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UNITED
      STATESSECURITIES
      AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM
      20-F



|(Mark One) |  |                                                                                                         
|---------- |  | --------------------------------------------------------------------------------------------------------
| ̈          |  | REGISTRATION
          STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|           |  |                                                                                                         
|           |  | OR                                                                                                      
|           |  |                                                                                                         
|x          |  | ANNUAL REPORT
          PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|           |  | For
          the fiscal year ended: December 31, 2004                                                  
|           |  |                                                                                                         
|           |  | OR                                                                                                      
|           |  |                                                                                                         
| ̈          |  | TRANSITION
          REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|           |  | For the transition period
    from  to                                                                  

Commission
      file number: 001-14404

TELEFÓNICA DEL PERÚ S.A.A.(Exact name of Registrant as specified
      in its charter)Telefónica of Peru(Translation of Registrants name
      into English)Republic of Perú(Jurisdiction of incorporation or organization)Avenida Arequipa 1155Santa Beatriz, LimaPerú(Address of principal executive offices)


Securities
registered or to be registered pursuant to Section 12(b) of the Act: None

Securities
      registered or to be registered pursuant to Section 12(g) of the Act:

|                                                        
|--------------------------------------------------------
|Title of class                                          
|                                                        
|Class B Shares, nominal
          par value S/.1.25 each

Securities
      for which there is a reporting obligation pursuant to Section 15(d)
    of the Act: None

The
    number of issued shares of each class of stock of Telefónica del Perú as of December
    31, 2003 was:

|                                                      |  |              
|----------------------------------------------------- |  | -------------
|Class
          A-1 Shares, nominal par value S/.1.25 |  | 669,762,378  
|Class
          B Shares, nominal par value S/.1.25   |  | 1,051,925,807
|Class
          C Shares, nominal par value S/.1.25   |  | 276,232      

Indicate
    by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13
    or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
    period that the Registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

Yes  x    No ̈

Indicate
    by check mark which financial statement item the Registrant has elected to follow.

Item
    17 ̈Item
    18  x

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TABLE OF CONTENTS

|                                      |                                                                              | Page
|------------------------------------- | ---------------------------------------------------------------------------- | ----
|                                      |                                                                              |     
|CERTAIN TERMS AND CONVENTIONS         | 1                                                                           
|PRESENTATION OF FINANCIAL INFORMATION | 1                                                                           
|FORWARD LOOKING STATEMENTS            | 1                                                                           
|PART I                                |                                                                              | 3   
|Item 1.                               | Identity of Directors, Senior Management and Advisers                        | 3   
|Item 2.                               | Offer Statistics and Expected Timetable                                      | 3   
|Item 3.                               | Key Information                                                              | 3   
|Item 4.                               | Information on the Company                                                   | 11  
|Item 5.                               | Operating and Financial Review and Prospects                                 | 37  
|Item 6.                               | Directors, Senior Management and Employees                                   | 61  
|Item 7.                               | Major Shareholders and Related Party Transactions                            | 67  
|Item 8.                               | Financial Information                                                        | 71  
|Item 9.                               | The Offer and Listing                                                        | 73  
|Item 10.                              | Additional Information                                                       | 77  
|Item 11.                              | Quantitative and Qualitative Disclosures About Market Risk                   | 86  
|Item 12.                              | Description of Securities Other Than Equity Securities                       | 88  
|PART II                               |                                                                              | 89  
|Item 13.                              | Defaults, Dividend Arrearages and Delinquencies                              | 89  
|Item 14.                              | Material Modifications to the Rights of Security Holders and Use of Proceeds | 89  
|Item 15.                              | Disclosure Controls and Procedures                                           | 89  
|Item 16A.                             | Audit Committee Financial Expert                                             | 89  
|Item 16B.                             | Code of Ethics                                                               | 89  
|Item 16C.                             | Principal Accountant Fees and Services                                       | 89  
|Item 16D.                             | Exemptions from the Listing Standards for Audit Committees                   | 90  
|Item 16E.                             | Purchases of Equity Securities by Issuer and Affiliated
    Purchasers       | 91  
|PART III                              |                                                                              | 92  
|Item 17.                              | Financial Statements                                                         | 92  
|Item 18.                              | Financial Statements                                                         | 92  
|Item 19.                              | Exhibits                                                                     | 92  

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CERTAIN TERMS AND CONVENTIONS

Our common shares, nominal value of one nuevo sol and twenty five cents each, are currently listed on the Lima stock exchange under the symbol TELEFBC1. American Depositary Shares,
or ADSs, each representing the right to receive ten shares, were delisted from the New York Stock Exchange (NYSE) on March 1, 2004. Our ADS depositary program was cancelled in February 2004 and ADS holders were entitled to receive the
underlying Class B shares.

As used herein:

Telefónica del Perú or Company and terms such as we, us and our mean Telefónica del Perú S.A.A. and its
consolidated subsidiaries and its predecessors unless the context otherwise requires.

Telefónica means Telefónica, S.A., a majority shareholder of Telefónica del Perú.

Telefónica Internacional means Telefónica Internacional, S.A., a subsidiary of Telefónica and a controlling shareholder of Telefónica del Perú,
and its consolidated subsidiaries.

PRESENTATION OF FINANCIAL INFORMATION

Our audited consolidated financial statements as of December 31, 2004, 2003, and 2002, and the notes thereto (the Consolidated Annual Financial Statements) are included elsewhere in
this annual report on Form 20-F (the Annual Report).

Medina, Zaldívar y Asociados, the then member firm of Arthur Andersen, was engaged as our independent financial auditors for the fiscal years ended December 31, 2000 and 2001. Our
financial statements for the fiscal years ended December 31, 2002, 2003 and 2004 were audited by Gris Hernandez y Asociados, member firm of Deloitte Touche LLP, and are included elsewhere in this Annual Report.

We publish our financial statements in Peruvian nuevos soles. In this Annual Report, references to dollars, U.S.$ or $ are to United States dollars,
references to nuevo sol, nuevos soles and S/. are to Peruvian nuevos soles and references to € are to euros. For the convenience of the reader, this Annual Report contains conversions of nuevos
soles amounts into dollars at specified rates. These conversions should not be construed as representations that the nuevos soles amounts actually represent such dollar amounts or can be converted into dollars at the rate indicated. Unless otherwise
stated, the exchange rate used to convert foreign currency amounts on our financial statements into nuevos soles was the SBS (Superintendencia de Banca y Seguros) Exchange Rate
as of each relevant date or period end. See Item 3: Key InformationExchange Rate Information.

FORWARD LOOKING STATEMENTS

This Annual Report contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Some of these forward-looking statements
include forward-looking terms such as anticipates, believes, could, estimates, expects, foresees, intends, may or should, or similar
expressions or the negatives thereof or other variations on these expressions, or similar terminology, or discussions of strategy, plans or intentions. These statements appear in a number of places in this Annual Report and include, but are not
limited to, statements regarding our intent, belief or current expectations with respect to:

- expected revenues, capital expenditures, future cash flows and financing requirements;
- economic and political developments in Perú (including shifts in the economic and regulatory policies);
- the effect of inflation and devaluation of the nuevos soles on our financial condition and results of operations;
- the implementation of our business strategy;

1

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- changes in rates, tariffs and the regulatory scheme;
- new services and expected demand for such services;
- our strategy and the effect of the liberalization of the Peruvian telecommunications industry;
- the impact of actions taken by our competitors and other third parties, including courts and other governmental authorities;
- the factors discussed under the section entitled Risk Factors in this Annual Report; and
- other statements contained in this Annual Report regarding matters that are not historical facts.

Forward-looking statements are only our current expectations and are based on our managements beliefs and assumptions and on information currently available to our management. Such
statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including but not limited to:

- economic and political instability of Perú;
- changes in inflation;
- depreciation and volatility of the Peruvian nuevos soles;
- changes in financial and telecommunications regulation;
- modification of our concessions to provide telecommunications services;
- our ability to successfully restructure our indebtedness or refinance our financial obligations when they become due;
- changes in technology;
- changes in the competitive environment; and
- changes in labor legislation.

Some of these factors are discussed in more detail in this Annual Report, including under Item 3: Key InformationRisk Factors, Item 4: Information on the Company
and Item 5: Operating and Financial Review and Prospects. If one or more of these risks or uncertainties affect us in the future, or if underlying assumptions are incorrect, actual results may vary materially from those described in this
Annual Report. We do not undertake to update any industry information or forward-looking statements set out in this Annual Report in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

2

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A.   Selected Financial Data

The following tables set forth our selected consolidated financial and operating information for the fiscal years ended December 31, 2004, 2003, 2002, 2001 and 2000, and should be read in
conjunction with, and are qualified in their entirety by reference to, our Consolidated Annual Financial Statements and Item 5: Operating and Financial Review and Prospects included elsewhere in this Annual Report.

We maintain our financial books and records and publish our financial statement in nuevos soles and prepare our financial statements to conform to generally accepted accounting principles in
Perú, which are based on the International Accounting Standards (IAS) authorized by theConsejo Normativo de Contabilidad(CNC) or the Accounting Council.
This Annual Report sometimes refers to those accounting principles as Peruvian GAAP. Peruvian GAAP differs in some respects from generally accepted accounting principles in the United States (U.S. GAAP). Note 35 to our
Consolidated Annual Financial Statements provides a description of the principal differences between Peruvian GAAP and U.S. GAAP as they relate to us, including a reconciliation of such differences on net income and total shareholders equity.

In January 2006, we will begin following the International Financial Reporting Standards (IFRS) 1 to 5 and the new versions of the International Accounting Standards (IAS), pursuant to
Resolution No. 034-2005-EF/93.01 of the CNC. The applications of these standards will affect the financial statements under Peruvian GAAP without impacting current or future financial statements under U.S. GAAP.

Due to reorganization transactions that occurred during 2000 (see Item 4: Information on the CompanyHistory and Development of the CompanyExchange Offers and Reorganization
Transactions), the selected financial data included in the table below provides income statement figures for 2000, which have been restated since the Annual Report for the 2001 fiscal year to show only continuing operations. The income
statement figures for 2001, 2002, 2003 and 2004 fully relate to continuing operations. The balance sheet figures were not restated.

In 1989, the CNC approved the inclusion of the impact of inflation in a Peruvian companys financial statements by adjusting the value of its non-monetary assets and liabilities by a
factor that equals the inflation rate as calculated by the national wholesale price index (National Wholesale Price Index) published by the National Institute of Statistics and Information. The net result of the adjustment is reflected
in the Gain (loss) from exposure to inflation/deflation item of the income statement. See note 5(a) to our Consolidated Annual Financial Statements. Peruvian GAAP also requires restatement of all financial statements to constant nuevos
soles, and, accordingly, all information in the Consolidated Annual Financial Statements and in the selected financial data set forth below has been restated in constant nuevos soles as of December 31, 2004. The effect of inflation accounting under
Peruvian GAAP has not been reversed in the reconciliation to U.S. GAAP. See notes 5 and 35 to our Consolidated Annual Financial Statements. Pursuant to CNCs resolution No. 031-2204-EF/93.01 dated May 11, 2004 and Law. No. 28394 dated November
22, 2004, the inflation adjustment requirement was suspended as of the 2005 fiscal year for both accounting and tax purposes. Both of these regulations provide that the adjusted inflation balances as of December 31, 2004 shall be deemed the
historical initial balances as of January 1, 2005.

3

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|                                      | As of the year ended December 31,                                              |                                                                       
|------------------------------------- | ------------------------------------------------------------------------------ | ----------------------------------------------------------------------
|                                      |                                                                                |                                                                       
|                                      | 2000                                                                           |                                                                       
|                                      |                                                                                |                                                                       
|                                      | (thousands of constant nuevos soles, except
    per share and per ADS amounts) | (thousands of U.S. dollars(1),
  except per share and per ADS amounts)
|                                      |                                                                                |                                                                       
|INCOME STATEMENT DATA                 |                                                                                |                                                                       
|Amounts in accordance with            |                                                                                |                                                                       
|Peruvian GAAP (continuing             |                                                                                |                                                                       
|operations unless otherwise noted):   |                                                                                |                                                                       
|Fixed local telephone services(2)     | 1,745,009                                                                      |                                                                       
|International long distance telephone |                                                                                |                                                                       
|services                              | 384,833                                                                        |                                                                       
|Domestic long distance telephone      |                                                                                |                                                                       
|services                              | 348,318                                                                        |                                                                       
|Public and rural telephone services   | 713,271                                                                        |                                                                       
|Interconnection with other operators  | 37,405                                                                         |                                                                       
|Business communications(3)            | 268,646                                                                        |                                                                       
|Cable television(4)                   | 269,137                                                                        |                                                                       
|Telephone directory advertising       | 104,480                                                                        |                                                                       
|Others                                | 174,469                                                                        |                                                                       
|                                      |                                                                                |                                                                       
|Total operating revenues:             | 4,045,568                                                                      |                                                                       
|                                      |                                                                                |                                                                       
|General and administrative            | 923,827                                                                        |                                                                       
|Personnel                             | 582,619                                                                        |                                                                       
|Depreciation                          | 778,852                                                                        |                                                                       
|Amortization                          | 121,954                                                                        |                                                                       
|Technology transfer and Management    |                                                                                |                                                                       
|fee(5)                                | 295,142                                                                        |                                                                       
|Materials and supplies                | 57,480                                                                         |                                                                       
|Shared service center expenses        |                                                                               |                                                                       
|Provision for impairment of assets    | 88,565                                                                         |                                                                       
|Capitalization of costs for telephone |                                                                                |                                                                       
|plant construction                    | (166,521                                                                       | )                                                                     
|                                      |                                                                                |                                                                       
|Total operating expenses              | 2,681,918                                                                      |                                                                       
|                                      |                                                                                |                                                                       
|Operating income                      | 1,363,650                                                                      |                                                                       
|                                      |                                                                                |                                                                       
|Interest income                       | 36,200                                                                         |                                                                       
|Interest expense                      | (355,295                                                                       | )                                                                     
|Other expenses, net                   | (337,135                                                                       | )                                                                     
|                                      |                                                                                |                                                                       
|Other income (expenses)               | (656,230                                                                       | )                                                                     
|                                      |                                                                                |                                                                       
|Gain (loss) from exposure to          |                                                                                |                                                                       
|inflation/deflation(6)                | 141,060                                                                        |                                                                       
|Income before workers profit sharing |                                                                                |                                                                       
|and income tax                        | 848,480                                                                        |                                                                       
|Workers profit sharing               | (123,363                                                                       | )                                                                     
|Income tax                            | (332,297                                                                       | )                                                                     
|                                      |                                                                                |                                                                       
|Net income (loss):                    | 392,820                                                                        |                                                                       
|                                      |                                                                                |                                                                       
|Net income (loss) per share           | 0.187                                                                          |                                                                       
|Net income (loss) per ADS(7)          | 1.866                                                                          |                                                                       
|Dividends per share(8)(9)             | 0.059                                                                          |                                                                       
|Dividends per ADS(7)(8)(9)            | 0.0588                                                                         |                                                                       
|Weighted average number of shares     |                                                                                |                                                                       
|outstanding (millions)                | 2.105                                                                          |                                                                       
|Amounts in accordance with U.S.       |                                                                                |                                                                       
|GAAP(10):                             |                                                                                |                                                                       
|Operating income                      |                                                                                |                                                                       
|From continuing operations            | 811,652                                                                        |                                                                       
|From discontinued operations          | 73,325                                                                         |                                                                       
|                                      |                                                                                |                                                                       
|Total                                 | 884,977                                                                        |                                                                       
|Net income (loss)                     |                                                                                |                                                                       
|From continuing operations            | 299,051                                                                        |                                                                       
|From discontinued operations          | 73,743                                                                         |                                                                       
|                                      |                                                                                |                                                                       
|Total                                 | 372,794                                                                        |                                                                       
|Net income (loss) per share           |                                                                                |                                                                       
|From continuing operations            | 0.141                                                                          |                                                                       

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|                                   | As of the year ended December 31,                                                    |                                                                           
|---------------------------------- | ------------------------------------------------------------------------------------ | --------------------------------------------------------------------------
|                                   |                                                                                      |                                                                           
|                                   | 2000                                                                                 |                                                                           
|                                   |                                                                                      |                                                                           
|                                   | (thousands of constant
          nuevos soles, except per share and per ADS amounts) | (thousands of U.S. dollars(1),
      except per share and per ADS amounts)
|                                   |                                                                                      |                                                                           
|From discontinued operations       | 0.035                                                                                |                                                                           
|                                   |                                                                                      |                                                                           
|Total                              | 0.176                                                                                |                                                                           
|Net income (loss) per ADS          |                                                                                      |                                                                           
|From continuing operations(7)      | 1.423                                                                                |                                                                           
|From discontinued operations(7)    | 0.340                                                                                |                                                                           
|                                   |                                                                                      |                                                                           
|Total                              | 1.763                                                                                |                                                                           
|BALANCE SHEET DATA                 |                                                                                      |                                                                           
|Amounts in accordance with         |                                                                                      |                                                                           
|Peruvian GAAP(11):                 |                                                                                      |                                                                           
|Cash and banks                     | 94,073                                                                               |                                                                           
|Property, plant and equipment, net | 9,384,861                                                                            |                                                                           
|Total assets                       | 12,194,651                                                                           |                                                                           
|Long-term debt(12)                 | 1,867,374                                                                            |                                                                           
|Total shareholders equity         | 5,148,195                                                                            |                                                                           
|Amounts in accordance with U.S.    |                                                                                      |                                                                           
|GAAP(10)(11):                      |                                                                                      |                                                                           
|Property, plant and equipment, net | 9,877,295                                                                            |                                                                           
|Total assets                       | 12,294,893                                                                           |                                                                           
|Long-term debt(13)                 | 2,076,038                                                                            |                                                                           
|Total shareholders equity         | 4,725,858                                                                            |                                                                           

|    
|----
|(1) 
|    
|(2) 
|    
|(3) 
|    
|(4) 
|    
|(5) 
|    
|(6) 
|    
|(7) 
|    
|(8) 
|    
|(9) 
|    
|(10)
|    
|(11)
|    
|(12)

5

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|(13) | Includes bonds, but excludes current portion of long-term debt and short-term bank loans. Certain long-term debts reflected in prior years have been written off and reflected as income under U.S. GAAP. See note 35 to the
Consolidated Annual Financial Statements.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Exchange Rate Information

The following table shows, for the periods indicated, certain information regarding the exchange rates for U.S. dollars expressed in nominal nuevos soles per dollar. On June 22, 2005, the nuevo
sol/U.S. dollar exchange rate was S/.3.253 to U.S.$1.00. See Item 10: Additional InformationExchange Controls.

|Exchange Rates |        
|-------------- | -------
|               |        
|Year           | High(1)
|               |        
|2000           | 3.548  
|2001           | 3.631  
|2002           | 3.652  
|2003           | 3.509  
|2004           | 3.506  
|               |        
|Month          | High(4)
|               |        
|December 2004  | 3.303  
|January 2005   | 3.287  
|February 2005  | 3.264  
|March 2005     | 3.263  
|April 2005     | 3.262  
|May 2005       | 3.263  

|   
|---
|(1)
|   
|(2)
|   
|(3)
|   
|(4)
|   
|(5)
|   

|B. | Capitalization and Indebtedness          
|-- | -----------------------------------------
|   |                                          
|   | Not applicable.                          
|   |                                          
|C. | Reasons for the Offer and Use of Proceeds
|   |                                          
|   | Not applicable.                          
|   |                                          
|D. | Risk Factors                             

You should carefully consider the risks and uncertainties described below and the other information in this Annual Report before making an investment in our Company. The risks described
below are not the only ones facing our Company or investments in Perú in general. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. There are a number of factors,
including those described below, which may adversely affect the price of our shares. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. See Forward-Looking Statements.

Risk Factors Related to Telefónica del Perú

Changes in the regulations affecting Perús telecommunications industry and the liberalization of Perús telecommunications market have had and may continue to have a
material adverse effect on our results of operations.

6

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Since 1998, the Peruvian government has issued a number of decrees opening the telecommunications markets to increased competition. As a result, new operators have entered the markets we
compete in. As of February 2005, 74 concessions had been granted for fixed local and domestic and international long distance services. Our main competitor in fixed local telephony services and public telephone services is Telmex Perú; and in
long distance telephony services, Americatel Perú, Telmex Perú and IDT. We also face direct competition in cable television services from Cable Express. Operators of data transmission networks and other companies providing wireless
services (including companies spun off from us in the reorganization transactions) could become indirect competitors if and to the extent those services become substitutes for fixed wireline telephony. We expect that future competition is likely to
develop within a small number of operators, each of whom will gain an increasing market share.

Increased competition has adversely affected our results of operations in long distance services. This has caused our revenues from international long distance to decrease by 37.1% in 2004
compared to 2003, and our revenues from domestic long distance to increase only 2.4% in 2004 compared to 2003. Contributing to this trend were changes in net settlement revenues, which comprise approximately 12% of international long distance
revenues. Net settlement revenues have declined over the years due to increased competition among international carriers and private operators, which has led to a decrease in contractually negotiated average settlement rates. Our net settlement
revenues will continue to decrease to the extent that our settlement rates for incoming international long distance traffic continue to decline due to competition. Furthermore, the launch of a new multi-carrier system in April 2002,
which allows customers to choose their long distance carrier on a per-call basis, has also significantly intensified competition in both domestic and international long distance services. We believe that our revenues from these long distance
services will continue to decline due to increased competition from the multi-carrier system and we cannot assure you that we will be successful in restoring our levels of incoming traffic or maintaining our market share in this market.

We expect that competition will have a greater impact on our fixed local telephony business in the near future, in light of the new regulation in effect that has increased competition in the
fixed local telephony market by introducing an interoperability system whereby other operators are permitted to access our fixed local network in order to provide service through prepaid phone cards. The interoperability system creates
price competition and decreases our market share and customer base. In addition, we also expect increased competition from providers of prepaid mobile cellular telephone services, which have been popular in other countries. This may have an adverse
effect on our telephone services market share as more customers switch to mobile only service.

In light of the range of regulatory, political and economic uncertainties, it is difficult for us to predict how our market share in the relevant customer segments will be affected, how the
prevailing prices for services will change, or what effects future competition may have on our operations. We cannot assure you that the recent regulatory changes will not increase competition further and, as a result, adversely affect our results
of operations and market share.

Our State Contracts require us to make ongoing rate reductions
      which adversely affect our financial results.


We provide telecommunications
      services in Perú pursuant to concessions granted by the Peruvian government through concessions contracts (the State Contracts).
      Under the terms of the State Contracts, we currently are and will continue to be subject to tariff
      regulation and oversight by theOrganismo Supervisor de la
      Inversión Privada en Telecomunicaciones(OSIPTEL).

Pursuant to the State Contracts, as of September 2001, a price cap system came into effect aimed at decreasing fixed local telephony and long distance rates. Under the price cap system, OSIPTEL
sets maximum rates for local and long distance telephone services on the basis of a specified formula that takes into account, among other things, inflation and a productivity factor. The productivity factor is revised and published by
OSIPTEL every three years. Under the price cap system, we are allowed to increase rates to account for inflation as determined by the Peruvian equivalent of the U.S. Consumer Price Index (CPI), but we must also decrease rates according
to a productivity factor, which is a measure of the gains in productivity of our Company relative to the gains in productivity of the rest of the Peruvian economy. In July 2001, OSIPTEL set the value of the productivity factor at (6%) annually,
equivalent to (1.535%) quarterly. In July 2004, OSIPTEL set the new value of the productivity factor for the period September 2004 to August 2007 at (10.07%) annually, or (2.619%) quarterly, the highest for

7

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comparable services worldwide for fixed local service, and (7.8%) annually, or (2.010%) quarterly, for domestic and international long distance services.

We focus on increases in the amount of traffic over our network and in efficiency gains in our business to offset the rate decreases. However, our efforts to control operating costs, improve
productivity and increase the volume of traffic over our network may not offset, in whole or in part, the decline in operating margins that may result from ongoing rate reductions. Future changes to the regulatory framework, which remains out of our
control, may have a material adverse effect on our business, financial condition or results of operations.

The interests of our affiliates, as our equity owners and creditors,
      may conflict with the interests of our minority shareholders.


The Spanish telecommunications
      and media company, Telefónica, directly and through its wholly-owned subsidiaries Telefónica Internacional and Telefónica Perú Holding
S.A.C., beneficially owns 98.2% of our capital stock and, therefore, controls us and can determine the outcome of any action requiring shareholder approval. Actions within the control of Telefónica and its affiliates include the election of
our board of directors and, subject to the requirements of Peruvian laws, the payment of dividends. Our day-to-day management and operations are the responsibility of Telefónica Internacional, as the operator under a management contract
entered into between us and Telefónica Internacional in 1994. Affiliates of Telefónica are also involved in other joint and separate investments and operations in the Peruvian communications and media sector, some of which may involve
or affect us. The interest of Telefónica as our controlling shareholder may conflict with the
interests of our minority shareholders.

Conflicts of interest between us, our directors or executive officers and Telefónica and other of our affiliates may also arise in connection with the negotiation and performance of
duties and the payment of fees under the management contract, as well as in connection with other business activities. Telefónica, through affiliates, is also involved in other joint and separate investments in the communications and media
sector in Perú, including the mobile cellular services following the effectiveness of the spin-off of our wireless services business and data transmission services in 2001. These business operations are controlled by Telefónica
Móviles, S.A. and Telefónica Datacorp S.A., each of which is a controlled subsidiary of Telefónica, independent from us. We also have a business support agreement with Telefónica Gestión de Servicios Compartidos
Perú S.A.C., which is also a controlled subsidiary of our parent company. In some circumstances, our interests may not be aligned with and may perhaps be adverse to the interests of Telefónica or its affiliates with influence over
Telefónica Internacionals actions.Telefónica or its affiliates may cause us to limit or forgo our pursuit of certain business opportunities so that other Telefónica
affiliates may pursue them, and the pursuit of such opportunities by other affiliates may not be in our
interest.

Our State Contracts may not be renewed if we do not comply
      with their terms as determined by the Peruvian government.


