and to the growth in retail ADSL lines (+94.3%), which stood at 217,931. There was a net gain of ADSL lines over the third quarter of 39,533 compared with the 29,307 of the second quarter. As a result, TASA remains the leader in the broadband market in the Southern area of Argentina.

Voice traffic per line maintains a remarkable growth rate (+5.1% in relation to the same period of the previous year), although it slowed down with regard to the first half of the year (+7.2% year on year) due to the smaller increase in total incoming traffic (+24.5% year–on–year variation compared with +31.9% to June). However, the growth of total outgoing traffic remained stable (+1.3%), with the increase in total Fixed–to–Mobile traffic (+31.0%) being particularly noteworthy, in line with the country's quickly developing cellular business.

The good progress of operating variables enabled TASA to maintain its growth rate in revenues (+10.4% in local currency), which stood at 653.4 million euros. Broken down by business, revenues from the traditional business grew by 8.7% year on year, due to the good performance of lines in service and traffic processed. Revenues from the internet business (Narrowband + Broadband) rose 33.1% in local currency to contribute 8.7% of revenues (+1.5 percentage points up on September 2004), thanks to the expansion of ADSL lines, the revenues of which increased by 92.1% year on year in local currency, offsetting the decrease in the narrowband business.

The increase in operating expenses slowed down to 12.2% in local currency (+18.0% at June), mostly thanks to the smaller increase in personnel expenses (+3.8%) despite the application of salary increases agreed with the unions and the insourcing of temporary employees with the subsequent saving on some external services. The growth of expenses is basically explained by the increase in external services (+21.9% in local currency) associated with the generation of revenues (greater commercial activity -customer care–, the increase in quality plans and facilities maintenance). The bad debt to revenues ratio was reduced to 0.7% (1.0% in the first half of the year) thanks to the good performance of recoveries and the growing prepaid plant (around 29% of fixed telephony lines), thus limiting bad debts.

The positive progress of revenues, together with the ongoing cost containment, enabled TASA to accelerate the growth rate of its operating income before depreciation and amortization (OIBDA) (+4.7% in local currency; +2.3% in June) to stand at 363.6 million euros. The OIBDA margin stood at 55.7% of revenues, 0.2 percentage points up on that of the first half of the year.

CapEx grew by 9.0% year–on–year in local currency to September, to stand at 81.3 million euros, having devoted around 35% to ADSL development. The increase in OIBDA, together with investment control, led to a growth in the operating free cash flow (OIBDA–CapEx) of 3.5% in local currency with regard to the same period in 2004 to stand at 282.3 million euros.

On January 1^st 2005, the distribution of the product and client portfolio for the business sector between CTC and T–Empresas Chile was reviewed. Due to this, Telefónica CTC Chile's 2004 results are shown on comparable terms with the new segmentation.

As a result of the business restructuring and re–segmentation analysis carried out, on September 22^nd CTC announced that it was to acknowledge a net, pre–tax extraordinary charge to its long distance business equivalent to 16.9 million dollars (around 4 million dollars in revenues and 13 million dollars in operating expenses) in the results of the third quarter, associated with international traffic.

At September 30^th, CTC managed 2.9 million accesses, 1.8% up on the same date in 2004 thanks to the progress of fixed telephony and ADSL lines that offset the fall in the narrowband business. The growth rate of fixed telephony lines accelerated (+3.4% compared with September 2004), having recorded a net gain of 80,362 lines over the previous twelve months thanks to the commercial emphasis placed on new minutes plan, prepaid plan and consumer control packages.

Broadband remained the main driver of growth at Telefónica CTC. By the end of the third quarter, there were 242,106 retail accesses, up 51.3% on September 2004. CTC continued to make significant commercial efforts aimed at the widespread implementation of broadband in Chile.

Total long–distance traffic continued to fall nationwide, due to the replacement effect of the mobile telephony and the Internet. Long distance traffic carried by CTC dropped 14.5% year on year. Despite the decline in this market, CTC maintained its relative shares of traffic (46.9% in domestic long distance and 33.0% in international long distance).

