Press release

Telefónica is bringing banking services for the first time to some of the world's poorest citizens in Latin America.  A new mobile banking (m-banking) initiative, targeting the 175 million people in the region who have mobile phones but do not currently have banking access, will be delivered in partnership with the Inter-American Development Bank (IADB).  The project will launch from July 2008 and be rolled out across the region.

This announcement was made by Matthew Key, CEO of Telefónica Europe, as he joined other global industry leaders, senior figures from the United Nations and international politicians at the UN Millennium Development Goals Business 'Call to Action' event hosted by UK Prime Minister, Gordon Brown, in London today.  Mr Key also signed the Business Call to Action Declaration on behalf of Telefónica, which endorses the company as a supporter of the Development Goals and commits it to tangible development action alongside governments and other organisations.

"Building on a number of other major Telefónica initiatives aimed at reducing social and economic exclusion, the project's principal aim is to improve financial access in Latin American markets by providing an m-banking solution to some of the most vulnerable in society - those groups that do not currently have access to banks or financial services," said Matthew Key.

 Telefónica executive chairman, César Alierta, stated: "At Telefónica, we believe it is essential that our activities have a positive social and economic impact on communities where we are present.  We are passionately committed to ensuring that everyone can enjoy the benefits of information and communication technology.  Our goal is to break down barriers that may block access to ICT - be they economic, geographic or because of disability."

Telefónica currently offers mobile communications to more that 86% of the population in 13 Latin American countries and has driven mobile penetration in the region over the last few years.  Part of its commercial strategy has been to encourage take-up amongst lower socio-economic groups.  Proactively decreasing access impediments and entry barriers amongst excluded groups, particularly in rural communities, has been a key element of Telefónica's approach - with the result that mobile penetration is now around 70% in the Latin American countries where Telefónica operates, as compared to rates of only 45% two years ago.

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Note to Editors:
Latin America has one of the highest levels of social inequality anywhere in the world.  In Europe, the population density and level of economic development tends to ensure services are available in all areas.  But in Latin America, some social groups or rural areas have no access to technology.

At the moment, more than 65% of population in Latin America has no access to banking services, with limited chances of saving money or getting loans in the formal financial system. Telefónica's m-banking project is targeted at some of Latin America's poorest communities where financial illiteracy and unemployment are the highest. As mobile penetration is still relatively high within this segment, m-banking can provide a more effective and convenient way to manage financial resources and, particularly, electronic remittances (many such communities rely heavily upon financial resources sent back by family members working outside of the local area).

The penetration of banking accounts in most Latin American countries is also much lower due to the traditional size of the "informal economy", a general distrust in the banking system and the lack of affordable and convenient financial products for lower socio-economic segments. In addition, physical branches are often a rarity with penetration only around 20%- 30% in most Latin American countries.

Providing the poor with access to savings, credit, insurance and other financial services significantly improves their ability to overcome the numerous difficulties that they face in their everyday lives. Further economic opportunities derived from financial planning for the poor also include a surge in their business growth expectations, smoother consumption patterns, cash and goods savings avoidance and better overall preparedness in case of fatal natural disasters, death or loss. A number of research studies have shown that individuals and families with bank accounts perform economically better than those that do not have access to financial services. As income and savings increase, it makes individuals less vulnerable to financial crises and it enables them to shift from everyday life survival to mid- and long-term planning.

The same applies to those people who are unable to efficiently manage their income and assets. Making basic payments (like taxes), withdrawing cash or protecting savings from theft, devaluation or low yields can be painful just because they do not have access to proper financial services. These circumstances may appear mainly in rural areas, less developed urban zones and in places where the informal economy prevails.

About Telefónica
Telefónica is one of the world's largest telecommunications operators by market capitalisation. Its activities are centred mainly on the fixed and mobile telephony businesses, while its broadband business is the key growth driver underpinning both.

It operates in 24 countries and its customer base of approximately 230 million globally.  Telefónica's growth strategy is focused on the markets in which it has a strong foothold: Spain, Europe and Latin America.

Telefónica O2 Europe Contact:

David Nicholas
Director of Communications
Telefónica O2 Europe plc
david.nicholas@o2.com

t: +44 (0)771 575 9176

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