Under the terms of our State
      Contracts, the Transport and Communications Ministry (the Ministry) may choose not to renew or extend our contracts if we have repeatedly not complied
with their terms as determined by the Peruvian government. In December 2003, we petitioned the government for a five-year extension of our State Contracts from 2019 to 2024. On June 11, 2004, the Ministry received the OSIPTELs evaluation
report, which stated that we had not complied with certain terms of the concessions contracts. Based on OSIPTELs report, the Ministry notified us of its intention not to renew our State Contracts. On June 25, 2004, we filed a petition
challenging OSIPTELs report based on certain errors and the Ministrys decision to deny Telefónicas
petition to extend the term of such contracts. To date, the Ministry has not issued its final ruling
denying or conceding the renewal of the concession term from 2019 to 2024. If this extension is denied,
we may again petition for additional five-year extensions in 2008 and 2013. We cannot assure you that
our State Contracts will be renewed for an additional five-year period, thus they may expire in 2019.

Our State Contracts are revocable and may be modified under
      certain circumstances.


Under the terms of the State Contracts, the
    Peruvian government may, if deemed to be in the public interest, unilaterally modify the terms of
    such contracts (i) as such terms relate to Perús international telecommunications policy
    and (ii) where necessary in order to comply with international laws, treaties or conventions. Any
such

8

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unilateral modification must be carried out in accordance with certain administrative procedures providing for public comment on any proposed changes. However, we cannot assure you that the government will not seek to
unilaterally modify the terms of the State Contracts. In addition, the Peruvian Congress, on November 19, 2001, sought to pass laws that would require us to charge fixed-line telephone calls on a per second basis rather than a per minute basis and,
on April 25, 2002, sought to pass laws that would eradicate the fixed rate that we charge for our fixed local telephony service. The executive branch of Perú suspended the enactment of both laws on the basis that such laws unconstitutionally
modified the terms of a government contract through impermissible legislative action. Subsequently,
the Congress rejected both laws. As a result thereof, on March 2003, Telefónica
introduced new tariffs, including a plan whereby billing is made on a per second
basis, in lieu of a per minute basis, in order to provide its users with more
alternatives.

The State Contracts provide that repeated noncompliance
with the terms of such contracts, including service requirements, maximum tariffs, interconnection requirements
and international  obligations, could result in one or more of the concessions being revoked or modified.
In addition, we cannot assure you that we will not face challenges to the terms of our contracts from
the Peruvian government in the future or that if we do face  such challenges, the outcome will be favorable
to us. Temporary or permanent revocation of any of our concessions will have a material adverse effect
on our financial condition and results of operations. See Item 4: Information on the
CompanyBusiness OverviewRegulatory Matters.

We depend on key personnel and our controlling shareholder.


Our senior management and senior operating
    officers consist, in part, of individuals previously employed by Telefónica. We believe that
    our increased revenues and improved efficiency since the privatization are largely a result of the
    technical expertise and management skills of our personnel. We also believe that our future success
    in a competitive environment will depend in large part on our ability to attract and retain highly
    skilled and experienced personnel, and the inability to do so could have a material adverse effect
on our Company.

In addition, our relationship with Telefónica
Internacional provides our Company with certain competitive advantages obtained through technology transfer
and management agreements as a  result of Telefónica Internacionals experience in the telecommunications
business in Latin America. Telefónica Internacional also provides us with increased negotiating
power through alliances with other affiliates, as well as  access to technology, product research and
development and purchasing power. If Telefónica Internacional should cease to be a controlling
shareholder, our results of operation and financial condition could suffer a material adverse effect.

Rapid technological advances may require us to make significant
      capital expenditures to maintain and improve the competitiveness of our service offerings.


The telecommunications industry is subject to rapid and significant changes in technology and requires the introduction of new products and services. Like other operators, we cannot predict the
effect of technological changes on our business. New services and technological advances may offer additional opportunities for competitors to compete against us on the basis of cost, quality or functionality. Our future success depends, in part, on
our ability to anticipate and respond in a timely manner to technological changes. This may require us to devote significant capital to the development, procurement or implementation of new technologies, and may be dependent on the final cost in
local currency of an imported technology and our ability to obtain additional financing. There can be no assurance as to the nature and extent of the impact of technological change on our viability or competitiveness. If any future technological
change places at risk our viability or competitiveness, the cost of upgrading our products and technology in order to continue to compete effectively could be significant, and our ability to fund this upgrading may depend on our ability to obtain
additional financing at acceptable costs.

One such advance is the current available technology that permits telephone calls and internet access (which itself may be used to carry voice calls) via cable. We expect increased competition
from providers of such services, especially as more people in Perú get access to computers and broadband. These developments could affect our results of operations, especially in our long distance telephone segment.

9

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We employ a largely unionized labor force and could be subject
      to an organized labor action.




As of December 31, 2004 approximately 1,975 of
our employees were union members. We recently completed our collective bargaining negotiations with the
three unions that represent our workforce  and entered into agreements that will be in effect through
November 30, 2006. However, we cannot assure you we will be able to renew these agreements in the future
or that strikes or other types of conflict with the unions or unionized personnel may  not result. If
our contingency plans prove to be inadequate, our ability to maintain ordinary service levels or otherwise
operate our business in the manner that customers expect could be materially adversely affected, and
we could face an immediate  loss of revenue. Damage to our reputation could also result, with a potential
longer-term negative effect on revenues. Our results of operations and financial condition could then
be materially adversely affected.

Peruvian accounting standards differ from U.S. GAAP, which
      affects how we account for certain items.


The financial statements presented in this
    Annual Report have been prepared in accordance with Peruvian GAAP, which differ in certain respects
    from U.S. GAAP. In particular, due to the high inflation rates experienced in the past, between 1989
    and 2004 all Peruvian companies were required to incorporate the effects of inflation directly in
    their accounting records and in their published financial statements. As of 2005, such practice has
    been discontinued by the CNC. Thus, the presentation of Peruvian financial statements and reported
    earnings may differ from those of companies in other countries in this and other respects. See note
    35 to the Consolidated Annual Financial Statements included in this Annual Report for a description
    of the principal differences between Peruvian and U.S. GAAP as they relate to our Company and a reconciliation
to U.S. GAAP of net income and shareholders equity.

Risk Factors Related to Perú

Perús economic conditions have an impact on our
      business, operations and the market price of our Class B shares.


Substantially all of our operations, capital
    investments and customers are located in Perú. Our business, financial condition and results
    of operation have been, and will continue to be,  affected by the economic environment in Perú.
    Although Peruvian GDP increased in 2004 by 4.8%, which represented the highest increase since 1998,
    the nations economy has historically experienced considerable fluctuations in growth,
proving to be vulnerable to external factors, including but not limited to interest rates in global financial
    markets, changes in international prices of commodities, low growth affecting the United States and
    other trading partners, and changes in  the credit ratings of Peruvian sovereign bonds. Perús
    economy is also affected by internal factors, including but not limited to general current economic,
    business or political events in Perú, the depreciation of the nuevo sol,
the ability of the Peruvian government to enact key economic reforms, the levels of domestic debt and
    domestic inflation, the level of foreign direct and portfolio investment and natural occurrences
    such as El Niño, earthquakes and floods. In
general, changes in Perús economic indicators such as per capita income, levels of private
consumption, exchange rates, employment rates and inflation would indirectly affect our results of operations,
as a downturn in the economy would  adversely impact, among other things, the value of our Class B shares,
our ability to access internal and external capital markets, the demand for our products and services,
and our customers ability
to make timely payments.

Adjustments to our tariffs to take into account increases in
              inflation may not be adequate enough to fully offset decreases in revenues caused by such
      inflation.


The inflation rate in Perú, as measured
    by the CPI, was 3.5% in 2004. Low levels of inflation are likely to continue in 2005. We are authorized
    to adjust tariffs on fixed local and long distance telephone services based on increases in the CPI
    net of the productivity factors. However, even if our tariffs successfully keep up with inflation,
    we cannot assure you that such adjustments will adequately offset the real adverse impact that increased
inflation would have on our revenues, business and demand for our products and services.

10

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We are affected by changes in the political climate in Perú to
      the extent that such changes affect the nations economic and regulatory policies.


Our results of operation and financial condition
    may be affected by changes in Perús political climate to the extent that such changes
    affect the nations economic policies or
regulatory regime. Between 1968 and 1990, the Peruvian government played an interventionist role in the
    nations
economy by expropriating private sector assets and imposing price controls, exchange rate controls, restrictions
on local and foreign investment and international trade, and restrictions on the ability of companies
to dismiss employees. Although the Peruvian government has not played an interventionist role since 1990,
our business, financial condition and results of operations may be adversely affected in varying degrees
by changes in government policies with respect to any of the factors previously mentioned.

Deterioration in economic and market conditions in Latin America
      and other emerging market countries adversely affects the Peruvian economy and our business.


The market for securities issued by Peruvian
    companies is influenced by economic and market conditions in Perú and, to varying degrees,
    market conditions in other Latin American and  emerging market countries. Although economic conditions
    are different in each country, the reaction of investors to developments in one country is likely
    to cause the capital markets in other countries to fluctuate. For example, political and  economic
    events, such as the crises in Venezuela, Ecuador, Bolivia, Brazil and Argentina, have influenced
    investors perceptions of risk with regards to Perú. The negative investor reaction to
    developments in our neighboring countries  adversely affects the market for securities issued by
    countries in the region, causes foreign investors to decrease the flow of capital into Latin America,
    and introduces uncertainty about plans for further integration of regional economies, all of  which
    affects Perú.

Depreciation of the nuevo sol or unexpected changes in exchange
      controls could have an adverse effect on our financial condition.


The Peruvian currency has historically experienced a significant number of depreciations, and as a result, the Peruvian government has adopted and operated under various exchange rate control
practices and determination policies, ranging from strict control to market determination of exchange rates. The nuevo sol depreciated against the U.S. dollar by 2.0% in 2002 and appreciated by 1.5% in 2003 and by 5.2% in 2004. As of December 31,
2004, we had S/.1,708 million in total debt, of which, taking into account hedging activities, 5.5% was denominated in U.S. dollars, 92.9% was denominated in nuevos soles and the remainder in other currencies. In 2004, although we received
approximately 25% of our revenues in U.S. dollars, primarily from Multimedia (cable television), CableNet, ADSL services and business communications, the majority of our revenues were denominated in nuevos soles. However, most of the equipment and
supplies we purchase are priced in currencies other than nuevos soles. Devaluation of the nuevo sol would thus cause our debt to become less expensive to service, considering that only 5.5% of our debt is denominated in U.S. dollars. Notwithstanding
the foregoing, the technology and goods necessary to operate our business would become more expensive.

In order to counteract this risk, we restructured our liabilities in terms of currency and maturity. We use derivative financial instruments to reduce to the extent possible our exposure to
fluctuations in the exchange rate. See note 33 to the Consolidated Annual Financial Statements, Item 5: Operating and Financial Review and ProspectsLiquidity and Capital Resources and Item 11: Quantitative and Qualitative
Disclosures About Market Risk. Nevertheless, we cannot assure you that our risk management strategies will be successful in limiting our exposure to changes in interest rates and foreign currency exchange rates. The failure of such risk
management strategies would have a material adverse effect on our business, financial condition and results of operations.

Item 4. Information on the Company

A.  History and Development of the Company

Compañía Peruana de Teléfonos S.A. (CPT) was incorporated in 1920 as a provider of local telephone services in Lima. CPT was controlled by International
Telephone & Telegraph until the Peruvian government nationalized the company in 1970, retaining 24% of its shares and issuing the remaining 76% to its subscribers. Entel Perú S.A. (ENTEL) was incorporated in 1969 as a state
enterprise. ENTEL provided domestic and

11

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international long distance telephone service throughout Perú and local telephone service outside of Lima, whereas CPT was responsible for local telephone service in Lima.

Privatization. In 1991, President Alberto Fujimoris administration began a process of privatizing CPT and ENTEL. Pursuant to a competitive bidding
process, in February 1994, Telefónica Internacional S.A. (through its interest in Telefónica Perú Holding S.A.C.) acquired a 35% interest in ENTEL and a 20% interest in CPT for U.S.$1.4 billion. In May 1994, Telefónica
Internacional acquired an additional 15% interest in CPT for U.S.$612 million. Until 2001, Telefónica Internacional owned 90% of the capital stock of Telefónica Perú Holding S.A.C., while I.G.M. Teléfonos S.A. (an entity
under the control of Graña y Montero S.A., a leading Peruvian construction firm) and Wiese Telefónica S.A. (an entity under common control with Banco Wiese Sudameris, a leading Peruvian bank) each owned 5%. In July 2001,
Telefónica Internacional acquired the 10% interest held by Graña y Montero and Wiese for a total of €227.3 million, and as a result, currently owns 99.9% of the capital stock of Telefónica Perú Holding S.A.C. In
connection with the privatization, Telefónica Perú Holding S.A.C. received the right to name a majority of the members of the boards of CPT and ENTEL. ENTEL was merged into CPT in December 1994, and the surviving entity changed its
name to CPTTelefónica del Perú S.A. Due to legislative changes, which now distinguish a publicly held corporation (S.A.A.) from a closely held corporation (S.A.C.), we are now known as Telefónica del Perú S.A.A.
Telefónica Internacional is controlled by Telefónica, formerly Telefónica de España, S.A., which is currently the leading telephone operator in Spain and developed the nations telephone network. Through
Telefónica Internacional, Telefónica is the leading operator of telecommunications networks in Latin America, in particular in Perú, Argentina, Chile and Brazil.

Following the privatization, the Peruvian government retained a 28.6% interest in our Company. A large number of individual and institutional investors, both in Perú and abroad, and
certain of our employees held the remainder of the shares. In July 1996, the government sold most of its remaining interest in our Company to individual and institutional investors in Perú, the United States and other countries, retaining a
2.0% interest. On July 2, 1996, our stock was listed and began trading on the NYSE. In July 1999, the Peruvian government sold its remaining 2.0% interest in a public offering registered with the Securities and Exchange Commision (the
SEC) of American Depositary Shares (ADSs), representing the Class B shares on the NYSE. Pursuant to decisions adopted at the shareholders meetings in March 1997 and March 1998, we launched a program to repurchase up to
10% of our outstanding share capital through a series of transactions totaling approximately U.S.$523 million (including transaction and financial costs). The repurchase program ended March 1999. A capital reduction of 10% of the stock so acquired
was approved at the March 1999 shareholders meeting. On January 8, 2004, pursuant to the decision adopted by the board of directors on December 17, 2003, Telefónica del Perú filed with the SEC and the NYSE its request to delist
its ADSs from the NYSE. The SEC approved such request, which was effective on March 1, 2004.

The address of our registered office is Avenida Arequipa 1155, Santa Beatriz, Lima, Perú. The phone number is (511) 265-7555.

Exchange Offers and Reorganization Transactions

In May 2000, Telefónica launched public
exchange offers to exchange shares and ADSs of Telefónica for shares and ADSs of its subsidiaries
in Brazil, Perú and Argentina. The
purpose of these exchange offers was to offer holders of equity securities of these subsidiaries an opportunity
to participate in the benefits expected to be achieved by the Telefónica Groups reorganization
by holding equity interests  in Telefónica, instead of its subsidiary operations. Upon the expiration
of the Peruvian exchange offer, shareholders representing approximately 53.12% of our capital stock tendered
their Class B shares and ADSs in exchange for  Telefónica shares and ADSs.Consequently,
in 2002, Telefónica became the beneficial owner of 424,095,420 of our Class B shares (including
converted Class C shares), and 69,385,184 of our ADSs (each representing ten Class B shares).

The acquisition of the shares of Telefónica del Perú through the exchange offer permitted Telefónica to reorganize its business along global business lines of fixed-line
telephone services in the Americas, worldwide wireless communication services, worldwide corporate data transmissions and telephone directories in order to enhance its strategic and competitive position globally and in each of its business lines. In
this context, our board of directors decided on November 22, 2000 to effect a reorganization of the businesses of its own subsidiaries (as described herein, the reorganization transactions). On December 26, 2000, at a shareholders
meeting, our

12

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shareholders approved the reorganization transactions under which we spun off our assets and liabilities related to the data transmission and wireless communications businesses.

Effective January 1, 2001, we transferred to Telefónica Móviles Perú Holding S.A.A., which is 98% owned by Telefónica Móviles S.A., a Spanish subsidiary of
Telefónica, S.A., our ownership interest in Telefónica Móviles S.A.C. Effective January 1, 2001, we transferred to Telefónica Data Perú Holding S.A.A. (now known as Telefónica Empresas Perú S.A.A.),
which is 97% owned by Telfónica Datacorp S.A., a Spanish subsidiary of Telefónica, our assets and liabilities relating to our data transmission business. As a result of the spin-offs, minority shareholders maintained in the spun-off
entities and in the Company the same percentage equity interest they owned in the Company before the reorganization transactions, subject to adjustments for fractional shares and fractional ADSs.

Since April 2001, as part of our reorganization transactions, Telefónica Gestión de Servicios Compartidos Perú S.A.C., a subsidiary of Telefónica, provides common
services such as accounting systems, human resources, logistical services, insurance management, information systems, property management and security and protection services to all business lines of Telefónica within Perú and
information systems to the Telefónica Group in the Americas. Our capital stock was reduced by the shareholders equity of the spun-off businesses and consequently, the shares of our capital stock were cancelled and new shares reflecting
our reduced capital stock were issued. Effective January 1, 2001, the spun-off companies began to operate as separate companies, with independent legal existences and full capacity to own and dispose of their respective assets. Telefónica
indirectly controls the spun-off entities, Telefónica Móviles Perú Holding S.A.A. and Telefónica Empresas Perú S.A.A., through Telefónica Móviles, S.A. and Telefónica Datacorp S.A. Unipersonal.
Our relationships with the spun-off companies are limited to ordinary course commercial relationships of the kind that normally occurs between a major fixed-line network operator, a major wireless network operator and a major data transmission
services provider. In addition, we maintain certain transitional contractual arrangements that will continue until the spun-off companies develop independent capabilities. See Item 7: Major Shareholders and Related Party
TransactionsRelated Party Transactions.

In addition, as part of our reorganization process, on December 26, 2000, we created a subsidiary, Telefónica Publicidad e Información Perú S.A.C., to focus on our
telephone directory business, among other services. On February 8, 2002, in line with Telefónicas worldwide business reorganization, we transferred our interest in Telefónica Publicidad e Información Perú S.A.C. to
Telefónica Publicidad e Información S.A., a subsidiary of Telefónica focused on the telephone directory business, for U.S.$31.2 million. Therefore, Telefónica Publicidad e Información Perú S.A.C. is no
longer our subsidiary and reports directly to Telefónica Publicidad e Información S.A. in Spain.

Capital Stock Changes

On November 8, 2004, our shareholders approved
an increase in our capital stock in the amount ofS/.1,173,603,880 from
S/.1,721,964,417 to S/.2,895,568,297 as a result of the capitalization of the amounts related to inflation
accumulated as of December 31, 2002. At the same meeting, the shareholders approved a  reduction in our
capital stock by S/.743,112,776 from S/.2,895,568,297 to S/.2,152,455,521. Effective December 31, 2004,
the amount of this capital reduction was distributed to shareholders on apro
 ratabasis at the rate of S/.0.435968977782321 per share, excluding
 shares held in treasury. These changes to our capital stock affected all of our shareholders on apro
  ratabasis by increasing, net, the nominal value of each share
  from S/.1.00 to S/.1.25. As of December 31, 2004, the nominal capital stock of the Company was S/.2,152,455,521,
represented by 1,721,964,417 nominal  shares with a par value of S/.1.25 each.

On March 28, 2005, our shareholders approved a program to reduce our capital stock in an amount not to exceed S/.1,350 million to be carried out within the twelve-month period following the
date of the meeting. Our shareholders delegated the implementation of this program to our board of directors. On May 25, 2005, the board authorized a reduction in our capital stock from S/.2,152,455,521.25 to S/.1,377,571,533.80, through a reduction
of the nominal par value of its shares equivalent to S/.0.45 per share, or from S/.1.25 to S/.0.80. Furthermore, the board authorized the Company to maintain the same number of outstanding shares and that the amount of the capital reduction would be
distributed on apro ratabasis to its shareholders in the amount of S./0.454608494004588 per share. These changes to our capital stock will become effective on July 26, 2005.
At such date, we will pay our shareholders an aggregate amount of approximately S/.755 million.

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B. Business Overview

We are a telecommunications service provider, offering fixed local and domestic and international long distance telephone services throughout Perú, as well as a wide range of other
telecommunications services, including public telephone, Internet and broadband services, company communications and cable television. As of December 31, 2004, we had 2,155,648 lines in service and a digitalization rate of 96.5% for local switching
equipment. At December 31, 2004, with revenues of S/.3,459 million (U.S.$1,054 million) and operating income of S/.849 million (U.S.$259 million) in 2004, we were the largest telecommunications company in Perú with a market share of
approximately 53%.

Our domestic telephone network includes installed
telephones and switchboards, a network of access lines connecting customers to exchanges and trunk lines
connecting exchanges and long distance  equipment. The following table sets forth both the pattern of
increased demand for domestic telephone service and the growth of our infrastructure to meet that demand.

|                                                               | Year Ended December 31, |  
|-------------------------------------------------------------- | ----------------------- | -
|                                                               |                         |  
|                                                               | 2002                    |  
|                                                               |                         |  
|Lines installed:                                               |                         |  
|Lima metropolitan area(1)                                      | 1,265,908               |  
|Rest of Perú                                                   | 763,005                 |  
|Total lines installed                                          | 2,028,913               |  
|Percentage growth (%)(2)                                       | 0.5                     |  
|Lines in service:                                              |                         |  
|Lima metropolitan area                                         | 1,153,528               |  
|Rest of Perú                                                   | 661,611                 |  
|Total lines in service(3)                                      | 1,815,139               |  
|Percentage growth (%)(2)                                       | 5.4                     |  
|Lines in service per 100 inhabitants                           | 6.8                     |  
|Local traffic (thousands of minutes)(2)(4)                     | 9,295,757               |  
|Percentage increase (decrease) (%)(2)                          | (8.4                    | )
|Local domestic long distance traffic (thousands of minutes)(5) | 444,124                 |  
|Percentage decrease (%)                                        | (11.2                   | )
|Applications pending                                           | 42,659                  |  
|New applications received(6)                                   | 243,582                 |  
|Time between application and line installations (days)(7)      | 10                      |  
|Digitalization rate Percentage (%)(8)                          | 96.1                    |  

|   
|---
|(1)
|   
|(2)
|   
|(3)
|   
|(4)
|   
|(5)
|   
|(6)
|   
|(7)

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(8)  Local switching equipment only.

Though our installed network grew at a relatively rapid pace in the years following the privatization, since we met the growth targets established in the State Contracts, our growth rate
decreased due to adverse economic conditions from 1999 to 2001; however, from 2002 to 2004, our installed network has grown by a compound rate of 4.4% . During the years following the privatization, basic telephone services continued to develop both
in terms of the number of installations and available services. New investments in technology have reduced the average waiting time for the installation of a new line, allowing us to meet regulatory goals.

At December 31, 2004, there were 2,155,648 lines in service, representing an increase of 9.5% compared to December 31, 2003. Our lines in service are concentrated in large urban areas,
particularly in the Lima metropolitan area, where 61.3% of our lines are installed and where telephone service penetration, at 16 lines per 100 inhabitants in 2004, is considerably higher than in Perú as a whole. In recent years, we have made
significant investments to meet subscriber demand for lines and to modernize our network. As a result, the rate of telephone line penetration in Perú increased from 3.4 lines per 100 inhabitants in 1994 to 7.8 lines per 100 inhabitants in
2004. This increase was due to a more efficient and less bureaucratic administration and a company mission to offer telecommunications services to the largest number of people possible. However, telephone penetration rates in Perú still
remain lower than rates prevailing in most other Latin American countries.

The services we provide and the rates we may charge are subject to regulation by the Communications and Transport Ministry and OSIPTEL. Regulatory and recent legal challenges concerning OSIPTEL
and the tariffs that we may charge are areas of concern for us. See Regulatory Matters and see Item 3: Key InformationRisk FactorsRisk Factors Related to Telefónica del PerúOur State Contracts
require us to make ongoing tariff reductions which adversely affects our financial results. Despite such challenges, however, our revenues in 2004 increased in the areas of cable television (0.9%), business communications (30.8%) and other
revenues (10.9%) .

Business Strategy

We are focused on one objective  to improve customer satisfaction. Our company is dedicated to fulfilling this objective and, to that end, we are actively working to enhance service
efficiency; create products and services that satisfy the specific needs of our clients; and improve both service quality and customer service.

In 2004, we launched, as part of a wider initiative of the Telefónica Group, a program called Compromiso Cliente,which is based on three principles: client satisfaction, employee satisfaction and corporate identity. We conducted surveys that demonstrated that client
and employee satisfaction as well as corporate identity increased with respect to 2003 from 53% to 60%, from 55% to 62% and from 21% to 27%, respectively.

In domestic telephone services, we have focused our efforts principally on the sale of prepaid and limited consumption lines. We believe that the introduction ofLíneas Cerradas, a product that allows our lower income customers to have greater access to telephone services, largely explains the 36% increase in line sales in 2004 compared to 2003. During
2004, we sold 404,552 new lines. Furthermore, our limited consumption lines have reduced the risk of uncollectible accounts. As of December 31, 2004, our limited consumption and prepaid lines represented 57% (1,156,752 lines) of our total lines in
service, a 34% increase from 2003. In addition, we have adopted measures to reduce operating expenses and implemented more conservative investment policies.

Our capital expenditure program is focused on achieving profitable growth in all of our business lines and upgrading our telecommunications networks to maintain high quality customer service.
During 2004, we incurred S/.485 million in capital expenditures, which represented a 10% increase from 2003. We believe that the use of new technologies and the increase of internal efficiency have enabled us to grow our traditional businesses
(local telephony, public telephony and cable TV) with lower capital expenditures. We are committed to the development of an information society in Perú. Accordingly, we have allocated S/.132 million to improve Internet access,
mainly broadband. This item accounts for 27% of the capital expenditures made during 2004, a 34% increase compared to 2003. We expect to increase our investments in such services in the long-term.

