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Major Spanish Cable Franchises Awarded to CyC

Madrid, Spain -- The three most desirable cable franchises
in Spain, covering the capital city here, have been awarded to CyC Telecomunicaciones
Madrid, a consortium that has become a major MSO competing with Cableuropa.

The licenses were hotly contested because of their value.

"Madrid makes up 30 percent of the telecommunications
market of Spain," said an analyst. According to industry forecasts, in 10 years'
time, 31 percent of Madrid's 4.5 million people will subscribe to cable and use cable

Cableuropa led another consortium with SpainCom and France
Telecom that also bid for

Madrid's licenses, and it has secured several other
franchises passing 3 million households.

CyC will invest 236 million pesetas ($1.5 million) in the
next 10 years to pass 2.6 million households with optical fiber and digital systems.
CyC's partners are Union Fenosa (24.25 percent), Endesa (23.25 percent), Italian Stet
(23 percent), Cable Total (15 percent), Argentina's Supercanal (7.5 percent) and
Ineuropa (7 percent).

CyC is getting ready to compete next year with Telefónica
Cable Madrid, a company recently created by telco Telefónica (formerly known as
Telefónica de España), which will

operate the cable market in Madrid. Telefónica next year
will be permitted to operate a competing cable franchise in every area separate from the
awarded franchises, but the cable players insisted that they'll have a significant
jump on the dominant telco.

"We will offer television, telephone and multimedia
services to 150,000 households in September," said a source from CyC.

Stet is also a shareholder in Retevision,
Telefónica's competitor in basic telephony. That will enable CyC to offer to
subscribers telephone services with an average price 14 percent lower than

The Latin American market is one of CyC's targets, for
which it will create an audiovisual center to produce channels, both for Spain and Latin
America. "Some of our channels will be distributed in that market, where our partner,
Supercanal de Cable, is already introduced," said a source from CyC.

Telefónica, preparing for the competition and seeking
further expansion, has signed an international alliance with WorldCom and MCI
Communications Corp., and it has a new partnership agreement with Portugal Telecom for
business opportunities in new areas, such as Morocco.

PT will likely get 5 percent of Telefónica Internacional
S.A. (TISA), Telefónica's international unit, which plans to issue stock to the
public. PT already holds 1.5 percent of Telefónica, while Telefónica holds 3.5 percent
of PT, and it might increase its ownership to 5 percent. PT vice president Hugo Correia
will become advisor to Telefónica.

Moreover, PT might participate in recently formed alliance
Telefónica Panamericana MCI. The closer link between Telefónica and PT will address the
Brazilian market's privatization. Telefónica manages a regional operator in Brazil.

British Telecommunications plc, which ended its ties with
Telefónica, holds 1.5 percent in PT, and it is also interested in the Brazilian market.
"It seems that Telefónica is trying to get PT's support and change its mind
about considering an alliance with BT in Latin America," said an industry analyst.

"We will create a consortium with PT and MCI to
increase our business in the Brazilian market," said Juan Perea, TISA's head,
who highlighted the intention to also invest in the U.S. Hispanic market through the
company's alliance with WorldCom and MCI.