Possible divestiture in Atento

TELEFÓNICA, S.A., ("TELEFÓNICA") as provided in article 82 of the Spanish Stock Market Act (Ley del Mercado de Valores), hereby reports the following

SIGNIFICANT EVENT

TELEFÓNICA announces that it is considering a possible divestiture in its subsidiary Atento Inversiones y Teleservicios, S.A.U.,contemplating, among other alternatives, a potential public offering of shares of that company.

Madrid, February 24th, 2011

"This Current Report does not constitute an offer to sell or solicitation of offers to buy securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which, or to any persons to whom, such an offer, solicitation or sale is unlawful. The information contained in this Current Report is being disclosed in accordance with Rule 135c under the U.S. Securities Act of 1933, as amended (the "Securities Act"), for securities which have not been, and will not be, registered under the Securities Act or the laws of any state, and may not be offered or sold in the United States, absent registration or an exemption from registration under such laws."