In addition, as part of our effort to improve our competitiveness, we have continued to invest resources into personnel training and development and have implemented employee incentive programs
to improve efficiency. Training and development represents one of the essential elements to achieve our objective: customer satisfaction.

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Categories of Revenue

The following table sets forth our operating
revenues from continuing operations and the percentage of revenues for the periods indicated for each
of the categories shown.

|                                   | Year Ended December 31,                                  | 
|---------------------------------- | -------------------------------------------------------- | 
|                                   |                                                          | 
|                                   | 2002                                                     | 
|                                   |                                                          | 
|                                   | (thousands of constant nuevos soles, except percentages) | 
|Fixed local telephone services(1)  | 1,709,482                                                | 
|International long distance        | 190,718                                                  | 
|Domestic long distance             | 267,383                                                  | 
|Public and rural telephone service | 798,038                                                  | 
|Interconnection with other         |                                                          | 
|operators                          | 94,965                                                   | 
|Business communications(2)         | 213,504                                                  | 
|Cable television(3)                | 314,906                                                  | 
|Others                             | 110,014                                                  | 
|                                   |                                                          | 
|Total                              | 3,699,010                                                | 
|                                   |                                                          | 

|   
|---
|(1)
|   
|(2)
|   
|(3)

For the purpose of facilitating the comparison
of business revenues with prior years, the revenues from dial-up internet traffic have been excluded
from the fixed local telephone revenues, the  revenues from Speedy Plus and traditional Speedy have been
excluded from the business communications revenues, and the revenues from CableNet have been excluded
from the cable television revenues. We discuss the revenues from these services under  the Internet and
Broadband section below.

Fixed Local Telephone Services


Revenues from fixed local telephone services as a percentage of total operating revenues decreased to 42.9% in 2004 compared to 44.4% in 2003. Revenues from local telephony, excluding Dial-Up
service revenues, were S/1.439 billion, 6.7% less than in 2003. Our revenues from local telephone services consist of measured service charges, monthly service charges, installation fees for new lines and other charges for maintenance and
value-added services such as call transferring, three-party conferencing, direct lines, quick dialing and caller identification.

We have the right to provide fixed local telephone
services on a non-exclusive basis until June 27, 2019, pursuant to the State Contracts. Pursuant to the
State Contracts, OSIPTEL approves  rates and fees adjusted by the CPI for each quarter under a price
cap system. Until December 31, 1998, rates for monthly services and installation services were higher
for commercial than for residential users, but the State Contracts mandated the  elimination of this
distinction beginning January 1, 1999. See Regulatory Matters. Also in 1998, in light
of Perús economic environment, we adopted business strategies to minimize our exposure to
customer credit risk  by shifting our focus to products and services such as limited-use lines and prepaid
calling cards. The service plant of the fixed local telephone services increased 9.4% in 2003 and reached
2,025,534 lines by the end of 2004 with a visible  concentration in lines with consumption limit and
prepaid lines (57% of the total number of lines). The level of growth recorded in 2004 has been the highest
since Telefónica arrived in Perú in 1994; we recorded a historical record
level of 404,552 new line sales. We also began offering various types of service plans for customers
to choose from based on their financial resources and needs. See Service Plans and Rates.
We also adopted stricter delinquency  strategies and other measures to improve collection of overdue
accounts. See Our Customer Base.

International Long Distance Services


Our international long distance services consist
    of incoming and outgoing international telephone traffic and switched transit traffic throughout
    Perú. Revenues from international long
distance services as a percentage of our total operating revenues was 3.2% in 2004 and 4.8% in 2003.
The amount of revenues from international long

16

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distance services depends on the volume of traffic, our rates charged to our customers for outgoing calls and the settlement rates agreed to with other international telecommunications operators for incoming calls
originating outside Perú and carried through the Companys network.

Under the State Contracts, we have the right to provide international long distance telephone services on a non-exclusive basis until June 27, 2019. We have entered into interconnection
agreements with other domestic and international telecommunications operators to carry each others calls. See Categories of RevenueInterconnection Agreements. Revenues from international long distance telephone services
are primarily derived from payments under settlement agreements between us and various foreign telecommunications operators or private carriers. The agreements govern the rates we pay to foreign carriers for the use of their facilities to connect
international calls billed in Perú, and the rates foreign carriers pay us for the use of our facilities to connect international calls billed abroad. The rates of payment under such agreements are negotiated with each foreign carrier, and
such rates vary according to the operator, the volume of traffic, in addition to other factors. Settlements among carriers are usually made on a net basis. Our settlement agreements with most foreign carriers generally provide for monthly billings
and quarterly settlement payments. We have had a settlement agreement with AT&T since 1969 and have also entered into settlement agreements on similar terms with MCI WorldCom, U.S. Sprint, Kokusai Denshin Denwa (KDDI), Japan Telecom Co. Ltd.,
Deutsche Telekom AG, Teleglobe Canada Inc., France Telecom, SwissCom Ltd., Korea Telecom, CTC Mundo, Entel Chile, Telefónica de Argentina, Telecom Argentina, Teléfonos de México S.A., ANTEL, Embratel, Telesp, Telecom Italia
S.p.A., Cable and Wireless and Concert Global Network Services Ltd. (British Telecom) and Telefónica. From time to time, we may conduct settlements with foreign carriers without formal agreements in force when the prior contract has expired
and a new one is in the process of being negotiated. In 2004, we did not experience any material payment delays or stoppages with respect to settlements from foreign carriers.

There is currently a favorable imbalance between total outgoing international calls and total incoming international calls, as the amount of incoming traffic is significantly greater than the
amount of outgoing traffic. As a result, the payments that we receive from other international operators are significantly higher than the payments that we make to such operators. In this context, certain international operators have been seeking
reductions in settlement rates that will adversely impact our international long distance revenues. See Item 3: Key InformationRisk FactorsRisk Factors Related to Telefónica del PerúFurther decline in average
settlement rates due to competition will adversely affect our international long distance revenues.

As of December 31, 2004, 15 companies, including AT&T Perú (now Telmex Perú), TIM Perú, Nextel Perú and Americatel, obtained concessions from the Peruvian
government to also provide long distance services in Perú. We also face indirect competition in international long distance telephone services from a number of overseas sources, including calling cards and the illegal rerouting of calls by
other international operators. In 2002, competition increased remarkably with the entrance of Americatel and IDT into the international long distance market. See Competition. The majority of the new participants were focused on
gaining market share for incoming traffic through price-based competition with aggressive offers. As a result, we reduced our rates for long distance international calls, which led to a decrease in revenues in this segment. This decrease, however,
was partially offset by an increase in the volume of international long distance calls. We anticipate that this trend will continue and expect that our investments in the digitalization of international routes will lower costs per circuit and offset
part of the projected reduction in international long distance rates and revenues.

By December 31, 2001, we began to provide subscribers with direct dialing capability to all of the countries to which telephone service from Perú was available. This traffic is
controlled by two network management centers for both domestic and international service, resulting in a high level of call completion. In 2004, we opened a direct international route with business telecommunications services from the United States.

In 2004, we accomplished the following: (1) improved the capacity of our international circuits by 7% compared to the prior year; and (2) continued to digitalize our network with the goal of
being 100% digital. These measures have enabled us to improve the quality and capacity of communications transmissions and to exceed our call completion targets. During 2004, we faced increased competition in long-distance, which was offset by the
increase in market size due to the increased use of prepaid calling cards. However, we continued to be the market leader. This was achieved through mass advertisement and promotions (i.e., Habla lo que quieras) and through the expansion of our distribution and coverage network.

17

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Customers who wish to make international long
distance calls can use the same prepaid calling cards and services as those used for domestic long distance
services. See Categories of
RevenuesDomestic Long Distance and Service Plans and Rates.

Domestic Long Distance Services


Revenues from domestic long distance services as a percentage of total operating revenues remained at 6% in 2004. Our revenues from domestic long distance services depend on the volume of
traffic and the level of our rates charged to customers through our bills or prepaid cards.

We have the right to provide domestic long distance telephone services on a non-exclusive basis until June 27, 2019, pursuant to the State Contracts. OSIPTEL approves the rates adjusted by the
CPI each quarter under a price cap system. See Regulatory Matters. The liberalization of the telephony market in 1994 reduced the number of local calling areas in Perú from 299 to 24, corresponding to the number of political
departments (which are equivalent to provinces) in the country. Now, calls made from anywhere within a political department are no longer billed as domestic long distance calls but as local calls. Since September 1998, domestic long distance rates
are not determined by distance but by two classifications: daytime (peak hours) or night (off peak hours).

A component of our domestic long distance revenue
also stems from prepaid phone card sales. See Item 5: Operating and Financial Review and ProspectsA.
Results of Operations.
Customers using a prepaid service such asFonofácil Plus,
Line 100, or even a classic one, can make domestic and long distance calls using prepaid telephone calling
 cards based on theTarjeta 147and
 Chip Super Plus 147 technology. Customers can also make domestic and long distance calls using theHola
  Perúcalling card. Distribution channels were augmented
  by increasing the coverage in sales points in the main cities of the country, thus boosting sales by
  22.1% compared to 2003 with sales reaching  S/.90.0 million (tax included) by December 31, 2004. Our
  market share based on traffic volume for calling cards at December 31, 2004 was approximately 74.6%
  . See Telephone Service Plan and RatesCalling Cards.

Public and Rural Telephone Services


Public and rural telephone services primarily consist of our operation of telephone booths and pay telephones, as well as the sale of telephone cards and advertising on booths and on telephone
cards. We have the right to provide public telephone services on a non-exclusive basis until June 27, 2019, pursuant to the State Contracts.

Our public telephones are classified as either exterior or interior. Exterior public telephones are entirely owned by us and are generally located in public places.
Interior public telephones are either (1) owned by proprietors, with monthly rental and connection fees charged to the proprietor who in turn receives a royalty fee calculated as a percentage of the payments made by users, or (2) owned by us and we
pay a rental fee to individuals on whose property such telephones are located. In both cases, the commissions represent a percentage of billed traffic.

During 2004 our public telephone lines in service increased 11.9% compared to 2003. The total number of public telephones in service reached 129,353 lines in 2004. The table below sets forth
selected data for our public and rural telephone services business for the periods indicated:

|                           | At December 31, | 
|-------------------------- | --------------- | 
|                           |                 | 
|                           | 2002            | 
|                           |                 | 
|Total public telephones(1) | 107,280         | 
|% growth (total)           | 12.2            | 
|Penetration(2)             | 4.0             | 

|   
|---
|(1)
|   
|(2)

18

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The current charges are set at S/.0.50 for every two minutes during peak times and S/0.50 for every three minutes during off-peak times (11:00 p.m. to 7:00 a.m.). A flat rate of S/1.00 per
minute applies to all domestic long distance calls.

Revenues from public and rural telephone services decreased by 8% in 2004 compared to 2003 and the public telephone plant exceeded 129 thousand lines, or 11.9% more than in 2003. Density
increased to 4.5 public telephones per one thousand inhabitants. This decrease in revenues is a consequence of the lower revenues of national long distance which was caused by the increasing migration from coin-operated phones to prepaid cards and
by the expansion of fixed telephony. The operating revenues from public and rural telephone services as a percentage of total operating revenues remained unchanged at 20% from 2003. During 2004, several external factors appeared to affect the
results of the public and rural telephony business: the increasing number of Internet cabins, and the substitution originated by the increased penetration of mobile telephony to segments of the objective market of public telephony. An increase in
fraud and vandalism also decreased the number of in-service telephones in the interior of the country.

In light of these new circumstances, the company
focused on expanding into low density areas of fixed telephones, as well as on the profitability of the
existing units. Loyalty programs  targeted to major customers were introduced, as well as long distance
campaigns focused on certain areas and segments. In addition, plans to substitute obsolete equipment
and avoid the usage of false coins were introduced. In the interior of the  country, we expanded our
plant, focusing our energies on the 29 locations with the most traffic and which have available infrastructure
and technology. Furthermore, we rolled out the technological migration plan to the VSAT system which
involved 302  locations with 498 telephones.

Interconnection Agreements


In order to permit other telecommunications
    operators to carry calls originating with their customers over our network, and to permit our customers calls to be carried over their
networks, we have active interconnection relations (contractual or mandatory) with 19 different operators. Interconnection services are freely negotiated between the parties and the charges are setup-based on the maximum rates set by OSIPTEL.
However, OSIPTEL regulates the maximum rate that we are permitted to charge. See Regulatory MattersInterconnection Charges.

As part of a general trend of the telecommunications market becoming more competitive, interconnection rates have been steadily decreasing. On April 1, 2003, the interconnection charge was set
at U.S.$.01208 per minute, priced by the second, based on the Long Run Incremental Cost (LRIC) model provided by us and approved by OSIPTEL. As of the date hereof, this remains the applicable charge. The challenge in 2004 was to continue the growth
of the telecommunications market using interconnection between networks as a tool and foster healthy competition with all operators. Among the main results of the period, the following are worth highlighting: the 23% growth of the total
interconnection traffic and the 14% growth in the total number of leasedconnections. During the year, seven new interconnection agreements were signed, the pre-selection,
interoperability and prepaid service was implemented for five new operators and new services were developed for four operators.

In 2004, the default level of long distance operators interconnected with Telefónica del Perú S.A.A. decreased, mainly because of Resolution No. 113-2003-CD/OSIPTEL published by
OSIPTEL in December 2003, whereby the operators in the interconnection services markets were required to guarantee their payment obligations. This enabled us to reduce our delinquency rate, reversing the tendency of 2003, when operators registered
substantial delinquencies. The development of new networks by some operators resulted in competition in several interconnection services, which contributed to the generation of more alternatives on the market.

As of February 28, 2005, we had active interconnection relations with the following operators for the services specified:

- Nextel del Perú S.A., digital trunking service;
- Gilat to Home S.A. (formerly Global Village Telecom N.V) domestic and international long distance, local, rural and public telephony;
- Telmex Perú (formerly AT&T Perú), local, domestic and international long distance;

19

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- Comunicaciones Móviles del Perú S.A (formerly Bellsouth del Perú S.A.), cellular service in Lima, Callao and provinces, local, domestic and international long
distance;
- Perusat S.A., domestic and international long distance;
- Americatel (formerly Orbitel S.A.), local, domestic and international long distance;
- Convergia (formerly Telsouth S.A.), domestic and international long distance;
- TIM Perú S.A., mobile PCS, domestic and international long distance;
- Impsat S.A., local, domestic and international long distance;
- Digital Way S.A., domestic and international long distance;
- Telefónica Móviles S.A.C., mobile;
- Te.Sa.M Perú S.A., satellite mobile;
- Rural Telecom S.A.C., local, rural and public telephony;
- L.A.&C. Sistemas S.A.C., domestic and international long distance;
- Infoductos Telecommunicaciones S.A. (formerly Red Cientifica Peruana), domestic and international long distance;
- IDT Perú SRL., domestic and international long distance;
- Sitel, S.A., domestic and international long distance;
- Lat Perú S.A.C., domestic and international long distance service; and
- LD Telecom, domestic and international long distance.

Business Communications


We provide business communications and related
    services in Perú for medium and small businesses offering a variety of business-related services. Effective January 1, 2001, we spun off
our data transmission business (excepting Digired and Infovia services) for large, medium and small businesses, which is now conducted directly by Telefónica Empresas Perú S.A.A. (previously Telefónica Data Perú S.A.A.),
a subsidiary of Telefónica. As of May 2003, Telefónica Empresas Perú S.A.A. is responsible for the commercial and technical management of the main clients for the whole business segment of Telefónica del Perú. The
objective has been, besides working jointly in the development of new products and services, to address the clients communication needs, to use the synergies of the Telefónica
Group and to reduce overhead and management expenses associated with these clients.

The lines of business communications services offered include:

- Digired (a data transmission service using switched digital circuits);
- Infovía, Infovía Plus, Infovía Com and Speedy Wan;
- ISDN services;
- Intelligent network;
- Telephone equipments (PBAX);
- Videoconferencing; and

20

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- Global solutions.

Our business communications services are supported by a central service system that provides maintenance and technical support on a 24-hour basis.

In mid-1996, we began offering Internet access and other on-line information services, such as database access and electronic mail, through third parties under Infovía. In 2001, we began
to offer Infovía Plus service, providing direct access to the Internet through commuted lines (analog telephone lines and ISDN). Today, Meganet, Internan and the Unired services are part of the catalogue of products and services of
Telefónica Empresas Perú S.A.A.

Since December 1997, the switching and signaling systems installed throughout the country have allowed us to offer ISDN services domestically and internationally, allowing data transmission,
video conferencing and fax transmission of increased speed and quality, as well as the development of applications in tele-education and other areas. We completed an intelligent network in 1997, which is a service delivery system which provides,
among other services, call-forwarding, toll-free telephone numbers and private party lines. The intelligent network functions like a conventional private network while transmitting over our wireline network.

The commercial service window for all business
clients was consolidated under the reorganization of the Company carried out in 2004. This enabled us
to obtain better knowledge of our clients  and anticipate their needs through improvement of service
procedures and communication channels. The result thereof was the launch of different products, services
and campaigns, such as minute packages, discounts for invoicing of volume voice  services, and Intelbras switchboards,
among others.

Cable Television


We currently provide cable television through
    a wholly-owned subsidiary, Telefónica Multimedia S.A.C., under the trade name Cable Mágico. Telefónica Multimedia
holds 20-year concessions granted for the Lima metropolitan area which began in 1993 and for certain other parts of the country which began in 1996. Under these concessions, Telefónica
Multimedia provides cable TV service in the Lima metropolitan area and seven cities in the rest of the
country.

Telefónica Multimedia revenues as a percentage of our total operating revenues were 9.8% in 2004 and 9.3% in 2003. As described above, we excluded the revenues of CableNet, which we
discuss under Broadband and Internet below, from this segment for the purpose of facilitating the comparison of business revenues with prior years. Therefore, the revenues from cable television and advertising without taking into account CableNet
reached S/.311 million in 2004, 0.2% less than 2003. Revenues of our cable business are invoiced in dollars.The lower revenues in nuevos soles during 2004 was a result of the
appreciation against the dollar.

The primary source of revenue to Telefónica Multimedia comes from cable television, which contributed 83.3% of Telefónica Multimedias total revenues in 2004. The remainder
of revenues comes from advertising and CableNet. As of December 31, 2004, Telefónica Multimedia had more than 389,000 cable television subscribers, compared to 363,000 at December 31, 2003. Lima subscribers represented 84.5% of the total,
while the remaining 15.5% were located in seven cities (Arequipa, Cusco, Chiclayo, Trujillo, Huancayo, Chimbote and Piura) in the interior of the country. Telefónica Multimedia offers its customers three types of cable television service: a
standard channel package for approximately U.S.$18 per month, which includes 36 channels; an intermediate package for approximately U.S.$25 per month, which includes 50 channels; and a premium package for approximately U.S.$35.30 per month, which
includes 81 channels. In addition, Telefónica Multimedia offers a number of premium channels for approximately U.S.$5 to U.S.$25 per month per package. In 2004, the channels such as RetroChannel, Cosmopolitan, Europa Europa, Clase,
Eurochannel, TCM (Classic Hollywood) and channels for children, like Jetix and Disney, were added, thus increasing the international entertainment programming quality. Advertising revenues comprised 8.5% of Telefónica Multimedias total
operating revenues in 2004. Telefónica Multimedias cable magazine, Cable Programming, is currently the magazine with the largest circulation in Perú and reaches a relatively affluent segment of the population. CableNet revenues
represented approximately 8.2% of Telefónica Multimedias total operating revenues in 2004.

Telefónica Multimedias cable network consists of a hybrid fiber coaxial network. The cable network has relatively short distances between transmission nodes, thereby enabling it to
achieve minimal signal loss and

21

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consistent quality. Most of the cable networks bandwidth is used to deliver television service, and the remaining capacity is used to deliver two-way services such as Internet access via cable modems, video on demand,
home banking and other such services. Telefónica Multimedias installed network reached approximately 598,488 households as of December 31, 2004.

On March 26, 2004, the shareholders approved
the spin-off of certain assets and liabilities of the Company. As a result thereof, on August 2004, the
Company transferred S/.205,994,000 of assets  and S/.51,204,000 of liabilities related to its cable television
business line to its subsidiary Telefónica Multimedia, S.A.C. Such spin-off will have no impact
on the consolidated financial statements of the Company and subsidiaries.

Broadband and Internet


Total revenues from broadband and Internet
    business equaled S/.295.5 million in 2004, a 50.5% increase compared to 2003. These revenues were
    included in revenues for Fixed Telephone, Business Communications and Cable Television. See Item
    4B. Categories of Revenues. The number of customers using Speedy or CableNet increased
126.5% in 2004 compared to the previous year.

In 2005, our management has focused on significantly expanding Internet access, disseminating its benefits and making it available to more families. Speedy and CableNet lines increased from
approximately 91,000 in 2003 to 205,000 in 2004. High performance services were also offered in 2004, through the establishment of strategic alliances with major companies, for the deployment of wireless access to the Internet through the Wi-Fi
technology installed in an executive and educational network. Furthermore, access to the Internet market was expanded to other value-added service suppliers, such as Terra and RCP.

The access speed of all Speedy users was also increased free of charge, so that customers may have access to new and better applications such as video, audio, interactive games and
video chat. Moreover, a new range of Speedy Business was offered to the business sector, as well as a new and more economic product, Speedy 100, which was added to already existing accounts. The new services contributed
significantly to the increased number of users. In 2004, clients also benefited from promotional campaigns such as Mes Gratis (Free Month) and Packs de Conexión (Connection Packs), which boosted the market and
facilitated the migration of narrow band clients to conventional Speedy. Narrow band campaigns were targeted to the use of flat rate services, the most representative of which were the extended time flat rate and the reduction of the
147 Card rate with Internet access.

Other Investments

We improved the quality of our international services by installing terrestrial fiber optic networks and investing in submarine fiber optic cable consortiums. During 2004, we bought (1+1/3)
capacity from STM-1 in the underwater cable SAm-1 for the ATM network which connects the main cities in South America to the United States. The transmission means for ADSL and Internet service (32 STM-1) are leased on the submarine cable SAm 1.

Until January 2005, we participated in Intelsat Global Service Corporation (Intelsat Ltd), a global satellite consortium with a 0.93% participation (representing an investment of
approximately S/.95 million) which provides voice, data and video connectivity solutions to businesses and governments. As a result of the sale of our participation in Intelsat Ltd, we currently lease from it the transponder capacity used for voice
and data domestic and international services.

In 2004, we entered into a leasing agreement for transponder capacity with Hispasat, for our rural service. In January 1995, we signed a satellite capacity leasing contract with the Mexican
satellite consortium Satmex (previously Solidaridad) in order to provide, on a point-to-point basis, voice, data, television and video-conferencing. In March 1996, we entered into an agreement with Panamsat, an American satellite consortium, in
order to provide international and domestic businesses with point-to-point services. In August 1997, we signed the incorporation agreement of the Simón Bolívar Andean Satellite System, which allows for satellite communications among
the various countries in the Andean region.

In November 1998, we became a member and shareholder of New Skies Satellites, which is incorporated in The Netherlands. In November 2004, we sold for U.S.$7,843,000 its shares held in said
company, which represented

22

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0.76% of its capital stock. It provides satellite services for Direct Home Television (television signals transmitted directly to residential clients) and video, data, voice and Internet communications services to a range
of telecommunications carriers, broadcasters, large corporations, Internet service providers and governments around the world. In 2002, we changed our method of participation in the maritime segment from an investment to a leasing expense based on
the capacity used.

In December 2003, we sold our stake in Inmarsat to Grapeclose Limited  an incorporated firm formed at the direction of private equity funds advised by Permira and Apax Partners  for
U.S.$1.4 million (U.S.$15 per share).

Discontinued Operations

Telephone Directory Advertising


Revenues from telephone directories represented
    approximately 2.5% of our total operating revenue in 2001. Effective February 8, 2002, in line with
    Telefónicas worldwide business
reorganization, we sold our interest in Telefónica Publicidad e Información Perú S.A.C. to Telefónica Publicidad e Información, S.A., a subsidiary of Telefónica
focused on the telephone directory business, for U.S.$31.2 million.

Telephone Service Plans and Rates

New Service Plans


In March 2003, as a result of negotiations with OSIPTEL, we released a new set of service plans for fixed local telephony. The new plans allow customers to choose the one that best fits their
consumer profile based on factors such as their ability to pay and their calling habits. These new service plans are available for new and old customers of classic line and limited-use line services. The tariffs and features approved for these new
service plans are as shown in the table below in nuevos soles (without value-added tax or VAT) as of June 2005, as stated in the State Contracts.

|                                                     |  |                                         |  |                                                 |  | Fixed local service additional minutes |    
|---------------------------------------------------- |  | --------------------------------------- |  | ----------------------------------------------- |  | -------------------------------------- | ---
|                                                     |  |                                         |  |                                                 |  |                                        |    
|New Tariffs Plans since 2003 (per-minute billing)(1) |  | Monthly fees
approved in June
2005(S/.) |  | Fixed local service
traffic bundled in the
rate |  | Peak Hour rate
(S/. per billing
unit)  |    
|                                                     |  |                                         |  |                                                 |  |                                        |    
|Plan 1                                               |  | 33.81                                   |  | 60 min.                                         |  | 0.119                                  |    
|Plan 2(5)                                            |  | 55.00                                   |  | 270 min.                                        |  | 0.108                                  |    
|Plan 3(5)                                            |  | 63.47                                   |  | 365 min.                                        |  | 0.098                                  |    
|Plan 4(5)                                            |  | 71.95                                   |  | 470 min.                                        |  | 0.090                                  |    
|Plan 5                                               |  | 80.42                                   |  | 580 min.                                        |  | 0.078                                  |    
|Plan 6                                               |  | 46.53                                   |  | Peak: 30 min. /                                 |  | 0.078                                  |    
|                                                     |  |                                         |  | Off-peak: 60 min.                               |  |                                        |    
|Línea Premium                                        |  | 101.61                                  |  | Peak: 60 min. /                                 |  | 0.078                                  |    
|                                                     |  |                                         |  | Off-peak:                                       |  |                                        |    
|                                                     |  |                                         |  | unlimited                                       |  |                                        |    
|Fonovox(3)                                           |  | 2.52                                    |  | N.A.                                            |  | N.A.                                   |    
|Fónofacil Plus                                       |  | 33.81                                   |  | 75 min.                                         |  | 0.118                                  | (2)
|New Tariffs Plans (per-second billing)(4)            |  |                                         |  |                                                 |  |                                        |    
|Plan al Segundo(4)                                   |  | 33.81                                   |  | 3600 sec.                                       |  | 0.00197                                |    
|Línea Social                                         |  | 21.01                                   |  | 1800 sec.                                       |  | 0.00197                                | (2)
|Línea Control Económica                              |  | 47.90                                   |  | 230 min.                                        |  | 0.118                                  | (2)
|Línea Control Súper Económica                        |  | 41.52                                   |  | 120 min.                                        |  | 0.118                                  | (2)

|                    
|--------------------
|N.A.: Not applicable
|(1)                 
|                    
|(2)                 
|                    
|(3)                 

23

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|(4) | Plans that use seconds as the unit of measure to price and bill calls.                                                                                                                                                                   
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                          
|(5) | Pursuant to a recommendation made by OSIPTEL, since September 2003, we no longer offer Plans 2, 3 and 4 to our customers. Nevertheless, we still have some customers subscribed to these plans who had signed up prior to
September 2003.

