24th Jul 2006 11:52
Telefonica SA24 July 2006 TELEFONICA, S.A. and TELEFONICA MOVILES, S.A., as provided in article 82 ofthe Spanish Securities Market Act (Ley del Mercado de Valores), hereby reportsthe following SIGNIFICANT EVENT Pursuant to the provisions of the absorption Merger Plan of TELEFONICA MOVILES,S.A. (TELEFONICA MOVILES) by TELEFONICA, S.A. (TELEFONICA) and in accordancewith the resolutions passed at the General Shareholders' Meetings of bothcompanies held on June 20, 2006 and June 21, 2006, respectively, publication ishereby made of the rules and procedures for the exchange of shares of TELEFONICAMOVILES for shares of TELEFONICA, as well as for the exchange of AmericanDepositary Shares (ADSs) of TELEFONICA MOVILES. I. Rules and Procedure for the Exchange of Shares of TELEFONICA MOVILES forShares of TELEFONICA 1. Treasury Shares to be Delivered by TELEFONICA In order to satisfy the merger exchange, TELEFONICA will deliver treasury sharesto the shareholders of TELEFONICA MOVILES pursuant to the exchange ratio fixedin the Merger Plan of four (4) shares of TELEFONICA, each having a par value ofone (• 1) Euro, for every five (5) shares of TELEFONICA MOVILES, eachhaving a par value of fifty (• 0.50) Euro cents, without any additionalcash compensation. TELEFONICA will not issue any new shares for such purposeand, therefore, will not increase its share capital as a result of the merger. By application of the provisions of Section 249 of the Business Corporations Law(Ley de Sociedades Anonimas), shares of TELEFONICA MOVILES that are held byTELEFONICA MOVILES, TELEFONICA or other persons acting in their own name but onbehalf of these companies will not participate in the exchange and will becancelled and voided. Given that there are 4,025,120,881 shares of TELEFONICAMOVILES affected by these provisions and that the entirety of its capital stockis represented by 4,330,550,896 shares, the number of shares of TELEFONICAMOVILES that will be involved in the exchange is 305,430,015 shares, each havinga par value of fifty (• 0.50) Euro cents. Based on the foregoing,TELEFONICA will deliver a total of 244,344,012 treasury shares, each having apar value of one (• 1) Euro, to satisfy the merger exchange pursuant tothe exchange ratio mentioned above. Pursuant to the provisions of the Merger Plan and the resolutions adopted forsuch purpose at the General Shareholders' Meetings of TELEFONICA and TELEFONICAMOVILES, the exchange and delivery of TELEFONICA shares shall be performedautomatically in the manner set forth below. 2. Procedure for the Exchange 2.1. Award of Shares of TELEFONICA Those holders of TELEFONICA MOVILES shares that are recognized in the book-entryrecords of the Sociedad de Gestion de los Sistemas de Registro, Compensacion yLiquidacion de Valores, S.A.(Securities Registration, Clearing and LiquidationSystems Management Company) (IBERCLEAR) and entities participating therein onthe date of registration of the merger instrument with the Commercial Registryof Madrid shall have the right to receive TELEFONICA shares in accordance withthe exchange ratio established for the merger. It is expected that the merger instrument will be recorded with the CommercialRegistry of Madrid on July 29, 2006 and, once the one month period for theopposition of creditors has elapsed and the credits of those who opposed themerger, if any, have been guaranteed, Friday, July 28, 2006 (the Reference Date)will therefore be the last day of trading on the Spanish stock exchanges forshares of TELEFONICA MOVILES, which shares will be cancelled as a result of themerger. 2.2. Agent Entity The entities participating in the merger have named Banco Bilbao VizcayaArgentaria, S.A. (the Agent Entity) as the entity in charge of all agency dutiesrelating to the exchange, through which ownership of the TELEFONICA MOVILESshares must be substantiated in accordance with the relevant operative rules andthrough which the procedures, if any, appropriate for the best execution of theexchange must be handled. 2.3. Procedure for the Acquisition of Odd-Lots Pursuant to the provisions of the Merger Plan, shareholders holding shares thatrepresent a fraction of the number of TELEFONICA MOVILES shares set as theexchange ratio may acquire or transfer shares in order to exchange them inaccordance with such exchange ratio. Each shareholder must individually maketimely decisions for such purpose to either purchase or sell TELEFONICA MOVILESshares in the market in order to reach the number of TELEFONICA MOVILES sharesthat are a multiple of five (5). Without prejudice to the foregoing, and pursuant to the provisions of the MergerPlan, the companies participating in the merger have agreed to establish amechanism designed to facilitate the exchange with those TELEFONICA MOVILESshareholders who are holders of a number of shares that is not a multiple offive (5).A The basic terms and conditions of such mechanism are as follows: (i) Taking into account that the exchange ratio for the merger isequivalent, in unitary terms, to the delivery of one TELEFONICA for every 1.25shares of TELEFONICA MOVILES, as of the close of the last session for trading ofTELEFONICA MOVILES shares on the Spanish stock exchanges on the Reference Date,each shareholder of TELEFONICA MOVILES who, by application of such unitaryexchange ratio of one TELEFONICA share for every 1.25 TELEFONICA MOVILES shares,is entitled to receive a whole number of TELEFONICA shares, and who has anodd-lot residue of less than 1.25 TELEFONICA MOVILES shares, may transfer suchresidue to the Agent Entity, which will also act as the odd-lot agent(hereinafter, the Odd-Lot Agent), all with the understanding that for thecalculation of the odd-lot corresponding to each shareholder position, all ofthe TELEFONICA MOVILES shares forming such position will be included. Likewise,a TELEFONICA MOVILES shareholder who is the owner of less than 1.25 TELEFONICAMOVILES shares may transfer such shares to the Odd-Lot Agent.It shall be deemedthat each shareholder of