By the end of the third quarter of 2005, revenues stood at 644.1 million euros, 1.4% higher than in 2004 in local currency. Revenues from the traditional business fell slightly in comparison with 2004 (–0.6% in local currency), given that the good performance recorded in revenues from local telephony and interconnection did not offset lower long distance and equipment sale revenues. Revenues from the Internet business (narrowband and broadband) continued to record strong growth rates and contributed 7.8% of total revenues (+1.9 percentage points in comparison with September 2004), driven by the good performance of Broadband revenues (+49.1% year on year in local currency).

Operating expenses increased by 2.5% to September in local currency as a result of commercial, installation, customer care and infrastructure maintenance efforts, which resulted in a 9.5% increase in external services expenses, as well as an increase in supply expenses (+2.2% year on year in local currency) due to heavier traffic to mobiles, which did not offset the 9.2% drop in personnel expenses.

As a result of the improvements to debt recovery systems and policies, there was an improvement in the bad debt provision that fell 9.5% in local currency in comparison with 2004.

By September end 2005, the operating income before depreciation and amortization (OIBDA) stood at 268.8 million euros, not comparable with the OIBDA obtained in the same period of 2004 that included the results of the sale of the CTC cellular subsidiary to Telefónica Móviles in July 2004, generating capital gains of around 425 million euros for CTC. Excluding this effect, accumulated OIBDA to September 2005 would only have fallen by 7.5% in local currency to stand at a margin of 41.7% of revenues (4.0 percentage points lower than in the same period 2004).

Accumulated CapEx to September was 66.4 million euros, an 8.8% increase in local currency with regard to 2004, mostly due to the growth in the broadband business to which around 32% of the investment was devoted. operating free cash flow (OIBDA-CapEx) stood at 202.4 million euros (11.2% down on 2004, excluding from 2004 the sale of the cellular subsidiary).

By the end of the third quarter of 2005, the total number of accesses continued with its positive trend at Telefónica del Perú (TdP), showing a growth of 13.6% year on year, almost in line with the growth rate recorded in June 2005. The intense commercial activity undertaken was reflected by: i) strong growth in fixed telephony lines (2.3 million lines, +10.4% year on year), generating a net gain from July to September of 52,065 lines, ii) significant increase in retail Broadband lines, exceeding 310,000 clients (a year–on–year increase of 86.5%) after obtaining a net gain of around 34,200 clients during the past quarter and over 100,000 year to date. The increase in the numbers of pay TV subscribers should also be noted, which grew by 14.1% to total 432,172 customers.

Revenues of Telefónica del Perú stood at 765.9 million euros at the end of the third quarter of 2005, a year–on–year increase of 1.4% in local currency. This increase can basically be explained by higher revenues from the internet business (Broadband+Narrowband) that grew by 42.1% in local currency thanks to the good performance of Broadband revenues (+61.2%) as a result of the increase in lines. The Internet business increased its weight in the total revenues, from 6.7% in of September 2004 to the current 9.4%. Revenues from the traditional business fell 1.6% year–on–year in local currency (vs. –2.0% in June 2005). The positive change in cable TV revenues (+7.9% year–on–year growth in local currency) and improved management of the public payphone infrastructure (more profitable locations), which generated a 4.3% year–on–year increase in revenues, was unable to offset the drop in revenues from observed traffic since the application of the new productivity factor in September 2004 (10.07% vs. 6% previously applied).

Total accumulated traffic reflected a year–on–year decrease of 2.5%, given that the growth in voice traffic (+2.7%), basically promoted by the good behavior of local Fixed–to–Fixed (+2.5%), International Long Distance (+30.2%) and incoming interconnection (+14.0%) traffic, was unable to offset the year–on–year drop in internet traffic (–39.7%) due to market orientation towards Broadband products.