Plans 1 through 6, Línea Premium and Plan al Segundo are service plans for classic lines, with no restrictions on use. Línea Premium includes unlimited voice and Internet calls
within our fixed local network from Monday through Friday from 8:00 p.m. to 8:00 a.m., and Saturdays, Sundays and holidays all day. Service plans for limited-use lines are Línea Social, Fónofacil Plus, Línea Control
Económica and Línea Control Súper Económica.

As of February 28, 2005, 1,136,240 customers
have either switched to or newly subscribed to one of these service plans.

Classic Lines


A classic line is the conventional service modality that gives customers access to telephony services without restrictions. Prior to 1998, classic lines were the only type of line available.

The rate for a classic line includes a monthly
service charge to our customers, and includes 60 local minutes. Additional minutes are charged at a rate
that varies according to the time of day.  Under the current rate structure, local calls during peak
hours are generally 40% more expensive than local calls during off-peak hours. In 2001, we decreased
the peak period by three hours, changing the peak period from between 7:00 a.m. and 10:59  p.m. to between
7:00 a.m. and 7:59 p.m. In 2002, we decreased the peak period again to between 8:01 a.m. and 7:59 p.m.
Monday to Friday and between 8:01 a.m. and 3:59 p.m. on Saturday.

Prepaid and Limited-Use Service Plans


Since the introduction of a three-year prepaid
    service in 1998, Teléfonos Populares, aimed at satisfying the telecommunications needs of
    low-income families, fixed prepaid telephone packages have represented a growing portion of total
    lines sold. In May 1999, we introduced limited-use lines, which allow local calls to be made for
    a fixed payment. A flat monthly fee of approximately U.S.$20 entitles the customer to a package that
    includes 150 minutes of free local calls during peak hours (7:00 a.m. to 7:59 p.m.) and 300 minutes
    during off-peak hours (8:00 p.m. to 6:59 a.m., Monday to Saturday, and all day on Sunday and national
    holidays). Customers who want to make long distance, cellular or additional local calls can use prepaid
    phone cards similar to those used at public telephones. Fixed-to-fixed local calls with prepaid cards
    from limited-consumption lines have lower tariffs than the same calls made from public telephones
with prepaid cards.

In September 2000, we launchedFonofácil, a prepaid line for S/.35 a month (currently S/.30 including VAT). This
permitted the customer to receive calls and make calls using Tarjeta 147. Customers wishing to make long distance calls or more local calls can use most prepaid phone cards of the type used in public telephones. This service grants customers greater
control over telephone costs while allowing us to reduce uncollectible risk and unused capacity. The percentage of subscribers disconnected from the network due to non payment decreased to 6.4% of total subscribers in 2003 from 8.9% in 2002 due to
our strict delinquent payment policies.

In March 2001, Teléfonos Súper Popular service began with four different options. Each option includes a telephone line, home installation, handset, maintenance, monthly service
charges and Memovox voicemail service and a certain number of minutes for local calling during all hours. Customers may choose among 200, 330, 600 or 800 minute packages for a flat monthly fee of approximately U.S.$17, U.S.$19, U.S.$24 or U.S.$27,
respectively.

We have service plans offering different options for the number of free calling minutes and monthly fees. The monthly fees stated below are effective June 2005.

FreeService Plan
      
      minutes
      
      Monthly feeTeléfono Popular(1)
      
      360
      
      53.05Peak Hour
      
      60
      
      Off-Peak Hour
      
      300
      
      


24

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FreeService Plan
      
      minutes
      
      Monthly feeLínea 70(1)
          
          450
          
          54.14Peak Hour
          
          150
          
          Off-Peak Hour
          
          300
          
          Línea 100(1)
          
          900
          
          77.43Peak Hour
          
          300
          
          Off-Peak Hour
          
          600
          
          Ahorro Inicial(1)
          
          270
          
          58.47Ahorro Personal Saving(1)
          
          410
          
          66.95Ahorro Familiar(1)
          
          750
          
          83.90Ahorro Máximo(1)
          
          1000
          
          92.37Teléfono Súper Popular A(1)
          
          270
          
          58.47Teléfono Súper Popular B(1)
          
          410
          
          66.95Teléfono Súper Popular C(1)
          
          750
          
          83.90Teléfono Súper Popular D(1)
          
          1000
          
          92.37Fónofacil(1)
          
          0
          
          25.21Nuevo Fonofácil(1)
          
          0
          
          33.81Plan Control 1
          
          275
          
          58.47Plan Control 2
          
          380
          
          66.95Plan Control 3
          
          590
          
          83.90Plan Control 4
          
          710
          
          92.37Plan Ahorro Especial
          
          980
          
          126.27Plan Ahorro Internet
          
          1180
          
          143.22Plan Ahorro Internet Plus
          
          1490
          
          168.64Línea Plus 0
          
          220
          
          59.24Línea Plus 1
          
          350
          
          67.71Línea Plus 2
          
          480
          
          76.19Línea Plus 3
          
          610
          
          84.66Línea Plus 4
          
          740
          
          93.14Línea Plus 5
          
          870
          
          101.61Línea Plus 6
          
          1000
          
          110.08Línea Plus 7
          
          1140
          
          118.56Línea Plus 12
          
          1840
          
          160.93Línea Plus 13
          
          1980
          
          169.41Línea Plus 19
          
          2820
          
          220.25


|   
|---
|(1)

Long Distance Rates

The price for domestic long distance calls also varies according to the time of day and day of the week. Effective September 1998, all calls originating and terminating within the same
political department were reclassified as local calls pursuant to a new structure for local calling areas due to the introduction of the new local areas structure. The price per billing interval for international long distance also varies depending
on the time of day, day of the week and the country called.

In addition to the establishment of new rates, we have restructured our long distance rate structure. We now have a single rate for domestic long distance service and differentiated
international long distance rates for each of the following areas: USA, Argentina, Chile, Brazil, Venezuela, Mexico, Cuba, the rest of America, Spain, Italy, Germany, Europe, China, Afghanistan/Pakistan/India, Japan and the rest of the world.
Additionally, we have different rates for calls made to each of these countries with prepaid cards.

25

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Calling Cards


In 1998, we launched the
      sale of prepaid phone cards called Tarjeta 147 that include a new memory chip technology.
      The technology used by Tarjeta 147 prepaid cards is also useful  for providing Internet service
      from residential telephone lines and in general allows the customer to make calls applying different
      rates depending on the destination and length of the call. In 2001, we improved the software platform
      for Tarjeta 147  and developed a new product called the Chip Super Plus 147, which
      facilitates dialing using the chip embedded in the card and can be used from residential telephone
      lines applying a certain code. The Chip Super Plus 147 also allows for  transfer of prepaid minutes
      between cards. On June 2004, due to the amount of fraud registered, marketing of the Tarjeta 147
      was restricted. In 2004, sales of the Tarjeta 147 prepaid cards decreased 10% in comparison to
      2003. In September 2001, we  launched the prepaid card service Hola Perú with domestic and
      international coverage for both incoming and outgoing calls.

Other Services


The Memovox voicemail system offers clients a message reception service for a monthly charge of S/.2.40. During 2004, the number of Memovox users increased to 1,318,502 from 1,113,668 in 2003.
As of April 30, 2005, the number of Memovox users was 1,386,388.

In August 2001, we launched Speedy, a new high-speed Internet access service based on ADSL technology. ADSL technology permits simultaneous use of traditional telephone lines for telephone
service and high-speed digital access to the Internet. In November 2001, we launched Tarifa Plana a Internet, a service providing switch access to the Internet from Monday to Saturday, 7:00 p.m. to 7:00 a.m. and all day Sundays and
national holidays for a flat monthly fee of U.S.$25. In December 2004, such fee was reduced to U.S.$15 and in March 2005 the service was extended to 24 hours a day for a flat monthly fee of S/.69 (including VAT).

Our Customer Base

We have implemented a number of initiatives to improve the quality of our customer base and decrease overdue or uncollectible accounts. We have developed a model to identify and assess the
level of credit risk and debt history of each new customer. Depending on the particular credit risk profile of each customer, we provide products and services tailored to limit exposure to credit risk, such as prepaid telephony services, credit
limits or restrictions on long distance services. For example, we launched telephone lines with mechanisms to limit usage called Líneas Ahorro. We also monitor our service levels to prevent any deterioration in our overall credit quality
profile.

In order to improve our collection processes, we have increased the number of service locations at which customers may pay their bills and we have implemented automatic calling systems and
hired call centers to remind customers of outstanding bills. We also offer to our customers the possibility to finance their overdue amounts, to choose the kind of services and to choose the level of payments and the payment period. These new
measures have reduced the risk of uncollectible accounts and allowed us to optimize the usage of available installed capacity.

To further manage the risk of uncollectible accounts, in 2002 we adopted a retention retirement plan which allows our customers to migrate at no additional charge from their current
telephone service to a fixed charge plan. The plan also offers customers an opportunity to refinance any overdue debt. This plan was introduced as part of our larger strategy to make the process of managing and collecting fees from overdue clients
more efficient.

With a view to ensuring client loyalty, we have focused on improving customer service. One important development was the opening of customer service multicenters. The multicenter concept
emphasizes one of our main competitive advantages, which is that we are the Company offering the widest range of telecommunications products and services in the country. Clients with a variety of telecommunications needs can now visit a single
office, which is staffed with customer service specialists who are trained to provide integral solutions involving basic telephony, public telephony and cable television.

During 2004, lines in service grew 9.5% to approximately 2,156,000 lines from 1,969,000 lines in 2003. Our segmentation strategy permitted us to penetrate the low-income segment due to the
popularity of limited-use and prepaid lines, which reached approximately 1,157,000 lines on December 31, 2004. To become more responsive to our customers needs and tailor our services appropriately, we continued to launch new products and new
options,

26

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ranging from prepaid lines with low prices to flat rates for voice and Internet. The growth rate registered in 2004 has been the largest since the arrival of Telefónica del Perú in 1994. We set a milestone in
the sale of new lines: 404,552, which figure also offsets write-offs that occurred during the year. Due to this expansion and through the use of promotional campaigns, large areas of the country were able to gain access to telephone services. In
addition, sales channels were adapted to the needs and characteristics of lower income segments. In order to facilitate the customer service transformation process, we conducted systematic polls in order to obtain a regular measure of customer
satisfaction and thus take corrective action. A result of this was the introduction of improvements in the products supplied and in the customer management processes.

In 2004, Telefónica launched the program Compromiso Cliente which will last for 1,000 days and which objective is to enhance satisfaction of the internal and the external
customer.

Traffic

We expect that the nature and composition of total traffic carried on the domestic telephone network will continue to change in the next few years. We anticipate further growth in traffic
carried on the domestic network due to increases in international traffic, Internet traffic and value-added services, such as voicemail. We also expect that domestic and international long distance traffic, as a percentage of total revenues, is
likely to continue to decrease as a result of increased competition and the related rate reductions. See Item 5: Operating and Financial Review and ProspectsOverview.

Technological Advancements

In recent years, we have increased the proportion of our lines that are connected to exchanges capable of handling digital signal technology which has improved the quality and efficiency of the
network, accommodated higher traffic levels, required less maintenance and permitted us to offer a broad range of voice, text and data applications simultaneously on the same network. In 1995, we completed our conversion from a microwave network
using an analog switching and transmission system to a digital network that employs both microwave transmission through the Synchronous Digital Hierarchy protocol and fiber optic cable technology. We have modernized our domestic long
distance network by installing several thousand kilometers of fiber optic cable for domestic long distance transmission between major cities. By December 31, 1999, we had replaced 100% of our analog exchanges in the Lima metropolitan area with
digital exchanges. At December 31, 2004, approximately 97% of all lines in service were connected to digital exchanges. We plan to continue to invest in ADSL technology. See Item 3: Key InformationRisk FactorsRisk Factors Related
to Telefónica del PerúRapid technological advances may require us to make significant capital expenditures to maintain and improve the competitiveness of our service offerings.

Competition

As of December 2004, we had 96% of the fixed telephone lines in service. Telmex Perú, formerly AT&T Perú, is our main competitor in terms of revenues with a focus on a
corporate clientele. Telmex Perús main commercial strategy has been to focus on a corporate clientele, to offer long distance services, fixed local voice and data services. Also they have been offering their services to Internet service
providers.

Americatel, a subsidiary of Entel Chile and a Telecom Italia Group affiliate  like the mobile operator TIM Perú (in January 2005 Telecom Italia announced it had sold its stake in
Entel Chile to a Chilean investment group)  is our main competitor in long distance services competing basically under the multi-carrier system with 16% and 27% average market shares in revenues for domestic and international long distance
services, respectively, according to our internal estimates. Other relevant competitors in long distance services are: Telmex Perú using the multi-carrier system and IDT, our main competitor in the prepaid cards market. Due mainly to the
launch of the multi-carrier system during 2002, our rates for domestic long distance services decreased by 3% and rates for international long distance services decreased by 1% as a result of increased competition. See Item 3: Key
InformationRisk FactorsRisk Factors Related to Teléfonica del PerúChanges in the regulations affecting Perús telecommunications industry and the liberalization of Perús telecommunications
market have had and may continue to have a material adverse effect on our results of operations; and see Regulatory MattersMulti-carrier System.

27

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As of December 2004, we provided 90% of the total public telephony service in Perú, which makes us the main provider of these services in the country. Telmex is our competitor in public
telephone services.

Cable television licenses are issued on a non-exclusive basis to several different operators in the same area. According to our own estimates, as of December 2004, Telefónica Multimedia
held a 91% market share nationwide based on revenues. Cable Express, a local operator, is our main competitor, with an estimated 3% market share. Telefónica Multimedias strategy is to rely on a strong differentiation in the quality of
its programming contents, for which it has signed agreements with several international and local content providers. In 2004, according to our internal estimates, we had 94% of the broadband market in terms of total market revenues, through our
Speedy (ADSL-based) and CableNet (cable modem-based) brands.

Regulatory Matters

Overview


We are a regulated operator in Perú. The operation of the telecommunications market in Perú has been and is subject to laws and regulation. The provision of telecommunications
services in Perú is regulated by the Transport and Communications Ministry (the Ministry) and by OSIPTEL. The Ministry has the authority, among other things, to grant concessions and to impose sanctions for infringements of the
Telecommunications Law. Pursuant to the Telecommunications Law, OSIPTEL was created as an independent regulatory body charged with overseeing the implementation of the State Contracts. In this capacity, OSIPTEL oversees and reviews on a regular
basis the expansion, penetration, service quality and tariff structure mandates set forth in the State Contracts; it enforces sanctions for infringements relating to concessions and it resolves disputes between operators. The board of directors of
OSIPTEL consists of five members who are appointed by the government. Pursuant to the OSIPTEL Regulation, action by OSIPTELs
board requires a majority vote on all matters.

We provide telecommunications services based on concessions granted by the Ministry pursuant to State Contracts entered into among the Ministry, CPT and ENTEL on May 16, 1994. These agreements
were previously approved by Supreme Decree No. 11-94-TCC, dated May 16, 1994 and were later modified by Supreme Decree No. 21-98-MTC (Decree 21) on August 5, 1998.

The concession agreements, as modified by Decree 21, contain, among others, the following provisions:

| | (a) | The services rendered by the concession agreements include fixed local telephone services, public telephone services and both domestic and international long distance services, as well as telex and telegraphy
services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (b) | The concession term is for 20 years, which may be renewed totally or partially at our request. Total renewal is for an additional 20-year period. Partial renewal is for periods of up to five additional years to the initial
concession term. Once a regulated operator chooses either a partial or total renewal modality, it cannot switch between them. In our case, we selected a partial renewal modality, which will allow us to renew our term every five years from the
effective date, up to a maximum of 20 years. Under the terms of our concessions contracts, the Transport and Communications Ministry may choose not to renew or extend our contracts if we have repeatedly not complied with the terms of our concessions
contracts as determined by the Peruvian government.                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | A partial renewal of five years was approved by Ministry Resolution No 272-92 dated June 21, 1999, extending the concession term until 2019.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | In December 2003, we petitioned the government for a five-year extension of our concessions contracts from 2019 to 2024. On June 11, 2004, the Ministry notified us of OSIPTELs recommendation not to renew the
concessions contract for an additional five-year period from 2019 to 2024. The Ministry based its recommendation on a report by OSIPTEL, which asserted that we had not complied with certain terms of the concessions contracts. On June 25, 2004 we
filed a petition in which we pointed out the mistakes made by OSIPTEL and the Ministry in denying Telefónicas petition. As of the date hereof, MTC has not issued its final ruling denying or granting the renewal of the concession term
from 2019 to 2024. If the request for extension is denied, then we may again petition for an additional five-year

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| |     | extension period from 2019 to 2024 in December 2008 and 2013. We cannot assure you that our concessions contracts will be renewed for an additional five-year period now or in the future, and our concessions contracts may
expire in 2019.                                                                                                                                                                                                                                                                                                               
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (c) | For the purpose of adjusting telephone rates (tariff-rebalancing), a non-renewable, limited concurrent five-year term (June 1999) for fixed local telephone service and both domestic and international long
distance carrier service was established. Subsequently, and following our request, through Supreme Decree No. 21-98-MTC dated August 5, 1998, the term of the limited concurrent period was shortened. At the same time, a revised tariff structure was imposed,
which established maximum rates and replaced the tariff-rebalancing system.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d) | A price cap system, based on specified formulas, became effective as of September 2001. See Item 3. Risk FactorsOur State Contracts require us to make ongoing rate reductions that adversely affect our financial
results.                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (e) | The obligation to enter, with the consent of OSIPTEL, into interconnection agreements with other companies rendering carrier and final services, as well as with those providing telecommunications services.                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (f) | Certain obligations regarding fixed local telephone service and both domestic and international long distance telephone services related to quality improvement of the service rendered and the expansion plan. In Supreme
Decree No. 21-98-MTC, the Peruvian government has recognized that these obligations have been satisfactorily complied with.                                                                                                                                                                                                     

Telefónica Multimedia holds 20-year concessions for cable television services for Lima and other areas of Perú (pursuant to Resolution No. 108-93-MTC/15.17 and No.
030-96-MTC/15.17) . The earliest date which Telefónica Multimedias concessions expire is 2013.

The State Contracts have the status of contract-law, which, under Peruvian law, are treated like contracts between private parties and, accordingly, may not be modified or terminated by the
state through subsequent legislation or regulation, except as provided in such contracts. However, under the terms of the State Contracts, the Ministry may, when in the public interest, unilaterally modify the terms of the State Contracts:

- as such terms relate to the Ministrys international telecommunications policy; and
- where necessary in order to comply with international laws, treaties or conventions.

Any such unilateral modifications must be carried out in accordance with certain administrative procedures which provide for public comment on any proposed changes. To date, the Ministry has not made or attempted to make
any unilateral modification to the State Contracts.

In accordance with the State Contracts Decree No. 013-93-TCC and its regulations, telephone concessionaires are required to pay the fees and rates, as set forth below.

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|Taxes and Fees                                                         |  | Beneficiary |  | Percentage
|---------------------------------------------------------------------- |  | ----------- |  | ----------
|                                                                       |  |             |  |           
|Special fee assigned to the Telecommunications Investment Fund (FITEL) |  | OSIPTEL     |  | 1.0%(1)   
|Contributions for supervision services                                 |  | OSIPTEL     |  | 0.5%(2)   
|Commercial service usage rate                                          |  | Ministry    |  | 0.5%(3)   

|   
|---
|(1)
|   
|(2)
|   
|(3)

Liberalization of Telecommunications Services


Pursuant to the State Contracts entered into in 1994, we had the right to provide fixed local and long distance telephone services as well as international carrier services on an exclusive
basis until June 27, 1999. The original terms of the State Contracts provided for a tariff-rebalancing system to be in effect until the end of the exclusivity period, after which such system would be replaced with a price cap system based on a
productivity factor, revised every three years.

For several decades, Perú has been a full member of the General Agreement on Tariffs and Trade (GATT) and at the end of 1994, it signed the articles which created the World Trade
Organization (WTO). Perú accepted and signed in April 1997 the Fourth Protocol of the General Agreement on Trade in Services (GATS) that included a schedule of specific commitments for basic telecommunications services and the Annex on
Telecommunications (GATS/SC/69/Suppl.1). By virtue of this agreement, the Council for Trade in Services was established on February 5, 1998, the date Article IV of the GATS came into effect.

The Peruvian government assumed commitments, which are considered supernational laws, which cannot be abrogated or unilaterally modified by the government, by changes in the government, nor by
changes to the constitutions of any of the member countries. Accordingly, for telecommunications services, the Government presented its schedule of commitments to the WTO about maintaining the limited competition period in fixed local telephone
service and long distance telephone service until June 1999 while opening other telecommunications services to full competition from either domestic or foreign investors, without distinctions in treatment between the two. Subsequently, the
government reduced the period of limited competition to July 1998, when Perú increased its commitments under the schedule of commitments submitted to the WTO.

On August 5, 1998, the Peruvian government published Decree 21, modifying, with our approval, the State Contracts entered into as of 1994. Decree 21 opened up the market for fixed local and
long distance services to competition approximately one year earlier than originally stipulated in the State Contracts due to the fact that goals for expansion and quality had already been met. Decree 21 postponed the implementation of the price cap
system for three years, but in the meantime replaced the tariff-rebalancing system with a revised tariff structure, which established maximum rates based on the current rate of inflation. Decree 21 established that the revised tariff structure would
be in effect from August 1998 to August 2001, after which time the price cap structure would go into effect.

Decree 21 also expanded the size of local service areas so that they encompassed entire political departments rather than smaller urban centers, hence making it cheaper for customers to call
longer distances at a local rate. In 1998, the Peruvian government also published Decree No. 020-98-MTC (Decree 20), which implemented certain of the modifications to the State Contracts made by Decree 21.

Pursuant to Decree 20, in the case of long distance services, each concessionaire agrees to provide such services to at least five cities with a minimum of 50,000 inhabitants each and located
in five different provinces. These expansion requirements must be met within a period of two years using the concessionaires own infrastructure and at least one switching center. In the case of fixed local service, the minimum expansion plan
requires the concessionaire to increase telephone lines in its area of operation by an amount equal to at least 5% of the total lines installed by the largest operator in such area, with at least 10% of new lines installed outside of the most
populated

30

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city in the area of operation. Concessions are also granted on a limited basis for radio frequencies under a competitive bidding process.

In March 2003, the Ministry modified Decree 20 by Decree 015-2003-MTC (Decree 15), to relax the expansion requirements for new entrants into the local fixed telephony and long
distance services market. Rather than having to comply with the minimum expansion plan within two years, new entrants now have five years to comply (although this time frame may be adjusted depending on demand). Also, Decree 15 eliminated the
expansion requirements for anywhere outside of the Lima metropolitan area and reduced the minimal concession area to a political province while maintaining the political department as a local area. Decree 15 did not modify any of the terms of our
State Contracts and only applied to our competitors.

On November 27, 2003, the Ministry published Supreme Decree No. 062-2003-MTC establishing the interoperability system, which enables local operators to access the network of another local
operator to offer services by prepaid cards. The decree established that the operators who want to access the interoperability system must commercially offer fixed telephone service and the Ministry must have approved their minimum expansion plans.
As such, the Ministry intends to expand the overage of fixed telephone service. The technical, economic and legal requirements to access the interoperability system were established by OSIPTEL in Resolution No. 025-2004-CD/OSIPTEL on March 8, 2004.
The economic requirements establish that, for calls originating and terminating in the same network, the interoperability operator of the prepaid card plan must pay the owner of the network the equivalent of twice the call origination
interconnection charge for the call. On April 20, 2004, the Ministry promulgated Ministerial Resolution No. 284-2004-MTC/03, which established the minimum expansion requirements that operators must complete in order to be eligible for operability.
Operators must expand the minimal plans to provide telephone service in certain localities by at least 5% of the number of subscribers, or 8% of the number of public telephones installed by the largest established operator. On April 23, 2004, the
Ministry approved the regulation for the interoperability through Supreme Decree No. 021-2004 MTC. On August 13, 2004, the Ministry modified Supreme Decree No. 062-2003 MTC through Supreme Decree No. 029-2004-MTC which established code habilitation
in fixed networks for other fixed and mobile operators; it also established the access to long distance services and valued-added services. On August 14, 2004, the Ministry established the special services with interoperability by Ministerial
Resolution No. 605-2004-MTC/03. Finally, on November 16, 2004, the Ministry published the project to modify Supreme Decree No. 062-2003-MTC which includes,inter alia, the
obligation of mobile operators for code habilitation of the interoperability system.