TELEFONICA MOVILES accepts the odd-lot acquisitionsystem herein provided for, without having to remit instructions to the relevantIBERCLEAR-participant, which shall inform the shareholder of the results of thetransaction once it has been concluded. (ii) Given the agreed exchange ratio, it is hereby noted for therecord that, regardless of the number of shares comprising each shareholder'position, the only circumstances under which the acquisition of odd-lots maytake place are the following: Number of Telefonica Moviles Corresponding Telefonica Odd-lot shares of Telefonica shares shares by virtue of the Moviles subject to the odd-lot exchange acquisition system 1 0 1 2 1 0.75 3 2 0.50 4 3 0.25 5 4 0 Therefore, in any shareholder position, an odd-lot will range between a minimumof 0.25 TELEFONICA MOVILES shares and a maximum of 1 TELEFONICA MOVILES share. (iii) The acquisition price of the odd-lots will be determined based onthe arithmetical mean of the average weighted price of TELEFONICA MOVILES shareson the Automated Quotation System (Sistema de Interconexion Bursatil)(Continuous Market) for the last three trading sessions for TELEFONICA MOVILESstock on the Spanish stock exchanges (which is expected to be the 26th, 27th and28th days of July, 2006). If the odd-lot in question is one share of TELEFONICAMOVILES, its acquisition price shall be the arithmetical mean of the averageweighted price of TELEFONICA MOVILES shares for the last three trading sessionsfor TELEFONICA MOVILES; similarly, if the odd-lot in question is other than oneshare, its acquisition price shall be calculated based on the same criterion setforth herein, but in a proportion corresponding to the specific amount of theodd-lot. (iv) The Odd-Lot Agent, acting on its own behalf, will acquire theodd-lot shares remaining in the positions existing at the close of the tradingsession for TELEFONICA MOVILES on the Reference Date.The shares or fractionalshares of TELEFONICA MOVILES acquired by the Odd-Lot Agent shall be exchangedfor the corresponding number of TELEFONICA shares as provided in the MergerPlan. 2.4. Performance of the Exchange It is expected that, upon completion of the trading session on the ReferenceDate, and after the acquisition of odd-lots by the Odd-Lot Agent, the exchangeof TELEFONICA MOVILES shares for TELEFONICA shares will be carried out after theregistration of the merger with the Commercial Registry of Madrid (expected tooccur on July 29, 2006). The exchange will be carried out through entities participating in IBERCLEARthat are depositaries of TELEFONICA MOVILES shares, in accordance with theprocedures established for the book-entry system, pursuant to the provisions ofRoyal Decree 116/1992, of February 14 and, to the extent applicable, theprovisions of Section 59 of the Business Corporations Law.A It is expected that on Monday, July 31, 2006, the beneficiaries of the exchangewill have possession of the TELEFONICA shares delivered in the exchange, afterthe performance by IBERCLEAR of settlements that are customary in these types oftransactions. II. Rules and Procedure for the Exchange of American Depositary Shares (ADSs)and Delisting of the TELEFONICA MOVILES ADSs from the New York Stock Exchange. As a result of the merger, the holders of TELEFONICA MOVILES ADSs will receivefour (4) ADSs of TELEFONICA for every fifteen (15) ADSs of TELEFONICA MOVILESthat they hold (or one (1) full TELEFONICA ADSs for every three pointseventy-five (3.75) TELEFONICA MOVILES ADSs surrendered). The entities participating in the merger have instructed Citibank, N.A. as theentity in charge of performing all the duties to execute the exchange in theUnited States with respect to TELEFONICA MOVILES ADSs through which ownership ofthe TELEFONICA MOVILES ADSs must be substantiated and through which theprocedures, if any, appropriate for the execution of the exchange must behandled. Furthermore, the holders of TELEFONICA MOVILES ADSs who are the holders of anumber of ADSs that is not a multiple of fifteen (15) or three pointseventy-five (3.75) will receive a cash payment (Cash-in-Lieu Payment) throughCitibank, N.A. corresponding to the net cash proceeds from the sale offractional entitlements to TELEFONICA ADSs. As stated above, it is expected that, insofar as the last day for trading on theSpanish Stock Exchanges of the TELEFONICA MOVILES shares is July 28, 2006 andinsofar as the merger instrument is registered with the Commercial Registry ofMadrid on July 29, 2006, the last day for trading of the TELEFONICA MOVILES ADSson the New York Stock Exchange is expected to be Friday, July 28, 2006. In accordance with the above, it is also expected that, beginning on Monday,July 31, 2006, holders of TELEFONICA MOVILES ADSs through The Depository TrustCompany (DTC) that are beneficiaries of the exchange will receive the TELEFONICAADSs delivered in the exchange, within the following two days, subject to theperformance of settlements that are customary in these types oftransactions.Holders of TELEFONICA MOVILES ADSs registered in their own namewill have the ability to present the American Depositary Receipts evidencingtheir TELEFONICA MOVILES ADSs on and after July 29, 2006 and for a period of sixmonths, after which the TELEFONICA MOVILES ADR facility will be terminated andthe TELEFONICA ADSs being held by Citibank as depositary for the TELEFONICAMOVILES ADSs will be sold. After the sale, persons presenting TELEFONICA MOVILESAmerican Depositary Receipts to Citibank will be entitled to the net cashproceeds resulting from the sale of the applicable TELEFONICA ADSs (subject tothe applicable escheatment laws in the U.S.A.). Finally, a request for deregistering the securities issued by TELEFONICA MOVILESwill be filed with the Securities and Exchange Commission, after which theobligations to provide information to this entity under the Securities ExchangeAct of 1934 shall cease. In Madrid, July 24th, 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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