Operating Expenses accumulated to September 2005 grew by 0.2% in local currency (vs. +1.2% in June 2005), basically as a result of greater commercial activity, that implied an increase in external services expenses of 5.8% in local currency. In the positive side, the drop in supply expenses is worth noting (–8.7%), mostly due to the lower interconnection costs as a result of less fixed–to–mobile traffic and the reduction on Fixed–to–Mobile interconnection rates. The reduction noted in bad debt provision (–47.5% year on year) is also worth noting, helped by the higher percentage of prepaid and consumption control lines in September 2005, compared with the same period of the previous year (58.2% at September end 2005 vs. 51.5% in September 2004).

Operating income before depreciation and amortization (OIBDA) amounted to 320.0 million euros, with a year–on–year drop of 1.2% in local currency (vs. -3.5% in June 2005), mostly due to the provision made for extraordinary contingencies, embargos and others. The OIBDA margin stood at 41.8% to improve the margin recorded in the first half of the year by 1.4 percentage points.

CapEx (83.1 million euros) recorded a year–on–year increase of 74.2%, due to a better accounting management of investments, the effect of which will be eased by the end of the year. As a result of the drop in OIBDA and the strong growth of CapEx, operating free cash flow (OIBDA - CapEx) fell by 13.9% in local currency.

As in previous quarters, the results from the first nine months of 2005 are shown in comparable terms with those corresponding to the same period of 2004 as a result of the change in the Telefónica Empresas América (TEA) consolidation perimeter to include TLD Puerto Rico operations and the new segmentation of business and wholesale clients at Telefónica Empresas Chile.

Revenues accumulated to September 2005 amounted to 444.8 million euros, a 15.0% growth (+8.2% in constant euros) in comparison with the same period in 2004. By product lines, Data and Internet services remained the highest contributors with a weight of over 62% of total revenues and a 12.1% increase in constant euros in comparison with the same period of the previous year. More than 50% of revenues from this caption came from Brazil. With regard to the other products lines, the good performance of International Services is also worth noting, with a year–on–year growth of around 14% in constant euros, primarily from higher revenues from T–Empresas USA, Colombia and Argentina.

The operating income before depreciation and amortization (OIBDA) accumulated by TEA to September 2005 amounted to 65.8 million euros, a 101.4% increase on 2004 (+80.6% in constant euros). The OIBDA margin stood at 14.8%, a 6.3 percentage point improvement. The CapEx recorded by TEA amounted to 36.1 million euros in September 2005, 14.7% up on that recorded in the same period of the previous year in constant euros, due mostly to the investment in equipment devoted to clients. Hence, the operating free cash flow (OIBDA - CapEx) exceeded the level reached in the same period of 2004 by more than four times (352.2% variation in constant euros) to stand at 29.6 million euros.

By country, Brazil recorded the greatest relative weight within the TEA Group (39% of revenues and 58% of OIBDA). By September 2005, its revenues totaled 173.5 million euros, with a 21.3% growth in local currency in relation to the September 2004 aggregate. The September OIBDA amounted to 42.1 million euros to record a 46.9% growth rate in local currency. As for the remaining operators concerned (Argentina, Chile and Peru), Telefónica Empresas Argentina recorded revenues of 53.2 million euros (+14.4% year–on–year in local currency), while Telefónica Empresas Chile became the second operator in the TEA Group in terms of revenues (87.4 million euros) and OIBDA (23.8 million euros). Telefónica Empresas Perú recorded year–on–year falls in both revenues (–1.3% in local currency to 46.5 million euros) and OIBDA (–7.9% in local currency to 7.2 million euros).

In other countries where Telefonica Group is not the incumbent operator (the US, Colombia and Mexico), it is worth noting the figures of T–Empresas USA, which recorded revenues of 51.3 million euros, which represents a 16.5% improvement in local currency in relation to the same period in 2004.

Revenues accumulated to September amounted to 134.0 million euros (+17.4% in current euros and +18.4% in constant euros). High growth rates were recorded in all lines of business, although revenues from the international IP service continued to contribute most to revenues (56%), with an 18.4% increase in constant euros. OIBDA recorded a year–on–year increase of 40.3% (+38.0% in constant euros) to total 41.5 million euros, improving the year–on–year margin as a percentage of revenues by 5.1 percentage points to reach 31.0%.