On January 12, 2004, the Ministry, through the
President of the Republic, sent to the Peruvian Congress the Project of Infrastructure Sharing Law for
its consideration and approval. This  project would establish the obligation to share ownership of the
infrastructure for electrical and telecommunications businesses, as demanded by considerations of public
health, environment and urban planning and/or when it is determined by OSIPTEL.  Law No. 28295 of Infrastructure
Sharing was published on July 21, 2004 and its regulation, which was approved by Supreme Decree No. 009-2005
MTC, was published on March 21, 2005.

Local and Long Distance Services


Tariff Rebalancing Structure

Prior to 1994, rates for local and long distance telephone services under a privatized market were significantly unbalanced in comparison to the costs of providing such services, with local
service rates being heavily subsidized by domestic and international long distance rates. In addition, installation fees significantly exceeded equivalent charges by operators in other countries. The tariff levels originally mandated under the State
Contracts sought to gradually rebalance telephone service charges by significantly increasing monthly service charges while lowering measured service charges, particularly for long distance. The State Contracts also mandated the gradual reduction of
installation fees and elimination of the distinction in fees charged to residential customers and commercial customers. The State Contracts provided that tariffs charged at any point in time for telephone services may fluctuate within a band of 5%
above and 15% below established maximum levels set forth therein, and that we could adjust our rates on a quarterly basis (subject to the maximum levels set) in accordance with changes in inflation as measured by the CPI. In addition, if the CPI
varied by more than 10% at any given time during the quarter, the State Contracts permitted us to appeal to the OSIPTEL for an immediate rate adjustment.

31

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The maximum tariffs were determined according to two formulas contained in the State Contracts. The first formula applied the required yearly increases and decreases, as the case may be, on an
approximatepro ratabasis for each quarter. The second formula additionally adjusted rates to take account of changes in the CPI during the preceding quarter. At the end of
each quarter, we were required to submit to OSIPTEL a proposal for the tariffs to be charged for the following quarter. The quarterly periods referred to herein for the purpose of adjusting tariffs do not coincide with fiscal quarters. OSIPTEL
reviewed on an ongoing basis the weighted average tariff charged to users in order to monitor compliance with the maximum tariff levels.

First Tariff Review

Effective August 1, 1998, Decree 21 required OSIPTEL to replace the old tariff-rebalancing system with a new revised tariff structure, which would be in effect through August 2001. As set forth
under the State Contracts, the revised tariff structure established maximum rates for local and long distance telephone services based on the rate of inflation as calculated by the CPI. For a list of the rates and fees approved during the period of
August 1998 to May 2003, see Regulatory MattersRates below.

Current Price Cap Structure and Productivity Factor

As of September 2001, pursuant to the State Contracts as modified by Decree 21, a price cap system went into effect, further restricting price increases and requiring overall rate reductions
for certain services. This new system adopted a price cap formula, adjusted quarterly, for three regulated baskets as defined by the State Contracts. These three baskets are: (1) connection fees, (2) monthly fixed fees and local usage fees, and (3)
domestic and international long distance usage fees. The price cap formula considered, among other things, the rate of inflation as measured by the CPI and a productivity factor which, pursuant to the terms of the State Contracts, would
be adjusted every three years. The formula allows us to increase tariffs up to the difference between the CPI and the productivity factor, equaling the gains in productivity of our business relative to the gains in productivity of the rest of the
economy. We are still permitted under the price cap system to adjust our rates on a quarterly basis (subject to the maximum levels established by OSIPTEL) in accordance with changes in inflation.

OSIPTEL set the value of the productivity factor,
effective September 2001 through August 2004, to be (6%) annually, equivalent to (1.535%) quarterly.
In July 2004, OSIPTEL set the new value of  the productivity factor for the period September 2004 to
August 2007 at (10.07%) annually, or (2.619%) quarterly, for fixed local service and (7.8%) annually,
or (2.010%) quarterly, for domestic and international long distance services. As a result  of the price
cap formula, we have decreased our tariffs sixteen times, in September and December of 2001, March, June,
September and December in each of 2002, 2003 and 2004 and again in March and June of 2005. Taking inflation
into account, the  maximum tariffs for groups C (sole installation charge) and D (monthly rent and local
calls) were reduced by 20.03%, while the tariff of group E (national and international calls) was reduced
18.02% . During this period, we also increased the length  of the off-peak hours.

Rates


The following table sets forth our rates and fees approved for the periods effective from January 1999 to August 2001 (as determined under the revised tariff system) and September 2001 to the
present (as determined under the current price cap system). The rates and fees are stated in constantnuevos soles as of July 31, 1998.

|                            |             |  |             |  |        |    |  |            |  | March     |  |        |    |  | June 2002- |  |             |  |        |   
|--------------------------- | ----------- |  | ----------- |  | ------ | -- |  | ---------- |  | --------- |  | ------ | -- |  | ---------- |  | ----------- |  | ------ | --
|                            | Jan. 1999 - |  | Sept. 2001- |  |        |    |  | Dec. 2001- |  | 2002- May |  |        |    |  | August     |  | Sept. 2002- |  |        |   
|                            | Aug. 2001   |  | Nov. 2001   |  | % Var. |    |  | Feb. 2002  |  | 2002      |  | % Var. |    |  | 2002       |  | Nov. 2002   |  | % Var. |   
|                            |             |  |             |  |        |    |  |            |  |           |  |        |    |  |            |  |             |  |        |   
|Installation:               |             |  |             |  |        |    |  |            |  |           |  |        |    |  |            |  |             |  |        |   
|Residential                 | 437.58      |  | 432.53      |  | (1.2   | %) |  | 427.97     |  | 419.15    |  | (2.1   | %) |  | 410.04     |  | 403.89      |  | (1.5   | %)
|Commercial                  | 437.58      |  | 432.53      |  | (1.2   | %) |  | 427.97     |  | 419.15    |  | (2.1   | %) |  | 410.04     |  | 403.89      |  | (1.5   | %)
|Monthly service charges(1): |             |  |             |  |        |    |  |            |  |           |  |        |    |  |            |  |             |  |        |   
|Residential                 | 46.31       |  | 45.67       |  | (1.4   | %) |  | 45.92      |  | 45.93     |  | 0.0    | %  |  | 45.64      |  | 44.99       |  | (1.4   | %)
|Commercial                  | 46.31       |  | 45.67       |  | (1.4   | %) |  | 45.92      |  | 45.93     |  | 0.0    | %  |  | 45.64      |  | 44.99       |  | (1.4   | %)
|Measured service            |             |  |             |  |        |    |  |            |  |           |  |        |    |  |            |  |             |  |        |   
|charges(2):                 |             |  |             |  |        |    |  |            |  |           |  |        |    |  |            |  |             |  |        |   
|Local                       | 0.077       |  | 0.077       |  | (0.6   | %) |  | 0.077      |  | 0.077     |  | 0.0    | %  |  | 0.077      |  | 0.075       |  | (1.8   | %)
|Local off-peak              | 0.039       |  | 0.038       |  | (3.0   | %) |  | 0.039      |  | 0.038     |  | (2.4   | %) |  | 0.038      |  | 0.038       |  | (0.6   | %)
|Domestic long distance      | 0.511       |  | 0.512       |  | 0.3    | %  |  | 0.499      |  | 0.490     |  | (1.7   | %) |  | 0.494      |  | 0.529       |  | 7.0    | % 

32

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|                            |             |  |             |  |        |   |  |            |  | March     |  |        |    |  | June 2002- |  |             |  |        |   
|--------------------------- | ----------- |  | ----------- |  | ------ | - |  | ---------- |  | --------- |  | ------ | -- |  | ---------- |  | ----------- |  | ------ | --
|                            | Jan. 1999 - |  | Sept. 2001- |  |        |   |  | Dec. 2001- |  | 2002- May |  |        |    |  | August     |  | Sept. 2002- |  |        |   
|                            | Aug. 2001   |  | Nov. 2001   |  | % Var. |   |  | Feb. 2002  |  | 2002      |  | % Var. |    |  | 2002       |  | Nov. 2002   |  | % Var. |   
|                            |             |  |             |  |        |   |  |            |  |           |  |        |    |  |            |  |             |  |        |   
|International long distance | 2.305       |  | 2.310       |  | 0.2    | % |  | 2.227      |  | 2.143     |  | (3.8   | %) |  | 2.072      |  | 1.862       |  | (10.1  | %)

|                             |            |  | March    |  |        |    |  | June 2003- |  |             |  |       |    |  |            |  | March    |  |        |   
|---------------------------- | ---------- |  | -------- |  | ------ | -- |  | ---------- |  | ----------- |  | ----- | -- |  | ---------- |  | -------- |  | ------ | --
|                             | Dec. 2002- |  | 2003-May |  |        |    |  | August     |  | Sept. 2003- |  |       |    |  | Dec. 2003- |  | 2004-May |  |        |   
|                             | Feb. 2003  |  | 2003     |  | % Var. |    |  | 2003       |  | Nov. 2003   |  | % Var |    |  | Feb. 2004  |  | 2004     |  | % Var. |   
|                             |            |  |          |  |        |    |  |            |  |             |  |       |    |  |            |  |          |  |        |   
|Installation:                |            |  |          |  |        |    |  |            |  |             |  |       |    |  |            |  |          |  |        |   
|Residential                  | 398.97     |  | 386.91   |  | (3.0   | %) |  | 389.06     |  | 380.39      |  | (2.23 | %) |  | 373.20     |  | 362.76   |  | (2.8   | %)
|Commercial                   | 398.97     |  | 386.91   |  | (3.0   | %) |  | 389.06     |  | 380.39      |  | (2.23 | %) |  | 373.20     |  | 362.76   |  | (2.8   | %)
|Monthly service charges(1):  |            |  |          |  |        |    |  |            |  |             |  |       |    |  |            |  |          |  |        |   
|Residential                  | 44.86      |  | 44.06    |  | (1.8   | %) |  | 44.30      |  | 44.12       |  | (0.41 | %) |  | 43.74      |  | 42.84    |  | (2.1   | %)
|Commercial                   | 44.86      |  | 44.06    |  | (1.8   | %) |  | 44.30      |  | 44.12       |  | (0.41 | %) |  | 43.74      |  | 42.84    |  | (2.1   | %)
|Measured service charges(2): |            |  |          |  |        |    |  |            |  |             |  |       |    |  |            |  |          |  |        |   
|Local                        | 0.073      |  | 0.070    |  | (4.3   | %) |  | 0.071      |  | 0.070       |  | (1.41 | %) |  | 0.070      |  | 0.068    |  | (2.1   | %)
|Local off-peak               | 0.037      |  | 0.032    |  | (11.6  | %) |  | 0.033      |  | 0.032       |  | (3.03 | %) |  | 0.032      |  | 0.032    |  | (2.1   | %)
|Domestic long distance       | 0.529      |  | 0.490    |  | (7.4   | %) |  | 0.539      |  | 0.523       |  | (2.97 | %) |  | 0.518      |  | 0.519    |  | 0.3    | % 
|International long distance  | 1.860      |  | 1.800    |  | (3.2   | %) |  | 1.892      |  | 1.907       |  | 0.79  | %  |  | 1.851      |  | 1.773    |  | (4.2   | %)

|                             | June 2004- |  |             |  |        |    |  |            |  | June 2005- |     |  |        |   
|---------------------------- | ---------- |  | ----------- |  | ------ | -- |  | ---------- |  | ---------- | --- |  | ------ | --
|                             | August     |  | Sept. 2004- |  |        |    |  | Dec. 2004- |  | August     |     |  |        |   
|                             | 2004       |  | Nov. 2004   |  | % Var. |    |  | Feb. 2005  |  | 2005       | (3) |  | % Var. |   
|                             |            |  |             |  |        |    |  |            |  |            |     |  |        |   
|Installation:                |            |  |             |  |        |    |  |            |  |            |     |  |        |   
|Residential                  | 359.55     |  | 352.55      |  | (1.9   | %) |  | 343.17     |  | 325.47     |     |  | (3.0   | %)
|Commercial                   | 359.55     |  | 352.55      |  | (1.9   | %) |  | 343.17     |  | 325.47     |     |  | (3.0   | %)
|Monthly service charges(1):  |            |  |             |  |        |    |  |            |  |            |     |  |        |   
|Residential                  | 42.46      |  | 42.37       |  | (0.2   | %) |  | 42.27      |  | 41.95      |     |  | (0.9   | %)
|Commercial                   | 42.46      |  | 42.37       |  | (0.2   | %) |  | 42.27      |  | 41.95      |     |  | (0.9   | %)
|Measured service charges(2): |            |  |             |  |        |    |  |            |  |            |     |  |        |   
|Local                        | 0.068      |  | 0.068       |  | (0.2   | %) |  | 0.062      |  | 0.049      |     |  | (11.7  | %)
|Local off-peak               | 0.041      |  | 0.041       |  | (0.2   | %) |  | 0.038      |  | 0.032      |     |  | (10.6  | %)
|Domestic long distance       | 0.509      |  | 0.497       |  | (2.4   | %) |  | 0.535      |  | 0.528      |     |  | (0.9   | %)
|International long distance  | 1.740      |  | 1.721       |  | (1.1   | %) |  | 1.470      |  | 1.211      |     |  | (10.2  | %)

|(1) | Includes free local calling time equal to 60 billing minutes.                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | Applies to call completion charge equal to a one-minute interval. Local tariffs correspond to the average charge for call set up and to the per minute charge. In December 2004, the reduction of the call set up charge began
(which had been applied since 1997, as a result of the change in the billing interval from three minutes to one minute). In June 2005, 100% of the planned reduction was achieved. Local and long distance calls are now billed at one minute
intervals.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) | Productivity factor applicable from June through August 2005 is 0.9788 for group C and 0.9849 for group E.                                                                                                                                                                                                                                                                                                                                                                             

Interconnection Charges


The Interconnection Regulation came into effect on January 16, 1998, pursuant to Resolution No. 001-98-CD, establishing that operators must provide at least one point of interconnection in each
local area for local-to-local, long distance-to-local and long distance-to-long distance interconnections. The charges for interconnection services are freely negotiated between the parties and are calculated based on interconnection costs,
contributions to the lender of local service and a reasonable profit margin. However, if the parties are unable to reach an agreement, interconnection charges established by OSIPTEL will be applied. Furthermore, OSIPTEL has the authority to
establish caps on the amount of interconnection rates that may be charged.

Upon the opening of the market to competition through Decree 20, OSIPTEL established the maximum interconnection rate based upon the analysis of policies applied in other countries. Pursuant to
Resolution No. 018-98-CD/OSIPTEL, dated October 5, 1998, OSIPTEL set the maximum and default interconnection charges at U.S.$0.015 per minute as the evening rate for interconnection to local fixed telephone networks and U.S.$0.029 for
interconnection to all other public telecommunications services. On November 30, 2000, pursuant to Regulation No. 61-2000-CD/OSIPTEL, OSIPTEL reduced the maximum interconnection charge for local fixed telephone networks from U.S.$0.029 per minute to
U.S.$0.0168 per minute, priced by each second rather than rounded to the nearest

33

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upper minute. This reduction became effective on January 1, 2001. Subsequently, pursuant to Regulation No. 029-2001-CD, dated June 27, 2001, the maximum weighted average interconnection charge for local fixed telephone
networks was further reduced from U.S.$0.0168 to U.S.$0.014 per minute, priced by the second. This further reduction came into effect on July 1, 2001.

In order to establish a maximum interconnection
charge based on cost-related information, we asked OSIPTEL to set the interconnection charge on the basis
of a Long Run Incremental Cost (LRIC)  model provided by us and subsequently approved by OSIPTEL. As
a result, the maximum interconnection charge was reduced to U.S.$0.01208 per minute, priced by the second.
The new rate adopted is lower than what we initially assumed in our cost model,  but higher than the
rate that OSIPTEL would have set based on its previous international benchmark methodology. The new rate
went into effect April 1, 2003. In March 2005, the Ministry modified Decree 20 through Decree 007-2005-MTC
in order to  establish OSIPTELs obligation to review interconnection charges every four years.

Multi-Carrier System


Pursuant to Decree 20 (as regulated by Resolution
    No. 006-99-CD/OSIPTEL, dated April 14, 1999) subscribers have the right to select long distance carriers
    in advance, but then all long distance  telephone calls are made, by default, through that carrier.
    In addition, under the new multi-carrier system effective April 2002, subscribers have the right
    to select long distance carriers on a per-call basis, such that a subscriber could opt to  select
    a different carrier for each long distance call made.

Long Distance Carrier Change Fees


Pursuant to Resolution No. 036/99-CD, dated December 14, 1999, OSIPTEL set the maximum amount to be paid when a subscriber changes long distance carriers at U.S.$5.00 (not including taxes).
Subscribers must pay this fee each time they select another long distance carrier.

Resolution No. 037/99-CD, dated December 14,
1999, permitted long distance concessionaires, including us, to recover from subscribers up to an industry
total of U.S.$13.3 million in costs that  they invested up-front for the expansion and development of
the telecommunications network in Perú. The concessionaires who invested may then recover their
costs by collecting over a five-year period per minute charges set at U.S.$0.0026 for  2000 and 2001,
U.S.$0.0038 for 2002, U.S.$0.0043 for 2003 and U.S.$0.0037 for 2004 on outgoing calls.

Expansion and Service Requirements


The State Contracts set forth certain mandatory
    expansion objectives (on a cumulative basis) with respect to the installation of additional lines
    and public telephones in the Lima metropolitan area and the rest of Perú that we agreed to
achieve and maintain through 1998.

We met all of our yearly additional line installation requirements under the State Contracts by December 31, 1998, and by 2004, we had installed 2,307,247 lines on a cumulative basis. The State
Contracts required that we provide public telephone service by June 27, 1999 to each of the 1,494 population centers listed therein as having more than 500 inhabitants. In 1994, we initiated a program to expedite the expansion of rural telephone
service and as of December 31, 1999, we provided public telephone service to all of the 1,494 locations. By July 2002, we had expanded the public telephony service up to 1,611 population centers, with 167 of them being serviced through local fixed
networks instead of single public telephones. By the end of 2002, 3,244 and 107,280 public telephones had been installed in rural and urban areas, respectively. By December 2003, we had installed 3,558 public rural telephones in 2,132 rural centers.
By December 2004, we had installed 3,854 public rural telephones in 2,139 rural centers.

In addition to the expansion mandates, the State Contracts provide that we must also improve service quality through 2003. These service quality mandates require us, among other things, to
increase our percentage of completed calls, reduce network failure, reduce waiting time for operator assistance and, beginning in 1998, reduce waiting time for responding to new service requests in urban areas (excluding prepaid phone service and
special promotions in which the connection fee is reduced by 20% or more). The mandates for responding to new service requests are described in the chart below.

34

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|                         |  | Service Requests Which Must be Met |  |             
|------------------------ |  | ---------------------------------- |  | ------------
|Years Ended December 31, |  | Within Waiting Time (%)            |  | Waiting Time
|                         |  |                                    |  |             
|2001                     |  | 96                                 |  | 15 days     
|2002                     |  | 97                                 |  | 10 days     
|2003                     |  | 98                                 |  | 5 days      
|2004                     |  | 98                                 |  | 5 days      
|2005                     |  | 98                                 |  | 5 days      

We are in compliance with our expansion and service mandates. We file compliance reports with OSIPTEL:

- on a monthly basis with respect to call efficiency, operator-assisted calls, failures allowed and repairs; and
- on a quarterly basis with respect to waiting time for installation.

Cable Television


OSIPTEL is also responsible for the supervision
    and enforcement of cable broadcasting and the regulation thereof. Pursuant to the Telecommunications
    Law, concessions for cable broadcasting are  granted for 20 year terms. Our cable television concessions
    were granted in 1993 for Lima and in 1996 for seven other Peruvian provinces. Both concessions were
    extended to new geographical locations in 2001. In March 2004, the Transportation and  Communication
    Ministry issued DS No. 012-2004-MTC which required cable operators to install free of charge cable
    service in hospitals and state schools for up to 1% of its total amount of subscribers.

Compliance


The State Contracts provide that repeated
    noncompliance with certain of the mandates set forth therein, such as adherence to service requirements,
    maximum rates for tariffs and interconnection charges and international telecommunications obligations,
    among others, could result in one or more of the concessions being revoked or limited. Although the
    State Contracts originally imposed significant monetary penalties for noncompliance with the expansionary
    requirements, these penalties no longer apply to us since we have already complied with all such
    requirements. The State Contracts impose monetary penalties for noncompliance with service quality
    requirements applicable only until 2003. Temporary or permanent revocation of any of our concessions
    could have a material adverse effect on our financial condition and results of operations. See Item
3: Key InformationRisk Factors.

OSIPTEL has sought to impose penalties on us under the State Contracts on two occasions in 1994, during the beginning of privatization, over disagreements regarding adherence to service
requirements and reporting rules. We appealed both decisions and both were decided in our favor on appeal and the penalties were dismissed. Since then, OSIPTEL has not sought to impose any further penalties on us.

C. Organizational Structure

As of December 31, 2004, Telefónica, the Spanish international telecommunications company, indirectly owned approximately 98% of all our outstanding shares. The remaining 2% of our
capital is owned by holders not affiliated with Telefónica. Our capital stock is owned by Telefónica Internacional, S.A., which is 100% held by Telefónica, and Telefónica Perú Holding S.A.C. Telefónica
Internacional owns a 99.99% interest in Telefónica Perú Holding S.A.C.

The following is a list of our significant subsidiaries, all of which were incorporated in Perú:

|                             |  | Year of       |  | Ownership | 
|---------------------------- |  | ------------- |  | --------- | 
|Name of affiliates(1)        |  | Incorporation |  | Interest  | 
|                             |  |               |  |           | 
|Telefónica Multimedia S.A.C. |  | 1995          |  | 99.99%    | 

35

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|Telefónica Servicios Integrados S.A.C.                            |  | 1996 |  | 99.99% | 
|----------------------------------------------------------------- |  | ---- |  | ------ | 
|Transporte Urgente de Mensajería S.A.C.                           |  | 1998 |  | 99.99% | 
|Telefónica Servicios Comerciales S.A.C.                           |  | 1999 |  | 99.90% | 
|Telefónica Soluciones Globales Holding S.A.C.                     |  | 2000 |  | 99.90% | 
|Telefónica Servicios Digitales S.A.C.                             |  | 2000 |  | 51.00% | 
|Servicios Editoriales del Perú S.A.C.                             |  | 2000 |  | 99.99% | 
|Servicios Globales de Telecomunicaciones S.A.C.                   |  | 2001 |  | 99.99% | 
|Telefónica Servicios Técnicos S.A.C.                              |  | 2001 |  | 99.99% | 
|Media Networks Perú S.A.C. (formerly Antena 3 Producciones, S.A.) |  | 2004 |  | 99.99% | 

|   
|---
|(1)

The scope of
each one of these affiliates is described below:

Telefónica Multimedia S.A.C.provides cable television services.

Telefónica Servicios Integrados S.A.C.provides telecommunications services related to computer and communications systems.

Transporte Urgente de Mensajería S.A.C.provides general local and domestic courier services, collection, delivery services, special courier
services, labeling, flier distribution and sorting of electronic mail.

Telefónica Servicios Comerciales S.A.C.provides specialized services for sales of all types of telecommunications goods and services.

Telefónica Soluciones Globales Holding S.A.C.handles commercial activities related to investments and possession of all types of goods, including
the purchase, sale, administration and custody of personal and real property, investment in shares, and bonds and other securities.

Telefónica Servicios Digitales S.A.C.converts and processes document images and offers consulting services on converted and stored images.

Servicios Editoriales del Perú S.A.C.handles the publication, design, distribution and other activities related to the production of all types of
publications and printed material and coordinates advertising on television, radio, panels and other mass media.

Servicios Globales de Telecomunicaciones S.A.C.provides general services for telecommunications and radio communications.

Telefónica Servicios Técnicos S.A.C.handles the commercialization, advising, installation and rendering services for equipment and
telecommunications network maintenance.

Media Networks Perú S.A.C.handles the production and syndication of television programs. This subsidiary was acquired in 2004, and was previously
owned by Antena 3 Televisión S.A., a company incorporated in Spain.

D.  Property, Plant and Equipment

Our principal properties consist of numerous buildings and telecommunications installations, including exchanges of various sizes, transmission equipment, cable networks, and equipment for
radio communications. Exchanges include local exchanges, toll exchanges that connect local exchanges to long distance transmission facilities and tandem exchanges that connect local exchanges with each other and with toll
exchanges.

Our properties are located throughout Perú, principally in the Lima metropolitan area. Of the net book value of our total fixed assets as of December 31, 2004:

- telephone plant and equipment represented approximately 83%;
- land and buildings represented approximately 11%; and

36

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- work in progress and equipment in transit represented approximately 6%.

We believe that such assets are, and for the foreseeable future will be, adequate and suitable for their respective uses. By December 31, 2004, we had replaced almost all electro-mechanical and
semi-electronic exchanges with digital exchanges, and our digitalization rate was approximately 97%.

At December 31, 2004, the net value of our material fixed assets was S/.5,814 million. In addition, we had S/.25.5 million of net assets acquired through lease financing, primarily buildings
and vehicle acquisitions. At December 31, 2004, the number of installed lines was 2,307,247, of which 93%, or 2,155,648, were lines in service.

Our Network

|Description                                 |  | 2000  |  | 2001  |  | 2002  |  | 2003  |  | 2004 
|------------------------------------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | -----
|                                            |  |       |  |       |  |       |  |       |  |      
|Coaxial cable (Km)                          |  | 5,585 |  | 5,697 |  | 5,738 |  | 5,797 |  | 5,870
|Fiber optic cable (Km)                      |  | 6,508 |  | 6,728 |  | 6,761 |  | 6,993 |  | 7,090
|Limited-consumption lines (Thousands of Km) |  | 5,270 |  | 5,270 |  | 5,316 |  | 5,517 |  | 5,757

For more information on our property, plant and equipment, see Business Overview.

