Relationship with the external auditor

The minimum responsibilities of the Audit and Control Committee include that of putting forward proposals to the Board of Directors for submission to the General Shareholders Meeting regarding the appointment of the Auditors referred to in Section 264 of the Companies Act (Ley de Sociedades de Capital), the terms under which they are hired, the scope of their professional remit, and the termination or renewal of their appointment. Likewise, the Committee must liaise with the Auditors in order to receive information on any issues that might threaten the latter's independence, and any others connected with the auditing procedure, and to receive information and to maintain with the Auditors the communications envisaged in audit legislation and in the technical auditing regulations.

In this manner, the Board of Directors establishes through the Audit and Control Commission a stable and professional relationship with the Company's Accounts Auditor, strictly respecting his independent nature.

In addition, and in compliance with the requirements established by the US Securities and Exchange Commission in implementation of the Sarbanes-Oxley Act, Telefónica's Audit and Control Committee approved an internal regulation to submit the provision of any type of service by the Company's external auditors to the Commission for approval.

Auditors' compensation

The fees paid to the various member firms of the Ernst & Young international organization, to which Ernst & Young, S.L. (the auditors of the Telefónica Group) belongs, amounted to 27.71 Million Euros in 2010.

The breakdown of this amount is the following:

	€ million
Ernst&Young's fees include amounts in respect of fully and proportionately consolidated Telefónica Group companies. In 2010 a total of 0.04 million euros, corresponding to 50% of the fees by proportionately consolidated companies was included.
Audit services	25.75
Audit-related services	1.92
Tax services	0.03
Other non-audit work	0.01
Total	27.71

Fees paid to other Auditors in 2010 amounted to 28.10 Million Euros as follows:

	€ million
Other auditors' fees include amounts paid in respect of fully and proportionately consolidated Telefónica Group companies. In 2010 a total of 0.02 million euros, corresponding to 50% of the fees paid by proportionately consolidated companies was included. The amounts disclosed above for 2010 included the fees of Ernts&Young and other auditors in respect of 100% of the consolidated Vivo Group, as this was a controlled interest at year end.
Audit services	0.75
Audit-related services	1.26
Tax services	7.29
Other non-audit work	18.80
Total	28.10

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