Item 5. Operating and Financial Review and Prospects

In addition to the management discussion below, you should carefully read our Consolidated Annual Financial Statements and selected financial data included elsewhere in this Annual Report for
additional information about us. We prepare our financial statements in accordance with Peruvian GAAP. Peruvian GAAP differs from U.S. GAAP. See Item 3: Key InformationSelected Financial Data and note 35 to our Consolidated Annual
Financial Statements.

Introduction; Presentation of Financial Information

We are a provider of fixed local, domestic and
international long distance, cable television, business communications and other telecommunications services
in Perú.

Factors Affecting Our Consolidated Results of Operations


Peruvian Political and Economic Environment

As a Peruvian company with all of our operations in Perú, our financial condition and results of operations have been, and will continue to be, influenced by the economic, political and
social environment in Perú. We believe that continued growth in the demand and customer base for our services in Perú will be influenced by the growth rate of the Peruvian economy, as well as by the nations economic, political
and regulatory policies.

During the period from 1997 to 2004, Perú experienced intermittent periods of economic growth and contraction as a result of external factors, including but not limited to, interest
rates in global financial markets, changes in international prices of commodities, low growth affecting the United States and other trading partners and changes in the credit ratings of Peruvian sovereign bonds. Perús economy is also
affected by internal factors, including, but not limited to, general current economic, business or political events in Perú, the depreciation of the nuevo sol, the ability of the Peruvian government to enact key economic reforms, the levels
of domestic debt and domestic inflation, the level of foreign direct and portfolio investment and natural occurrences such as El Niño, earthquakes and floods. The economic and monetary program implemented by the Peruvian government during the
early 1990s achieved a drastic reduction in inflation, liberated interest rates and eliminated exchange rate controls. Since 1992, the Peruvian government also privatized most of its assets, including those in finance, fishing, electricity, mining
and telecommunications. As a result of the privatization program undertaken by the government, the public sector currently plays a more limited role than it did in previous decades. The more than 200 privatizations completed in Perú since
1992 have generated revenues of approximately U.S.$9.8 billion during that period and almost U.S.$9 billion in private investments associated with those programs.

37

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President Alejandro Toledo, who assumed the presidency in July 2001, implemented some proposals to stimulate Perús economy, including privatization and a fiscal austerity program.
Although Toledos policies spurred moderate economic growth in the fourth quarter of 2001 and the first quarter of 2002, certain of his social and economic priorities have been met with political resistance. For example, in June 2002, in
response to protests and political opposition in Arequipa and Tacna to the sale of the power generation companies Egasa S.A. (Generación Eléctrica de Arequipa, S.A.) and Egesur, S.A. (Generación Eléctrica del Sur, S.A.),
the Peruvian government suspended the sale of the two companies and the privatization process. Regional authorities also challenged the sale.

As of January 1, 2003, Perús centralized government system now includes 25 new regional governments governed by locally elected officials. APRA, the second largest party in
Congress, won 12 out of 25 presidencies, whereas Perú Posible, led by current President Toledo, only won one. While this political shift is not expected to impact Perús economic, regulatory or political policies in the near-term,
it is uncertain how this will affect Perú in the long-term. Nevertheless, Perú is a member of the WTO and has signed GATS, in which Perú committed to a schedule to open up their telecommunications market to competition. These
international agreements are supranational laws that cannot be changed by subsequent governments or changes in Perús constitution.

Overall, Perús economy in 2004 performed relatively well, according to analysts. First, the gross domestic product (GDP) grew by 4.8% and some foreign accounts attained historic
levels (exports of U.S.$12.617 billion, a trade balance of U.S.$2.793 billon and international reserves of U.S.$12.631 billion). Moreover, the inflation target of 3.5% was met and the fiscal deficit was reduced (from 1.8% to 1.1% of the GDP). This
economic performance was mainly supported by a quite favorable international environment. We expect the following factors to impact Perús economy in 2005: (i) the political uncertainty related to the beginning of the presidential and
parliamentary election campaigns that will take place in April 2006; (ii) the gradual decrease or deterioration of global economic activities could be more abrupt than anticipated, which would affect the prices and the world demand for Peruvian
export products; (iii) an increase in interest rates; and (iv) the elimination of global trade quotas for textiles and clothing on the national export industry, which would be of particular importance for urban employment.

Macroeconomic Results

GDP grew 4.8% in 2004 and 42 consecutive months of growth were accumulated. GDP was mainly driven by the export sectors vitality. However, domestic demand grew below this indicator. In
contrast, private investment grew at its fastest rate since 1998. Sectorwise, for the second consecutive year, non-primary sectors grew more than primary sectors. The lower performance of the latter is mainly associated with the drought that
affected the farming sector. However, the fishing sector had a good year, the mining sector registered its highest copper, gold and silver prices of the last 15 years, and the hydrocarbon sector began to register important growth rates following the
start-up of operations in Camisea. Within the non-primary sectors, the performance of non-primary manufacture stands out, which grew at its fastest rate since 1996.

As far as prices are concerned, inflation stood at 3.48%, the highest figure recorded in the last four years, but remained within the target range established by the Central Bank: between 1.5%
and 3.5% . Throughout the year, certain inflationary pressures were evidenced owing to two important shocks on the supply: the drought that affected the price of farming products and the increase in international oil prices. On the other
hand, the wholesale price index registered a 4.89% growth. With respect to public finances, the fiscal deficit decreased to 1.1% of the GDP (below the government target of 1.4% of the GDP). Tax collection reached 13.3% of the GDP, the highest figure
recorded in six years owing to a 9.7% increase in revenues in real terms. The larger revenues obtained were due to economic growth, the fight against evasion, the increase of tax rates and the institution of new taxes. For example, in August 2003
the VAT rate was increased from 18% to 19%, and in March 2004 the tax on financial transactions (ITF) was created. As far as expenditures are concerned, there was an under-execution in the first half of the year, which was corrected in the following
months and kept expenditures within budget limits.

The trade balance reached a historical surplus of U.S.$2.793 billion, mainly based on the substantial growth of traditional and non-traditional exports. Among the former, it is worth noting the
evolution in the sale of minerals, especially copper and gold. Textiles and farming products were once again the most dynamic items among non-traditional products. The national currency experienced an appreciatory trend, explained by the strength of
foreign accounts together with a gradual de-dollarization process and a global dollar depreciation trend. The nuevo sol registered a 5.2% appreciation and closed at levels of S/.3.283 per dollar.

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Inflation and Depreciation

Although our business and results of operations are affected by the economic environment in Perú in general, we are particularly affected by certain economic indicators such as inflation
and depreciation of the nuevo sol. During the first quarter of 2005 and during 2004, 2003, and 2002, depreciation (appreciation) of the nuevo sol with regard to the U.S. dollar, and inflation in accordance with the National Wholesale Price Index,
was as follows:

|                     |  | Depreciation   |  |           | 
|-------------------- |  | -------------- |  | --------- | 
|Year                 |  | (appreciation) |  | Inflation | 
|                     |  |                |  |           | 
|2002                 |  | 2.00%          |  | 1.70%     | 
|2003                 |  | (1.45%)        |  | 2.00%     | 
|2004                 |  | (5.21%)        |  | 4.89%     | 
|2005 (first quarter) |  | (0.67%)        |  | 0.34%     | 

Inflation affects our financial statements through the effect of exposure of our monetary assets and liabilities to inflation. Our financial results are impacted by inflation/deflation every
year and the line item Other income, expenses was adjusted to take into account the loss from exposure to inflation and deflation. As described above, as of January 1, 2005, we no longer adjust for inflation pursuant to CNC
resolutions.

Increasing Competition

Competition as a result of the opening of the telecommunications market in Perú has adversely affected our domestic and international long distance telephony segments. Although the
overall demand for fixed local and long distance services has increased in Perú over the years, our revenues from domestic long distance services decreased from 8.3% in 2000 to 6.0% of total operating revenues in 2004, while revenues from
international long distance services decreased from 9.6% in 2000 to 3.2% in 2004. The decrease in revenues in these areas is due to a combination of a reduction in net settlement revenues, the impact of the multi-carrier system and a reduction in
the maximum tariffs and interconnection charges that we are permitted to charge. We expect that our long distance revenues will continue to fall as a percentage of our operating revenues. Furthermore, although competition has only had a negligible
impact thus far on our fixed local telephone revenues, we expect that this will change in the future as the regulatory authorities have committed themselves to strengthening competition in this particular market.

See Item 3: Key InformationRisk FactorsRisk Factors Related to Telefónica del PerúChanges in the regulations affecting Perús
telecommunications industry and the liberalization of Perús telecommunications market have had and may continue to have a material adverse effect on our results of operations. Our growth and results of operations in these areas
will depend significantly on our ability to increase the amount of our overall traffic, compete for new customers, control costs, minimize uncollectible accounts, control the rate of churn and expand services in other areas such as broadband (ADSL).

Coercive Collection Processes by Municipalities

Various municipalities in Lima and other provinces have initiated local administrative actions that have resulted in the seizure of our funds and impaired our rights to collect from customers.
These municipalities allege that we have installed telephone poles within their jurisdiction without municipal authorization and have assessed permit fees and fines. They have attached our assets without a definitive judicial determination, which
has affected our ability to collect amounts due from our customers in those municipalities. As of December 31, 2004, the total amount assessed by these municipalities during the last three years was S/.128.3 million. We have made provisions as of
December 31, 2004, 2003 and 2002 in the amounts of S/.37.5 million, S/.104.2 million and S/.21.7 million, respectively.

We believe that these cases have been initiated illegally, that they infringe on our right to defend ourselves and that they lack the necessary legal grounds. Some of these coercive collections
have already been declared illegal by certain courts. We will continue to pursue legal actions against these municipalities. We anticipate that all or most of the seizures will be declared illegal. Nevertheless, these actions by the municipalities
have adversely affected our consolidated results of operations during the three year-period ended December 31, 2004.

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Productivity Factor

We are subject to a price cap formula, which is based on the rate of inflation as measured by the CPI and a productivity factor. The formula allows us to increase tariffs up to the difference
between the CPI and the productivity factor, which is supposed to equalize the gains in productivity of our business relative to the gains in productivity of the rest of the economy.

OSIPTEL set the value of the productivity factor, effective September 2001 through August 2004, to be (6%) annually, equivalent to (1.535%) quarterly. In July 2004, OSIPTEL set the new value of
the productivity factor for the period September 2004 to August 2007 at (10.07%) annually, or (2.619%) quarterly, for fixed local service and (7.8%) annually, or (2.010%) quarterly, for domestic and international long distance services. As a result
of the price cap formula, we decreased our tariffs in March, June, September and December of 2004 and again in March and June of 2005. These reductions in tariffs, which resulted in part because of the productivity factor, had an adverse effect on
our consolidated results of operations.

Ongoing Reduction in Tariffs

The tariff scheme for local and long distance telephony services plays a key role in our operating and financial results. Our fixed local and long distance telephony tariffs are subject to a
price cap structure based on inflation and a productivity factor to be determined by OSIPTEL every three years. In March 2003, we released a set of new service plans for fixed local telephony. See Item 4: Information on the
CompanyBusiness OverviewRegulatory MattersRates.

Our results of operations are vulnerable to the possibility of future changes to the tariff structure and the productivity factor imposed by OSIPTEL. Tariff reductions of differing scopes and
magnitudes may continue for a number of years and while we intend to continue to strive to control operating costs and improve productivity, those costs may not offset, in whole or in part, the decline in operating margins that may result in the
mid- to long-term. See Item 3: Key InformationRisk FactorsRisk Factors Related to Telefónica del PerúOur State Contracts require us to make ongoing tariff reductions which adversely affect our financial
results.

Traffic

We expect that the nature and composition of total traffic carried on the domestic telephone network will continue to change in the next few years. We anticipate further growth in traffic
carried on the domestic network due to increases in international traffic, Internet traffic and value-added services, such as voicemail. We also expect that domestic and international long distance traffic, as a percentage of total revenues, is
likely to continue to decrease as a result of increased competition and the related rate reductions. We also expect to see increased competition from pre-paid mobile phone services and from providers of phone services over the Internet, particularly
as more people get access to broadband. See Item 5: Operating and Financial Review and ProspectsOverview.

Technological Investments

We have committed ourselves to investing in our ADSL technology and the acquisition and installation of lines in broadband as the most significant of our capital expenditures over the next few
years. We expect that future revenues from broadband services will grow and come to represent an increasingly larger portion of our total operating revenues. In general, business communications and cable television are growing rapidly, and as they
mature over the next few years, we believe that their operations will experience increases in efficiency and productivity, taking into account that these areas are subject to less regulation in general than telephony services.

Customer Base

We have adopted a business strategy to partially offset lower long distance revenues by providing a wider variety of service plans and product options to meet the different needs of high,
middle- and low-income clients. We expect to continue to pursue the development of products tailored to high credit risk customers, such as limited-use phones and prepaid phone cards, in order to minimize the amount of uncollectible accounts. We are
also pursuing more effective and efficient methods of collecting overdue debt and helping customers refinance such debt. As a

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result, we have seen an increase in lines in service, mainly due to an increase
in prepaid plans, which has helped us decrease our uncollectible accounts.

Discussion of Critical Accounting Estimates and Policies


The preparation of our financial statements requires us to make estimates and judgments that could affect the reported amounts of assets, liabilities, revenues and expenses, and the related
disclosure of contingent assets and liabilities. Consequently, our reported financial condition and results of operations will vary depending on the accounting methods, assumptions and estimates that underlie the preparation of our financial
statements. We consider the following policies to be most critical in understanding the judgments that are involved in preparing our financial statements and the uncertainties that could impact our financial condition, results of operations and cash
flows.

Revenues, costs and expenses recognition. Revenues for all telephone services are recognized in the period in which the services are rendered, as
measured primarily by the minutes of traffic processed. Local, domestic and international long distance fixed telephone services are billed monthly based on a cyclical system. Services not billed from the day of closing of the billing to the last
day in the month are included in the next cyclical billing. The rights and obligations arising from commercial operations with interconnection operators and carriers abroad for international long distance services are recorded monthly for the
estimated accrued value. When the final settlementsfor participation in incoming and outgoing call traffic are received, the provision is annulled and the net transaction
amounts are recorded. Revenues and costs from telephone line installations are recognized at the time the related contracts are signed, except in the case of the Popular Telephone service, in which the installation revenues and costs are recognized
during the contract term. Other income, costs and expenses are recognized as accrued independently of their realization, and are recorded in their corresponding periods.

Allowance for doubtful accounts. The allowance for doubtful accounts in trade accounts receivable is charged to income and is mainly determined based
upon the aging of the accounts receivables unpaid for more than four months from the invoicing date. The allowance is recorded in the general administrative expenses caption of the consolidated statement of income. In our opinion, this procedure
permits a reasonable estimation of the allowance for doubtful accounts, considering the clients characteristics in Perú.

Property, plant and equipment. Property, plant and equipment are stated at cost less accumulated depreciation. Certain assets of ENTEL Perú were
revalued according to appraisal values set by independent appraisers as of December 31, 1992. The surplus arising from this revaluation was credited in 1992 to the shareholders equity. Depreciation is computed on a straight-line basis over
estimated useful lives.

The useful life and depreciation methods are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items
of property, plant and equipment. Maintenance and minor renewals are charged to expenses as incurred. Major improvements and renewals are capitalized. Direct payroll and allocated overhead costs related to the construction of the telephone plant are
capitalized as part of the cost of the related assets. Construction in progress represents the property and plant under construction and is stated at cost. This includes cost of construction, plant and equipment and other direct costs. Construction
in progress also includes the cost of important spare parts directly identified with specific assets. Construction in progress is not depreciated until the relevant assets are finished and put into operational use.

Provisions and contingencies. A provision is recognized when, and only when, we and our subsidiaries have a current legal obligation as a result of a
past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. When the effect
of time in the value of money is important, the amount of the liability is the present value of the expenses that we expect to incur in order to cancel the liability. Possible contingencies are not recognized in the Consolidated Annual Financial
Statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

Income tax and workers profit sharing. Income tax and workers profit sharing are determined in accordance with tax and legal regulations in
force in Perú. The income tax rate and workers participation are 30% and 10%,

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respectively. See note 30 to the Consolidated Annual Financial Statements. In addition, deferred income tax and workers profit sharing are recognized using the balance sheet method. According to the balance sheet
method:

- deferred assets and liabilities are recognized for the future tax effects of temporary differences, at the rate we expect to liquidate such taxes; and
- the deferred assets are reduced, if necessary, in the amount of those tax benefits (credits) which, according to available evidence, are estimated to not be realizable.

Temporary differences are defined as any difference between the financial reporting basis and the tax basis of an asset or liability that at some future date will be reversed, thereby resulting in taxable income or expense
for income tax and workers profit sharing. Temporary differences ordinarily become taxable income or deductible assets when the related asset is recovered or the related liability is settled. A deferred tax liability or deductible asset
represents the amount of taxes payable or refundable in future years. In accordance with the corresponding accounting standard, we determine our deferred tax based on the tax rate applicable to their non-distributed profits. Any additional tax on
profit distribution is recorded on the date in which such distribution is agreed.

In accordance with Resolution 110-99-EF-94.10 of CONASEV, on December 31, 1999 we began recording the effect of the deferred tax liability as of December 31, 1997. The accumulated liability
effect amounted to approximately S/.160,035,000 as of December 31, 1997 (constant nuevos soles as of December 31, 2004), of which one-sixth was recorded as a charge to retained earnings until the accumulated effect is fully recognized. As of
December 31, 2004, 2003 and 2002, we recognized approximately S/.160,035,000, S/.138,190,000, and S/.112,570,000, respectively, of such accumulated effect.

Impairment of assets. When events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, we revise the
property, plant and equipment, intangible assets and goodwill for impairment. When the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized in the consolidated statements of income. The recoverable amount is
the respective value in use which is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets
or, if it is not possible, for the cash-generating unit.

Transactions in foreign currency. Foreign currency assets and liabilities are stated in local currency at free market exchange rates prevailing at the
date of the consolidated balance sheet. The gain or loss related to transactions in foreign currency is recorded in the consolidated statement of income.

Intangible assets.
Intangible assets are measured initially at cost. An intangible asset is recognized if it is probable
that the future economic  benefits attributable to the asset will flow to us and the cost of the asset
can be measured reliably. After initial recognition, intangible assets are measured at cost less accumulated
amortization. Intangible assets are amortized on a  straight-line basis over the best estimate of their
useful lives, which is usually five years. The amortization period and the amortization method are reviewed
at the end of each year.

Peruvian GAAP


Peruvian GAAP requires that the financial statements be adjusted for inflation using theIndice de Precios al por Mayor,
    or the IPM, the Peruvian equivalent to the National Wholesale Price Index. See note 4(a) to the Consolidated
    Annual Financial Statements. For purposes of the discussion of operating revenue contained in this
    section, tariffs as adjusted by the CPI have also been restated in constant nuevos soles as of December
    31, 2004 by using the IPM. The CPI and IPM generally follow the same pattern but have varied slightly
    in the past. As a result, the magnitude of tariff changes presented in this section may differ slightly
    from the magnitude of tariff changes established by the State Contracts. See Item 4: Information on the CompanyBusiness OverviewRegulatory MattersLocal and Long Distance Services.
    Unless otherwise indicated, all financial data is presented in thousands of constant nuevos soles
as of December 31, 2004.

In January 2006, we will begin following the International Financial Reporting Standards (IFRS) 1 to 5 and the new versions of the International Accounting Standards (IAS), pursuant to
Resolution No. 034-2005-EF/93.01 of the

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CNC. The applications of these standards will affect the financial statements under Peruvian GAAP without impacting current or future financial statements under U.S. GAAP.

A. Results of Operations

The following table sets forth our operating revenues from continuing operations for the periods indicated for each category of service shown and the percentage that each category contributes
to total operating revenues. See our Consolidated Annual Financial Statements for operating revenues from discontinued operations from the years indicated below.

|                                    | Fiscal Years Ending December 31,                                   | 
|----------------------------------- | ------------------------------------------------------------------ | 
|                                    |                                                                    | 
|                                    | 2002                                                               | 
|                                    |                                                                    | 
|                                    | (thousands of constant nuevos soles,
          except percentages) | 
|Fixed local telephone services:     |                                                                    | 
|Monthly service charges             | 928,554                                                            | 
|Measured service charges            | 659,126                                                            | 
|Installation fees                   | 21,844                                                             | 
|Other                               | 99,958                                                             | 
|                                    |                                                                    | 
|Total                               | 1,709,482                                                          | 
|International long distance         |                                                                    | 
|telephone services:                 |                                                                    | 
|Incoming traffic revenues           | 85,642                                                             | 
|Outgoing traffic revenues(1)        | 74,047                                                             | 
|Others                              | 31,029                                                             | 
|                                    |                                                                    | 
|Total                               | 190,718                                                            | 
|                                    |                                                                    | 
|Domestic long distance telephone    |                                                                    | 
|services(2)                         | 267,383                                                            | 
|Public and rural telephone services | 798,038                                                            | 
|Interconnection with other          |                                                                    | 
|operators                           | 94,965                                                             | 
|Business communications             | 213,504                                                            | 
|Cable television                    | 314,906                                                            | 
|Others                              | 110,014                                                            | 
|                                    |                                                                    | 
|Total operating revenues            | 3,699,010                                                          | 
|                                    |                                                                    | 

|   
|---
|(1)
|   
|(2)

The following table sets forth our operating expenses for the periods indicated for each category shown and the percentage each category contributes to total operating expenses.

|                                  | Fiscal Years Ending December 31,                                   |  
|--------------------------------- | ------------------------------------------------------------------ | -
|                                  |                                                                    |  
|                                  | 2002                                                               |  
|                                  |                                                                    |  
|                                  | (thousands of constant nuevos soles,
          except percentages) |  
|General and administrative        | 965,335                                                            |  
|Personnel                         | 443,651                                                            |  
|Depreciation                      | 906,385                                                            |  
|Amortization                      | 136,617                                                            |  
|Technology transfer and           |                                                                    |  
|Management fee                    | 246,421                                                            |  
|Materials and supplies            | 59,019                                                             |  
|Shared service center expenses(1) | 118,140                                                            |  
|Provision for impairment of       |                                                                    |  
|assets                            |                                                                   |  
|Capitalization of costs for       |                                                                    |  
|telephone plant construction      | (50,117                                                            | )
|                                  |                                                                    |  
|Total operating expenses          | 2,825,451                                                          |  
|                                  |                                                                    |  

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|(1) | This line item includes costs associated with outsourcing services to Telefónica Gestión de Servicios Compartidos Perú S.A.C. beginning in 2001.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                 

Comparison of Results of Operations for the Fiscal Years Ending December
31, 2004 and 2003

Operating Revenues


Operating revenues from continuing operations decreased 4.3% to S/.3,459.3 million in 2004 from S/.3,616.0 million in 2003. This was attributable to lower revenues from Fixed Local Telephony
(7.6%), Long Distance (15.7%), Public and Rural Telephony (8.0%), and Interconnection with Other Operators (6.1%), partially offset by the increase in revenues from Business Communications (30.8%), Cable Television (0.9%) and Other Operating
Revenues (10.9%) .

Fixed Local Telephone Services

Fixed local telephone services primarily consist of measured service charges, monthly service charges, installation fees, and other services. The amount of revenue from fixed local services
depends on:

- the volume of local telephone traffic (as measured by the number of minutes);
- the number of new lines installed;
- the number of billable lines in service; and
- the rates we charge which are affected by quarterly adjustments according to OSIPTEL.

Fixed local telephone service decreased 7.6% to S/.1,485.2 million in 2004 from S/.1,607.1 million in 2003. This decrease was due to a reduction in measured service charges of 22.9% as a result
of the application of the new productivity factor of (10.07%) per annum since September 1, 2004 and the new conditions of usage established by OSIPTEL.

Monthly service charges. Monthly service revenues include the monthly basic charges for classic lines and prepaid limited-use lines. The amount of
revenue depends on the rates we charge and the number of billed lines in service. Revenues from monthly service charges increased to S/.933.3 million in 2004 from S/.923.4 million in 2003, representing a 1.1% increase, in spite of the application of
the new productivity factor as of September 1, 2004 and the new Conditions of Usage established by OSIPTEL.

Measured service charges. Measured service includes revenues that we collect from local calls made by our classic line and limited-use line customers and
a portion of our prepaid card sales for voice or Internet communication. Measured service revenues from classic lines derive from local calls made by our customers once they have used all their local minutes included in the monthly service charge.
Measured service revenues from limited-use lines derive from the number of local minutes included in the service plan. Measured service revenues from prepaid cards are allocated to fixed local telephone services based on the amount of local traffic
used by prepaid cards in the previous month, which does not necessarily correspond to the prepaid cards sold in that month. Both classic line and limited-use line customers can use Tarjeta 147, but the latters usage outweighs the
formers. Measured service revenues depend first on the volume of fixed-to-fixed local telephone traffic from our classic lines as measured by the total number of minutes and the rates that we charge. Measured service revenues from limited-use
lines depend second on the number of limited-use plans purchased by our customers and the number of minutes included in the plan. In general, revenues for this service were negatively impacted as a result of the growth in the base of limited
consumption and prepaid lines, which increased from 47% to 57% of the total lines in service during 2004. Furthermore, it was impacted by the reduction of Internet billable time due to the increase of broadband clients and for the trend of
substituting traffic for mobile telephony.

Revenues from measured local service decreased to S/.429.9 million in 2004 from S/.577.6 million in 2003, representing a 22.9% decrease due to the application of the new productivity factor and
the new Conditions of Usage.

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Installation. Revenues from installation fees consist primarily of fees for installation of new phone lines. Revenues depend on the number of new lines
installed and the installation rate that we charge. Revenues from installation fees decreased to S/.19.3 million in 2004 from S/.21.9 million in 2003, representing an 11.8% decrease. This decrease was due primarily to a decrease in the installation
rate, partially offset by an increase in the number of installations.

Other.
Revenues from other services consist of fees from Memovox, three-party conferencing, sale of telephones
and reconnections (restoration of services), among others. Revenues decreased 1.6% to S/.102.7 million
in 2004 from S/.104.3 million in 2003, due to a 30.2% decrease in revenues from reconnection fees, resulting
from customers switching to limited-use and prepaid lines.

International Long Distance Telephone Services

International long distance services consist of incoming and outgoing international telephone traffic and switched transit traffic throughout Perú. The amount of revenues depends on the
following:

- the volume of incoming and outgoing international telephone traffic (as measured by the number of minutes);
- the rates we charge our customers;
- the settlement rates agreed to with various international carriers; and
- the volume of sales of our prepaid phone cards.

International long distance telephony revenues amounted to S/.109.4 million in 2004 from S/.173.8 million in 2003, representing a 37.1% decrease.

Incoming traffic revenues. Incoming traffic revenues consist of the measured service charge for an incoming international long distance call. Revenues
from incoming international long distance traffic fell to S/.51.1 million in 2004 from S/.53.8 million in 2003, representing a 5.0% decrease. This decrease was due to an average of 33% lower settlement rates.

Outgoing traffic revenues. Outgoing traffic revenues consist of the measured service charge for an outgoing international long distance call. Revenues
from international long distance outgoing traffic reached S/.27.6 million in 2004 from S/.54.9 million in 2003, representing a 49.6% decrease, primarily due to lower tariffs as a result of continual marketing campaigns and market competition and
less traffic, which decreased 18%.

Others. Revenues from other international long distance come from Tarjeta Hola Perú and other sources, such as rental fees from
international operators for the use of our circuits. Revenues from prepaid cards are allocated to international outgoing calls based on the amount of international traffic used by prepaid cards in the previous month, which does not necessarily
correspond to the prepaid cards sold in that month. Revenues decreased by 53.0% in 2004 to S/.30.6 million from S/.65.2 million in 2003. This decrease was due to the fact that, as of 2004, earnings of the Hola Perú cards are
registered in a separate manner under Domestic Long Distance Telephone Services and under the line item Others. Previously they had been recorded entirely under the line item Others.

Domestic Long Distance Telephone Services

The amount of revenues from domestic long distance services depends on:

- the rates we charge our customers;
- the volume of domestic long distance traffic (as measured by the number of minutes); and
- the volume of sales of our prepaid phone cards.

Revenues from domestic long distance increased 2.4% to S/.209.0 million in
2004 from S/.204.1 million in2003 as a result of registered revenues
from the Hola Perú card, as domestic long distance traffic, which were

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registered in 2003 under the line item Others as revenues from international long distance. These revenues offset the decrease in revenues from direct dial which resulted from less traffic during 2004 (9.3% less
than in 2003) and lower tariffs as a result of continual promotions and the substitution of direct dial with prepaid cards.

Revenues from prepaid cards are allocated to domestic long distance based on the amount of domestic long distance traffic used by prepaid cards in the previous month, which does not necessarily
correspond to the prepaid cards sold in that month.

Public and Rural Telephone Services

Public and rural telephone services primarily consist of the operation of telephones, which accept both coins and prepaid cards, as well as the sale of telephone cards and advertising on booths
and on telephone cards. The amount of revenues from public and rural telephone services depends on:

- the number of public telephones in service;
- the volume of traffic (measured in terms of both number of calls and minutes);
- the rates charged per call and per minute; and
- the volume of sales of our prepaid phone cards.

Revenues from prepaid cards are allocated to public telephone service based on the amount of public telephone traffic used by prepaid cards in the previous month, which does not necessarily
correspond to the prepaid cards sold in that month.

Revenues from public and rural telephone services decreased 8.0% to S/.677.4 million in 2004 from S/.736.7 million in 2003, mainly explained by lower revenues from fixed-to-fixed domestic long
distance traffic due to market pressure on tariffs as a result of significant migration from coin usage to the use of prepaid cards sold by us and other operators, the increase in the mobile subscriber base, the increase of prepaid lines in basic
telephony and the increase in our main competitors new lines.

Interconnection with other operators

Revenues under this line item decreased to S/.150.6 million in 2004 from S/.160.4 million in 2003, representing a 6.1% decrease. These revenues come from interconnection services provided to
other telephone operators.

The amount of interconnection revenues is determined by:

- the number of fixed, long distance multi-carrier and mobile telephone calls that need to be interconnected; and
- the interconnection rates we charge, which are contractually negotiated among telephone operators but are also capped at a maximum default charge established by OSIPTEL.

Revenues decreased primarily as a result of a
decrease in the number of long distance operators, some of which exited the market as a result of the
failure to fulfill their payment obligations to the  Company.

Business Communications

Our revenues for business communications are derived from our data transmission services, including Digired and ADSL, among others, from the commercialization of ISDN lines and from the sale or
leasing of telephone exchanges. The amount of our revenues is determined by:

- rates and prices charged for various services and products; and
- the quantity of our services and products sold or leased to customers.

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Business communication revenues increased 30.8% to S/.311.7 million in 2004 from S/.238.3 million in 2003, primarily due to the strong promotion of growth in broadband. As a result, ADSL lines
in service increased from 66,403 at the end of 2003 to 185,516 at the end of 2004, a 179.4% increase. See Item 4: Information on the CompanyBusiness OverviewCategories of RevenueBusiness Communications.

Cable Television

Cable television services are provided through our wholly owned subsidiary Telefónica Multimedia S.A.C. The amount of revenues from Telefónica Multimedia for cable television and
CableNet broadband cable Internet connection services depend primarily on:

- the number of subscribers;
- the rates that we charge for various service and program options;
- installation fees charged to new subscribers; and
- advertising revenues.

Total revenues from Telefónica Multimedia increased 0.9% to S/.338.6 million in 2004 from S/.335.7 million in 2003.

Cable television. Revenues from cable television services come from monthly access fees. Revenues increased 0.6% to S/.276.8 million in 2004 from
S/.275.1 million in 2003.

CableNet. CableNet revenues are derived from monthly access fees and installation fees, which comprised 8.2% of Telefónica Multimedias
revenues. CableNet revenues increased by 15.2% to S/.27.8 million in 2004 from S/.24.1 million in 2003, primarily due to an increase in the number of users of CableNet as a result of advertising campaigns and promotional offers.

Advertising.
Advertising revenues represent 8.5% of the revenues of Telefónica
Multimedia. Revenues decreased 4.7% to S/.28.9 million in 2004 from S/.30.3 million in 2003, primarily
due to the appreciation of the nuevo sol against the U.S. dollar in 2004 of 5.23% .

Others. Includes TV Net and Other TV Cable revenues (installation fees, decoder, others). These revenues decreased 16.1% to S/.5.1 million in 2004 from
S/.6.1 million in 2003, generated mainly by increasing revenues of installation fees.

Others

Revenues under this line item increased to S/.177.4
million in 2004 from S/.160.0 million in 2003, representing a 10.9% increase. These revenues come from
services granted to related companies.  In addition, revenue increase resulted from the revenue increase
in network adaptation, which resulted from the increase in the number of operators in the market.

Cost of Sales and Operating Expense


Cost of sales and operating expenses primarily
    consist of general and administrative expenses, personnel expenses and depreciation. Operating expenses
    from continuing operations amounted to S/.2,610.4 million in 2004 from S/.2,931.1 million in 2003,
    representing a 10.9% decrease. This was due to a decrease of the management fee paid to Telefónica Internacional (the Management Fee)
    of S/.152 million (49.1%), a decrease in general and administrative expenses of S/.103.2 million
    (10.1%), a decrease in the personnel expense of S/.40.2 million (9.5%), decreases in depreciation
    of S/.6 million (0.7%) and amortization of S/.52 million (38.3%), and a decrease in shared service
    center expenses of S/.9.5 million (9.2%), which was partially offset by higher expenses in materials
and supplies of S/.6.2 million (9.7%) and a new provision for impairment of assets of S/.27 million.

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Personnel

Personnel expenses are determined by:

- salaries and benefits paid to each employee; and
- the number of employees.

Personnel expenses decreased to S/.383.7 million in 2004 from S/.423.9 million in 2003, representing a 9.5% decrease due to the reduction in the headcount of Telefónica del Perú
SAA in light of the Voluntary Early Retirement Program announced in October until March 31, 2005. The number of our employees (not including employees of our subsidiaries, affiliates and temporary programs) decreased by 4.9% to 3,153 employees at
the end of 2004 from 3,316 employees at the end of 2003.

General and Administrative

General and administrative expenses include services provided by third parties (consisting of expenses for leases, maintenance and repairs,inter
alia) and provisions for doubtful accounts. General and administrative expenses decreased 10.1% to S/.923.1 million in 2004 from S/.1,026.4 million in 2003. This decrease was primarily due to (a) the reduction in
provisions for doubtful accounts which decreased to S/.49.6 million in 2004, or 1.4% of revenues, compared to S/.131.6 million in 2003, or 3.6% of revenues, representing a decrease of 62.3% in 2004 primarily due to lower registered earnings in
business, an increase of the prepaid base, a new regulation regarding collections to other operators and improvements in collection management; and (b) a reduction in the engagement of third-party services which decreased 1.3% to S/.774.4 million
from S/.784.6 million in 2003.

Depreciation

Depreciation remained relatively constant, decreasing only 0.7% to S/.910.3 million in 2004 from S/.916.7 million in 2003.

Amortization

Amortization decreased 38.3% to S/.83.4 million in 2004 from S/.135.0 million in 2003. This decrease was primarily due to the fact that certain software applications reached their useful lives
and are now completely amortized.

Technology Transfer and Management Fee

Technology transfer and management fees consist of payments made to Telefónica Internacional pursuant to a management contract. Telefónica Internacional receives a transfer fee
which is equal to 1% of our quarterly service income. As of the second quarter of 2004, its management fees were equal to 9% of our earnings from operations (without depreciation, amortizations, payment of fees, taxes, rights and other economic
outflows set forth under the concession agreements).

As of the third quarter of 2004, as a result of an addendum dated September 30, 2004 entered into with Telefónica Internacional, this fee is calculated with respect to advisory and
consulting services performed by professionals and specialized technicians appointed by Telefónica Internacional who provide their services subject to a fixed fee. Such addendum nullified the application of the 9% fee mentioned
before.

These fees decreased 49.1% to S/.157.8 million in 2004 from S/.309.9 million in 2003. The Management Fee is paid on a quarterly basis, only if we meet certain financial criteria. In 2004, the
criteria was satisfied in the three quarters and the Management Fee was paid three times that year. In 2003, the Management Fee was paid four times because we satisfied the criteria during four quarters.

Materials and Supplies

Expenses related to materials and supplies include expenses associated with projects for business communications, such as the sales of telephone exchanges and fuel costs for our vehicles.
Materials and supplies

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expenses increased 9.7% to S/.69.7 million in 2004 from S/.63.5 million in 2003. This was primarily due to the increase and development of the ADSL product.

Shared Service Center Expenses

Shared service center expenses include refundable costs and payments made to Telefónica Gestión de Servicios Compartidos Perú S.A.C. pursuant to a service contract for the
provision of administrative services. These expenses decreased 9.2% to S/.93.5 million in 2004 from S/.103.0 million in 2003. This change was primarily due to lower prices charged by Telefónica Gestión de Servicios Compartidos
Perú S.A.C. due to increased efficiency in the services they provide us.

Provision for Impairment of Assets

In 2004, we had a provision for impairment of assets in an amount of S/.27.1 million. We did not have a similar provision in 2003. This provision resulted from a revision to the value of assets
that we no longer use and to the replacement of certain software applications.

Capitalization of Costs for Telephone Plant Construction

Capitalization of costs for telephone plant construction
represents the value of work performed for and capitalized as part of fixed assets. This amount decreased
19.1% to S/.38.3 million in  2004 compared with S/.47.3 million in 2003. This decrease was due to a lower
level of costs in proportion to investments.

Operating Income


Operating income reached S/.848.9 million
    in 2004 compared to S/.684.9 million in 2003, representing a 23.9% increase. This was primarily due
    to lower Management Fee payments, Depreciation,  Amortization and Personnel expenses.

Other Income (Expenses)


Non-operating loss (Other income (expenses))
    decreased 2.7% to S/.397.4 million in 2004 from S/.408.4 million in 2003. This was caused by the
    effect of a 15.5% decrease in the interest expenses from S/.145.6 million in 2003 to S/.123.1 million
in 2004 as a result of lower debt levels due to better cash flow generation and lower interest rates.

Other expenses, net

The losses registered in Other expenses,
net increased 1.3% to S/.298.8 million in 2004 from S/.295.1 million in 2003 due primarily to an
increase in provisions and prior  years expenses, including provisions related to asset depreciation
and amortization and to deferred expenses.

Gain (Loss) From Exposure to Inflation


The amount adjusted for inflation was a gain
    in 2004 of S/.78.7 million compared to a gain of S/.7.1 million in 2003. This was caused by the effect
    of a 4.89% increase in the IPM (Index of  Wholesale Prices) and an appreciation of the nuevo sol
    by 5.23% in 2004.

Workers Profit Sharing Expense


Workers profit sharing expense is calculated
    as a percentage of income before income tax. Workers profit
    sharing expense increased 83.6% to S/.128.3 million in 2004 from S/.69.9 million in 2003. The increase
was primarily due to a higher net income before taxes.

Income Tax


Income tax is determined at the income tax rate of 30%. Income tax increased 83.9% to S/.350.9 million in 2004 from S/.190.8 million in 2003. The increase was also due to a higher net income
before these taxes.

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Net Income


Notwithstanding the S/.156.7
      million decrease in operating revenues in 2004 with respect to 2003, which was offset by lower
      expenses related to a reduction in the Management Fee of S/.152.1 million and the positive effect
      of the monetary correction in S/.71.5 million, net income increased 121.1% to S/.50.9 million in
      2004 compared to S/.23.0 million in 2003. See Item 4: Information on the CompanyBusiness
OverviewCategories of RevenueBusiness Communications.

Comparison of Results of Operations for the Fiscal Years Ending December
31, 2003 and 2002

Operating Revenues


Operating revenues from continuing operations decreased 2.2% to S/.3,616.0 million in 2003 from S/.3,699.0 million in 2002. This was attributable to lower revenues from Fixed Local Telephony
(6.0%), Long Distance (17.5%), and Public and Rural Telephony (7.7%), partially offset by the increases in revenues from Interconnection with Other Operators (68.9%), Business Communications (11.6%), Cable Television (6.6%), and Other Operating
Revenues (45.4%) .

Fixed Local Telephone Services

Fixed local telephone service decreased 6.0% to S/.1,607.1 million in 2003 from S/.1,709.5 million in 2002. This decrease was due to a reduction in measured service charges of 15.4% as a result
of the migration to new tariff plans, which began in the first quarter of 2003, and the application of the productivity factor in March, June, September and December of 2003.

Monthly service charges. Revenues from monthly service charges decreased to S/.923.4 million in 2003 from S/.928.6 million in 2002, representing a 0.6%
decrease due to the migration to our new tariff plans launched between March and May 2003 and due to the application of the productivity factor.

Measured service charges. Revenues from measured local service decreased to S/.557.6 million in 2003 from S/.659.1 million in 2002, representing a 15.4%
decline due to decreased traffic as a result of the migrations to our new tariff plans implemented in 2003 and the application of the productivity factor.

Installation. Revenues from installation fees amounted to S/.21.9 million in 2003, similar to 2002.

Other.
Other revenues increased 4.3% to S/.104.3 million in 2003 from S/.100.0 million in 2002, primarily due
to S/.4.2 million higher revenues resulting  from payments made by other operators for the network adaptation
to allow our customers to make long distance calls through them.

International Long Distance Telephone Services

International long distance telephony revenues amounted to S/.173.8 million in 2003 from S/.190.7 million in 2002, representing an 8.9% decrease.

Incoming traffic revenues. Revenues from incoming international long distance traffic fell to S/.53.8 million in 2003 from S/.85.6 million in 2002,
representing a 37.2% decrease. This decrease was caused by an average of 38.0% lower settlement rates.

Outgoing traffic revenues. Revenues from international long distance outgoing traffic reached S/.54.9 million in 2003 from S/.74.0 million in 2002,
representing a 25.9% decrease, primarily due to lower tariffs as a result of continual advertising campaigns and market competition.

Others. Revenues from other international long distance calls increased by 110.0% in 2003 to S/.65.2 million from S/.31.0 million in 2002. This increase
was due to sales of Hola Perú cards resulting primarily from the development of distribution channels and from the establishment of more market competitive rates. In addition, during 2003 we conducted the advertising campaign
Soles de Regalo, which increased the value of the prepaid cards by 30%. We also promoted prepaid cards for different events such as El Caserito Regalón and Ferias y Bodega.

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Domestic Long Distance Telephone Services

Revenues from domestic long distance decreased 23.7% to S/.204.1 million in 2003 from S/.267.4 million in 2002, primarily due to lower tariffs as a result of continual promotions and the
substitution of direct dial with prepaid cards.

Public and Rural Telephone Services

Revenues from public and rural telephone services decreased 7.7% to S/.736.7 million in 2003 from S/.798.0 million in 2002, mainly explained by lower revenues from fixed-to-fixed domestic long
distance traffic due to market pressure on tariffs as a result of significant migration from coin usage to the use of prepaid cards sold by us and other operators, the increase in the mobile subscriber base, the increase of prepaid lines in basic
telephony and the increase in our main competitors new lines.

Interconnection with Other Operators

Revenues under this line item increased to S/.160.4 million in 2003 from S/.95.0 million in 2002, representing a 68.9% increase, primarily due to 138% higher revenues from long distance
operators.

Business Communications

Business communication revenues increased 11.6% to S/.238.3 million in 2003 from S/.213.5 million in 2002, primarily due to the strong promotion of growth in broadband. As a result, ADSL lines
in service increased from 20,800 at the end of 2002 to 66,403 at the end of 2003, a 219.2% increase. See Item 4: Information on the CompanyBusiness OverviewCategories of RevenueBusiness Communications.

Cable Television

Revenues from Telefónica Multimedia increased 6.6% to S/.335.7 million in 2003 from S/.314.9 million in 2002, primarily due to an increase in the number of subscribers.

Cable television. Revenues from cable television services come from monthly access fees. Revenues increased 3.2% to S/.275.1 million in 2003 from
S/.266.6 million in 2002, primarily due to an increase in the number of subscribers.

CableNet. CableNet revenues are derived from monthly access fees and installation fees, which comprised 7.2% of Telefónica Multimedias
revenues during 2003. CableNet revenues increased by 92.4% to S/.24.1 million in 2003 from S/.12.5 million in 2002, primarily due to an increase in the number of users of CableNet as a result of advertising campaigns and promotional offers.

Advertising. Advertising revenues represented 9.0% of the revenues of Telefónica Multimedia during 2003. Revenues decreased 6.1% to S/.30.3
million in 2003 from S/.32.3 million in 2002. Telefónica Multimedia regained its status as one of the principal providers of advertising space in Peruvian television, with an estimated market share of 12.1% of Peruvian television advertising
revenues in 2003.

Others. Includes TV Net and Other TV Cable revenues (installation fees, decoder, others). These revenues increased 78.1% to S/.6.1 million in 2003 from
S/.3.4 million in 2002, generated mainly by increasing revenues in installation fees.

Others

Revenues under this line item increased to S/.160.0 million in 2003 from S/.110.0 million in 2002, representing a 45.4% increase, primarily due to the revenue from network adaptation, which
resulted from the increase in the number of operators in the market.

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Cost of Sales and Operating Expense


Operating expenses from continuing operations amounted to S/.2,931.1 million in 2003 from S/.2,825.5 million in 2002, representing a 3.7% increase. This was due to an increase in general and
administrative expenses of S/.61.0 million (6.3%), an increase in depreciation of S/.10.3 million (1.1%) and an increase in materials and supplies of S/.4.5 million (7.6%), which was partially offset by lower personnel expenses (S/.19.7 million) and
amortization (S/.1.6 million).

Personnel

Personnel expenses decreased to S/.423.9 million in 2003 from S/.443.7 million in 2002, representing a 4.4% decrease due to a lower average number of employees. The number of our employees (not
including employees of our subsidiaries, affiliates and temporary programs) decreased by 1.5% to 3,316 employees at the end of 2003 from 3,366 employees at the end of 2002.

General and Administrative

General and administrative expenses increased 6.3% to S/.1,026.4 million in 2003 from S/.965.3 million in 2002. This increase is primarily due to advertising and promotion expenses related to
the new tariff plans, the contract with Terra regarding the development of advertising services, the provision of broadband content and email services, and higher expenses for sports events and signal rentals due to the 7.0% increase in the average
lines of Cable TV from the year 2002.

Provisions for doubtful accounts increased to S/.131.6 million in 2003, or 3.6% of revenues, compared with S/.126.0 million in 2002, or 3.4% of revenues in 2002, which represents an increase of
4.5% in 2003 primarily due to a decrease in collection rates for interconnection receivables.

Depreciation

Depreciation increased 1.1% to S/.916.7 million in 2003 from S/.906.4 million in 2002. This increase was primarily due to new activations in our installed plant. On December 31, 2003, work in
progress decreased by 10.4% to S/.255.1 million compared with S/.284.7 million in 2002. The increase in our installed plant in service increased the base upon which we calculate our depreciation, resulting in a higher depreciable average plant, and
higher depreciation costs.

Amortization

Amortization decreased 1.2% to S/.135.0 million in 2003 from S/.136.6 million in 2002. This decrease was primarily due to to the fact that certain software applications reached their useful
lives and are now completely amortized.

Technology Transfer and Management Fee

Technology transfer and management fees increased 25.8% to S/.309.9 million in 2003 from S/.246.4 million in 2002. The management fee was paid on a quarterly basis provided we met certain
financial criteria. In 2003, such criteria was met in all four quarters, thus, the management fee was paid four times during the year. In 2002, the management fee was paid three times because we met the criteria in three quarters.

Materials and Supplies

Materials and supplies expenses increased 7.6% to S/.63.5 million in 2003 from S/.59.0 million in 2002. This was primarily due to the increase and development of the ADSL product.

Shared Service Center Expenses

Shared service center expenses decreased 12.8% to S/.103.0 million in 2003 from S/.118.1 million in 2002. The decrease was principally due to improvements in efficiency. See Item 7: Major
Shareholders and Related Party TransactionsRelated Party TransactionsOther Contracts.

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Capitalization of Costs for Telephone Plant Construction

Capitalization of costs for telephone plant construction
decreased 5.6% to S/.47.3 million in 2003 compared with S/.50.1 million in 2002. This decrease was due
to a lower level of costs in  proportion to investments.

Operating Income


Operating income reached S/.684.9 million
    in 2003 compared with S/.873.6 million in 2002, representing a 21.6% decrease. This was primarily
    due to the lower revenues from Long Distance, Local  Telephony, and Public and Rural Telephony as
    well as an increase in operating expenses.

Other Income (Expenses)


Non-operating loss (Other income (expenses))
    decreased 25.9% to S/.408.4 million in 2003 from S/.550.9 million in 2002. The reduction was due
to the following:

- The losses registered in Other expenses, net decreased to S/.295.1 million in 2003, S/.68.3 million less than 2002 due to lower extraordinary expenses as a result of lower costs
related to the disposal of investments and stocks, and lower costs of early retirement programs.
- Interest expense decreased to S/.145.6 million in 2003 from S/.243.6 million in 2002, mainly because of lower debt levels resulting from the better cash flow generation and the lower
interest rates reducing our interest expense.

Gain (Loss) From Exposure to Inflation/Deflation


The amount adjusted for inflation was a gain
    in 2003 of S/.7.1 million compared to a loss of S/.17.2 million in 2002. This was caused by the effect
    of the devaluation of the nuevo sol by 2%  against the U.S. dollar and the increase in the IPM by
    2% in 2003.

Workers Profit Sharing Expense


Workers profit sharing expense decreased
    5.4% to S/.69.9 million in 2003 from S/.73.8 million in 2002. The decrease was primarily due to a
decrease in net income before taxes, which decreased the proportionate expenditure.

Income Tax


Income tax decreased 4.0% to S/.190.8 million
    in 2003 from S/.198.8 million in 2002. The decrease was primarily due to a decrease in net income.

Net Income


Net income amounted to S/.23.0 million in
    2003 compared with S/.32.8 million in 2002, representing a 29.8% decrease, as a result of the factors
    discussed above. See Item 4: Information on
the CompanyBusiness OverviewCategories of RevenueBusiness Communications.

U.S. GAAP Reconciliation

Our financial statements have been prepared in accordance with Peruvian GAAP, which differs in certain significant respects from U.S. GAAP. You should read note 35 to our Consolidated Annual
Financial Statements for a description of the principal differences between Peruvian GAAP and U.S. GAAP and a reconciliation to U.S. GAAP of net income and total shareholders equity. The comparisons are as follows:

- For the year ended December 31, 2004, net income was S/.221.4 million under U.S. GAAP compared to net income of S/.50.9 million under Peruvian GAAP, and shareholders equity was
S/.2,892 million under U.S. GAAP compared to S/.2,727 million under Peruvian GAAP.

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- For the year ended December 31, 2003, net income was S/.9.51 million under U.S. GAAP compared to S/.23.0 million under Peruvian GAAP, and shareholders equity was S/.3,436 million under
U.S. GAAP compared to S/.3,463 million under Peruvian GAAP.
- For the year ended December 31, 2002, net income was S/.31.8 million under U.S. GAAP compared to S/.32.8 million under Peruvian GAAP, and shareholders equity was S/.3,580 million under
U.S. GAAP compared to S/.3,640 million under Peruvian GAAP.

B. Liquidity and Capital Resources

Sources of funds

During 2004, we decreased our total debt at year-end to S/.1,708 million from S/.1,837 million in 2003. At December 31, 2004, we had S/.63 million in cash and banks, which are held in U.S.
dollars and nuevos soles.

In July 26, 2005 we will pay our shareholders
an aggregate amount of approximately S/.755 million in connection with the capital reduction approved
in May 2005.

Cash Flow Analysis


The table below sets forth our consolidated cash flows for the periods indicated. Positive figures refer to cash inflows and negative figures refer to cash outflows:

|                                           | Year ended December 31,     |  
|------------------------------------------ | --------------------------- | -
|                                           |                             |  
|                                           | 2002                        |  
|                                           |                             |  
|                                           | (thousands of nuevos soles) |  
|                                           |                             |  
|Net cash inflow from operating activities  | 1,717,215                   |  
|Net cash outflow from investing activities | (259,004                    | )
|Net cash outflow from financing activities | (1,564,190                  | )
|Effects of (inflation/deflation) on cash   | (1,221                      | )
|Increase (decrease) in cash and banks      | (107,200                    | )

Cash Flows from Operating Activities


Cash flow from operations increased 5% to
    S/.1,298 million in 2004 from S/.1,231 million on December 31, 2003 due primarily to lower payments
    to suppliers, interest expenses and management  fees, partially offset by a decrease in revenues
    during 2004, primarily resulting from the effect of the application of the productivity factor.

Cash Flows from Investing Activities


Cash outflow from investing activities for
    continuing operations increased 26% to S/.466 million in 2004 from S/.370 million in 2003, principally
    due to purchases of Internet access equipment, mainly through broadband technologies and traditional
    voice lines, as well as the use of a new commercial invoicing and support system. As a result of
    this policy, the purchase of plant, equipment, materials and supplies increased 10% to S/.494 million
    in 2004 from S/.450 million in 2003. Net proceeds from the sale of assets decreased by 49.7% to S/.40
    million from S/.80 million in 2003. Furthermore, we paid S/.12.7 million to Antena 3 S.A. for the
    acquisition of 99.99% of the shares representing the capital stock of Antena 3 Producciones, S.A.
(currently, Media Networks Perú S.A.C.).

Cash Flows from Financing Activities


Our net cash used in financing activities decreased 6% to S/.811 million in 2004. The reduction in cash outflows from financing was mainly attributed to a decrease in net debt payments,
although partially offset by higher payments made to shareholders as a result of decreases in the capital stock of the Company.

We continued to execute our financial plan by managing our exchange rate and interest rate risk by diversifying our sources of financing. As a result, we continued with our participation in the
capital markets.

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We believe that our working capital is sufficient to meet all of our present requirements.

Indebtedness

As of December 31, 2004, total debt was S/.1,708 million, including the value of those derivatives designated as accounting hedges. Total debt decreased from S/.1,837 million in 2003 to
S/.1,708 million in 2004 due to our repayments of certain promissory notes. The proportion of debt with maturity longer than one year decreased to 54% of total debt as of December 31, 2004 compared to 70% as of December 31, 2003, as a result of six
bonds which are scheduled to be redeemed during 2005.

In 2004, we amortized S/.75.8 million of our long-term indebtedness, mainly corresponding to the amortization of S/.25.9 million of our debt to Telefónica del Perú Grantor
Trust and to the repayment of two local bonds issued in the local capital market for the equivalent of
S/.26.3 million.

As of December 31, 2004, our consolidated debt in nuevos soles was S/.1,075 million or 64% of total indebtedness, S/.579 million in U.S. currency or 34.4% of total indebtedness, and S/.27
million in other foreign currencies or 1.6% of total indebtedness.

As of December 31, 2004, taking into account
the purchase position of hedge derivatives of U.S.$148 million and U.S.$20.5 million in cash held in
foreign currency, our net financial position with regards  to foreign currency transactions was U.S.$15.8
million in liabilities as of December 31, 2004.

See Item 11: Quantitative and Qualitative
Disclosures About Market RiskForeign Currency Exchange Rate Risk and Item 3: Key InformationRisk
FactorsRisk
Factors Related to PerúDevaluation of the nuevo sol or unexpected changes in exchange controls
would have a material adverse effect on our financial condition.

Long-term Indebtedness


As of December 31, 2004, our primary long-term debt was as follows:

- U.S.$41.9 million (S/.137.4 million) long-term debt with Banco Europeo de Inversión, due September 2013, bearing a fixed interest rate of 5.72%, of which U.S.$4.7 million matures in
2005;
- U.S.$31.4 million (S/.103.2 million) loan from Telefónica del Perú Grantor Trust, securitization of receivables of international long distance operators, due December 2008,
bearing a fixed annual interest rate of 7.48%, of which U.S.$7.9 million matures in 2005; and
- S/.115.5 million long-term debt with BBVA Banco Continental, due April 2006, bearing a fixed interest rate of 5.95%.

On December 16, 1998, the Company issued certificates for U.S.$150 million through Telefónica del Perú Grantor Trust (the Trust), a New York grantor trust. Such
certificates are securitized by U.S. dollar-denominated net settlement receivables generated and owed to the Company by several international telecommunications carriers with whom we have executed service arrangements (the purchased
receivables). The issuing Trust was created between the Company, as grantor, and The Bank of New York, as trustee, under New York law. Pursuant to the Trust, receivables are held to increase the debt service ratio to include funds on deposit
in reserve accounts held by the Trustee. As of December 31, 2004, the outstanding balance of such certificates was U.S.$31.4 million.

Under the Trust Agreement, we are required to fund a debt service reserve account (the DSRA) with cash equal to 110% of the base receivables amount (the sum of
certificate interest, scheduled amortization amounts and amounts related to Peruvian taxes) due each semi-annual payment date. Under the amended trust agreement in August 2002, we added 106% of the base receivables amount, U.S.$6.2
million, to the DSRA to cover the possibility of a disruption of settlement payments from carriers rated Ca or lower. Consequently, the following covenant was amended. If (1) the rating by one or more of the rating agencies of the certificates is
below investment grade for 180 days, (2) the corresponding downgrade was principally due to a material decrease in the amount of cash collections and proceeds of purchased receivables and (3) certificate holders representing at least 15% of the

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certificate balance provide written notice to the trustee, then the Trust must
offer to purchase any and all outstanding certificates at a specified put price, and we are obligated
to pay to the Trust the aggregate put  price with respect to all certificates redeemed. See Credit
Rating and Credit Risk below.

In response to the possibility of a disruption
of settlement payments from carriers rated Ca or lower byMoodys,
in August 2002 we added 106% of the base receivables amount (which then represented U.S.$6.2 million)
to the Debt Service Reserve Account (DSRA) to cover such risk. As a consequence, the trustee
 must retain, during each payment cycle, an amount equal to 106% of the base receivables amount plus
the original 110% of the base receivables amount that is maintained in the DSRA at all times. The amount
of funds in the DSRA was U.S.$11.0 million  as of December 31, 2004.

Other Indebtedness


During 2004, we continued our local capital market issuances of bonds and commercial papers. On March 26, 2004, our shareholders approved a modification of the original issue authorization. The
new issue authorization, in effect extends the term until March 2008, permits issuance of (1) medium- to long-term bonds of up to U.S.$680 million and (2) commercial paper issuances of up to U.S.$300 million, provided that the amount outstanding
under the two instruments combined may not exceed U.S.$900 million.

Credit Rating and Credit Risk


Telefónica del Perú Grantor Trust certificates (the Certificates) are currently rated Ba2 (rating watch negative) by Moodys Investors Services
(Moodys) and BBB (rating watch neutral) by Fitch Inc. The Certificates were downgraded in November 2004 by Moodys,
according to them, as a result of the deterioration of the overall quality of the core designated carriers
(those who covered the base receivables payment) and a heightened volatility in net settlement cash flow
due to a declining trend in net settlement per minute rates.

The downgrade of the Certificates ratings has not affected our participation in the commercial paper and bond markets in Perú. In November 19, 2004, following the upgrade of the
Peruvian sovereign debt, Fitch upgraded Telefónica del Perús foreign currency corporate rating from BB- to BB. We continue to maintain a AAA rating in the local market as rated byApoyo &
Asociados Clasificadora de Riesgo(associated with Fitch Inc.) andClass y Asociados, Clasificadora de Riesgo.

Capital Expenditures

In 2004, we invested S/.485 million, 10% more than the previous year. This was driven by the increase in broadband and traditional telephony lines, which led to the extension of the
transmission network, as well as to the use of new commercial, billing and support systems. By leveraging new technologies and increasing investment efficiency we were able to grow traditional business lines (local, payphone and cable TV) with lower
capital expenditures.

Telefónica continues to lead the development of an Information Society in Perú, allocating S/.132 million to grow public access to the Internet, mainly through broadband
technologies. This initiative accounted for 27% of capital expenditures in 2004, an increase of 34% versus 2003. We expect an increase in investments for broadband access in the future.

The following table presents capital expenditures in 2002, 2003 and 2004 for each of the categories shown:

|                                    | Years Ended December 31,(1)        
|----------------------------------- | -----------------------------------
|                                    |                                    
|                                    | 2002                               
|                                    |                                    
|                                    | (millions of constant nuevos soles)
|Domestic telephone network          | 189.8                              
|Cable television                    | 28.1                               
|Public and rural telephone services | 53.3                               
|Internet                            | 50.3                               
|Other                               | 17.9                               
|                                    |                                    

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|      | Years Ended December 31,(1)        
|----- | -----------------------------------
|      |                                    
|      | 2002                               
|      |                                    
|      | (millions of constant nuevos soles)
|Total | 339.5                              
|      |                                    

|   
|---
|(1)

Our main capital expenditures for the fiscal year ended December 31, 2004 were:

- our core business support system named ATIS being developed to improve our billing and collection capabilities (replacing old legacy applications) and to provide
overall customer relationship management (CRM);
- growth in local lines, mainly for new customers;
- investment in ADSL technology, including the acquisition and installation of broadband lines;
- payphone services;
- investments to maintain the operational readiness of our network facilities; and
- growth of cable TV subscribers.

Our investing activities are expected to total about S/.470 million for the fiscal year ending December 31, 2005. We expect the bulk of that investment to be allocated to ADSL technology, local
lines growth, expansion of payphone services and to further strengthen our systems with future releases of ATIS. Furthermore, we expect a small investment to complete the changes to our network and systems to comply with new regulatory mandates.

We believe that our capital expenditure requirements will be met through a combination of cash flows from our operations and borrowings.

In addition, we expect that our capital expenditure amounts for 2005 and 2006 will be similar to those of recent years.

New Accounting Pronouncements

The following is a discussion of significant
new accounting pronouncements under U.S. GAAP and Peruvian GAAP in relation to our financial results.

New Accounting Pronouncements Under U.S. GAAP


Statements of Financial Accounting Standards
      N° 123 (Revised 2004):

Shared Based Payment

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Shared Based Payments
(SFAS 123R). This statement eliminates the option to apply the intrinsic value measurement provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees to stock compensation awards
issued to employees. Rather, SFAS 123R requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period
during which an employee is required to provide services in exchange for the award and the requisite service period (usually the vesting period). SFAS 123R applies to all awards granted after the required effective date, December 15, 2005, and to
awards modified, repurchased, or cancelled after that date. SFAS 123R will be effective for our fiscal year ending December 31, 2005. The Company does not anticipate that the adoption of this standard will have a material effect on its consolidated
financial position, consolidated results of operations or consolidated cash flows.

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> Statements of Financial Accounting Standards No. 151: Inventory Costs  An Amendment of ARB No. 43, Chapter 4

On November 24, 2004, the FASB issued SFAS No. 151, Inventory Cost, a revision of ARB No. 43, Chapter 4. The amendments to SFAS No. 151 aim to improve financial information, stating
that the expenses of inactive facilities, transportation costs, manipulation costs and scrap material costs should be recorded in the statement of operation as expenses of the period. The application of fixed cost to inventories should be based on
the normal capacity of the production facilities.

SFAS No. 151 will be applicable to valuation of inventories by the end of the first reporting period ending after June 15, 2005. The Company does not anticipate that the adoption of SFAS No.
151 will have a material impact on its consolidated financial position, consolidated cash flows or consolidated results of operations.

> Statements of Financial Accounting Standards No. 153: Exchanges of Non-monetary Assets  An Amendment of APB Opinion No. 29

On December 16, 2004, the FASB issued SFAS
No.153, Exchanges of Non-monetary Assets  AnAmendment of
APB Opinion No. 29, which amends Accounting Principles Board Opinion No. 29 Accounting for
Nonmonetary Transactions. This amendment is based on the idea that exchange transactions should
be  valued in accordance with the value of the exchanged assets. The exception made for similar non-monetary
productive assets is eliminated and substituted by a more extensive exception related to non-monetary
assets with a non-commercial  consideration. APB No. 29 stated that the exchange transaction of a productive
asset for a similar one should be recorded at the book value of the exchanged asset.

SFAS No. 153 will be applicable for non-monetary asset exchange transactions occurring in fiscal periods beginning after June 15, 2005. The Company does not anticipate that the adoption of SFAS
No. 153 will have a material impact on its consolidated financial position, consolidated cash flows or consolidated results of operations.

> SAB No. 107  Shared Based Payment

On March 29, 2005, the SEC released a Staff Accounting Bulletin (SAB) relating to the FASB accounting standard for stock options and other share-based payments. The interpretations in SAB No.
107, Share-Based Payment (SAB 107) express views of the SEC Staff regarding the application of SFAS No. 123 (revised 2004), Share-Based Payment (Statement 123R). Among other things, SAB 107 provides interpretive guidance
related to the interaction between Statement 123R and certain SEC rules and regulations, as well as provides the Staffs views regarding the valuation of share-based payment arrangements for public companies. The Company does not anticipate
that the adoption of SAB 107 will have any effect on its consolidated financial position, consolidated results of operations or consolidated cash flows.

> FIN No. 46  Consolidation of Variable Interest Entities  an interpretation of ARB No. 51

In January 2003, the FASB released Interpretation No. 46 Consolidation of Variable Interest Entities (FIN 46) which requires that all primary beneficiaries of Variable Interest
Entities (VIE) consolidate such entities. FIN 46 is effective immediately for VIEs created after January 31, 2003 and for VIEs in which an enterprise obtains an interest after that date. It also applies in the first fiscal year or interim period
beginning after June 15, 2003 to VIEs in which an enterprise holds a variable interest it acquired before February 1, 2003. In December 2003, the FASB published a revision to FIN 46 (FIN 46R) to clarify some of the provisions of the
interpretation and to defer the effective date of implementation for certain entities. Under the guidance of FIN 46R, entities that do not have interests in structures that are commonly referred to as special purpose entities are required to apply
the provisions of the interpretation in financials statements for periods ending after March 14, 2004. The adoption of this statement had no impact on our consolidated financial position or consolidated results of operations.

> SAB No. 104  Revenue Recognition and EITF 00-21

In December 2003, the SEC issued Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition. SAB 104 updates portions of the interpretive guidance included in Topic 13 of the codification of
Staff Accounting Bulletins in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance

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and SEC rules and regulations. The adoption of this statement had no impact on our consolidated financial position or consolidated results of operations.

> EITF Issue No. 04-1  Accounting for Pre-existing Relationships between the Parties to a Business Combination

This issue addresses the accounting for pre-existing relationships between the parties to a business combination. The consensuses in this issue should be applied to business combinations
consummated and goodwill impairment tests performed in reporting periods beginning after October 13, 2004. The application of this new accounting literature had no impact on its consolidated financial position, consolidated cash flows or
consolidated results of operations.

> EITF Issue No. 01-08  Determining Whether an Arrangement Contains a Lease

In May 2003, the EITF reached consensus in EITF Issue No. 01-08 to clarify the requirements of identifying whether an arrangement should be accounted for as a lease at its inception. The
guidance in the consensus is designed to mandate reporting revenue as rental or leasing income that otherwise would be reported as part of product sales or service revenue. EITF Issue No. 01-08 requires both parties to an arrangement to determine
whether a service contract or similar arrangement is, or includes, a lease within the scope of SFAS No. 13, Accounting for Leases. The adoption of this EITF had no impact on our consolidated financial position or consolidated results of
operations.

> EITF Issue No. 03-11  Reporting Realized Gains and Losses on Derivative Instruments that Are Subject to FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and Not Held for Trading
>     Purposes

In July 2003, the EITF reached consensus in EITF
Issue No. 03-11 that determined that whether realized gains and losses on derivative contracts not held
for trading purposes should be reported  on a net or gross basis is a matter of judgment that depends
on the relevant facts and circumstances and the economic substance of the transaction. In analyzing the
facts and circumstances, EITF Issue No. 99-19, and Opinion No. 29, Accounting
for Non-monetary Transactions, should be considered. EITF Issue No. 03-11 is effective for transactions
or arrangements entered into after September 30, 2003. The adoption of this EITF had no impact on our
consolidated financial position or  consolidated results of operations.

New Accounting Pronouncements Under Peruvian GAAP


> Recognition and Measurement of Financial Instruments

CNC approved International Accounting Standard (IAS) 39, Recognition and Measurement of Financial Instruments in May 2001 and application of IAS 39 became effective
under Peruvian GAAP on January 1, 2003. IAS 39 requires that all financial assets (including derivatives) be recognized at cost value, and subsequently revalued at the estimated fair value, with the exception of loans, investments held to maturity
or financial investments whose values cannot be ascertained by the market, which are to be recognized at cost. In the case of financial liabilities, only derivatives and liabilities held for trading will be considered at the estimated fair value.
Depending on how hedge relationship is defined per each derivative, the Company will recognize the change in fair value directly in the statement of income, or only the part corresponding to changes in the hedge item, with the balance recorded as
part of shareholders equity. The standard also establishes that the effects of hedging operations must be recognized in the consolidated statements of income in order to offset the changes in the underlying assets that are being hedged. Its
adoption had no significant impact on our financial position or results of operations.

> International Financial Reporting Standards (IFRS)

By Resolution No. 034-2005-EF/93.01 of the CNC dated February 17, 2005, published on March 2, 2005, the CNC approved and rendered official the International Accounting Standards (IAS), which
were amended in December 2003 and in March 2004, and the International Financial Reporting Standards (IFRS) 1 to 5. It also cancelled IAS 15 as of January 1, 2005 and IAS 22 and 35 as of January 1, 2006.

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According to the aforementioned Resolution, the IFRS and the new versions of the IAS will apply to the preparation and presentation of financial statements as of January 1, 2006, and
optionally, as of January 1, 2005. These changes will affect the financial statements under Peruvian GAAP without impacting current or future financial statements under U.S. GAAP.

> Investments in Property

The CNC approved IAS 40, Investments in Property, in May 2001 and application of IAS 40 became effective under Peruvian GAAP on January 1, 2002. IAS 40 requires that one of the
following recording methods be applied with regard to lease income generated from investments in property:

| | (i)  | estimated market value, and any change in
    such value must be reflected in the income statement, or                                                                                             
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                    
| | (ii) | cost, disclosing the estimated
        market value in a note to the consolidated financial statements. The chosen method must be applied
    to all investments in real estate held by the entity.

The adoption of provisions of IAS 40 did not have a material effect on our Consolidated Annual Financial Statements.

> Accounting for Inflation

Pursuant to CNC Resolution No. 031 2004/EF/93.01 issued on May 18, 2004, the CNC has suspended the requirement to adjust the financial statement for inflation. Beginning on January 1, 2005, the
balances as of December 31, 2004, adjusted for inflation, will be considered as initial historical balances.

C. Research and development, patents and licenses, etc.

In May 1994, CPT and Entel each entered into a Technology Transfer and Management Agreement with Telefónica Internacional for a term of five years, to be automatically renewed for
subsequent five-year periods up to a maximum of 20 years, coinciding with the initial term of the concession.

Under the agreement, Telefónica Internacional agreed to provide technical and operational expertise with respect to our entire range of activities. We also participate with the other
companies in the Telefónica Group in the development and implementation of major projects designed to streamline the groups overall management and operation of networks and services. Technology transfer fees amounted to S/.30.4 million
in 2004, S/.47.2 million in 2003, and S/.36.9 million in 2002.

D. Trend Information

See Item 5: Operating and Financial Review and ProspectsIntroduction; Presentation of Financial Information.

E. Off-balance Sheet Arrangements

We have no majority-owned subsidiaries that are not included in our Consolidated Annual Financial Statements, nor do we have any interests in or relationships with special purpose entities. For
a discussion about certain derivative instruments, see Item 11: Quantitative and Qualitative Disclosures About Market Risk.

F. Tabular Disclosure of Contractual Obligations

Contractual Obligations

The following table discloses
aggregate information about our contractual obligations as of December 31, 2004:

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|                              | Payments due by period             
|----------------------------- | -----------------------------------
|                              |                                    
|                              |                                    
|                              |                                    
|                              | Total                              
|                              |                                    
|                              | (millions of constant nuevos soles)
|Contractual obligations       |                                    
|Long-term debt                | 918                                
|Capital lease                 |                                   
|Operating lease               | 192                                
|Purchase obligations          |                                   
|                              |                                    
|Total contractual obligations | 1,110                              
|                              |                                    

We have additional commitments under derivative contracts. For a discussion of these additional commitments, see Item 11: Quantitative and Qualitative Disclosures About Market Risk.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

DIRECTORS AND EXECUTIVE OFFICERS

Board of Directors

In accordance with our bylaws, the Annual Shareholders Meeting on March 26, 2003 established the number of directors of the board of directors for the current term as nine. As a result,
the Special Shareholders Meeting for Class A-1 shares appointed five directors. The Special Shareholders Meeting for Class B shares appointed four directors. As of December 31, 2004, the board of directors is comprised as
follows:

|Name                                    |  | Class of Shares |  | First Appointed
|--------------------------------------- |  | --------------- |  | ---------------
|                                        |  |                 |  |                
|José Fernando de Almansa Moreno-Barreda |  | Class A-1       |  | 2003           
|José María Álvarez-Pallete López        |  | Class A-1       |  | 2002           
|Alfonso Ferrari Herrero                 |  | Class A-1       |  | 2003           
|Antonio Carlos Valente Da Silva         |  | Class A-1       |  | 2004           
|Enrique Used Aznar                      |  | Class A-1       |  | 2001           
|José Antonio Colomer Guiu               |  | Class B         |  | 2000           
|Luis Javier Bastida Ibargüen            |  | Class B         |  | 2003           
|Javier Nadal Ariño                      |  | Class B         |  | 2003           
|Juan Revilla Vergara                    |  | Class B         |  | 2003           

The current occupations and employment histories of our current directors are set forth below:

José Fernando de Almansa Moreno-Barreda, a Spanish national, has been a member of our board of directors since 2003. He holds a law degree from
the University of Deusto (Bilbao, Spain). He joined the Spanish Diplomatic Corps, and served from 1976 to 1992, as secretary of the Spanish embassy in Brussels, cultural counselor of the Spanish representation to Mexico, chief director for Eastern
European affairs and Atlantic affairs in the Spanish Foreign Affairs Ministry, counselor to the Spanish permanent representation to NATO in Brussels, minister-counselor of the Spanish embassy in the Soviet Union, general counsel of the National
Commission for the Fifth Centennial of the Discovery of the Americas, and deputy general director for Eastern European affairs in the Spanish Foreign Affairs Ministry. From 1993 to 2002, Fernando de Almansa was appointed Chief of the Royal Household
by His Majesty King Juan Carlos I, and is currently the personal adviser to His Majesty. He is a member of the board of directors and president of the International Affairs Commission of Telefónica S.A., and a member of the board of directors
of Telefónica Móviles S.A., Telefónica de Argentina S.A., Telecomunicaçoes de Sao Paulo S.A., and BBVA Bancomer Mexico.

José María Álvarez-Pallete López, a Spanish national, was appointed chairman and chief executive officer of Telefónica
Internacional S.A. on July 24, 2002. He began his career at Arthur Young Auditors in 1987. In 1988, he joined Benito & Monjardin/Kidder, Peabody & Co., where he held various positions in the research and corporate finance departments. In
1995, he joined Valenciana de Cementos Portland (CEMEX) as head of the Investor

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Relations and Studies department. In 1996, he was promoted to Financial Manager for the company in Spain, and in 1998 to General Manager for Administration and Financial Affairs for CEMEX Groups interests in
Indonesia, headquartered in Jakarta. José María Álvarez-Pallete joined Telefónica in February 1999 as CFO of Telefónica Internacional. In September of the same year, he became CFO of Telefónica, S.A. He is a
member of the following additional boards of directors: Telefónica de España, Telefónica Móviles S.A., Telefónica Data S.A., Telefónica Internacional, Telefónica de Argentina, Telesp,
Telefónica CTC Chile, among others. Mr. Álvarez-Pallete holds a graduate degree in economics from the Complutense University of Madrid. He also studied Economics at the Université Libre de Belgique.

Alfonso Ferrari Herrero, a Spanish national, has been a director since March 2003 and president of the Audit Committee since April 2003. He also serves
as a director of Telefónica, S.A., and Telefónica CTC-Chile, S.A., among others. From 1995 to 2000, he was Executive Chairman of Beta Capital, S.A., and prior to that, he served on several boards of directors representing Banco Urquijo
where he had been a partner since 1985. He has a doctorate in Industrial Engineering from the Polytechnic University of Madrid and he holds an MBA from Harvard University.

Antonio Carlos Valente Da Silva, a Brazilian national, was appointed a member of the board of directors of Telefónica del Perú S.A.A. and
President thereof on November 24, 2004. Previously, he was the maximum authority in regulation of Grupo Telefónica for Latin America. He has acted as Vice-President of the Agencia Nacional de Telecomunicaciones (Anatel) of Brazil and during
2002-2003 he acted as President of the Foro Latinoamericano de Reguladores de Telecomunicaciones (Regulatel), an institution which unites 19 countries of Latin America and the Caribbean. He has had managerial positions in the Telebras System, in the
following areas: engineering of telecommunications systems, technical operational basis and managerial principles. Mr. Valente is an electrical engineer and has completed post graduate studies in business administration and specialization courses in
systems and business, including managerial strategy in MIT/Sloan.

Enrique Used Aznar, a Spanish national, has been a director since April 2001 and a member of the Audit Committee since April 2003. Mr. Used is a director
of Telefónica, S.A. and the Chairman of AMPER, S.A. and AmperProgramas and the Deputy Chairman of Medidata (Brazil). Previously, he held the position of Chairman of Telefónica Latinoamérica, S.A., Telefónica
Móviles, S.A., Estratel and Telefónica Investigación y Desarrollo, S.A. He has also served as Deputy Chairman and Chief Executive Officer of Telefónica Publicidad e Información and Compañía
Telecomunicaciones de Chile. He has also served as a member of the board of directors of Telefónica de Argentina, ATT Network System International and Ericsson (Spain).

José Antonio Colomer Guiu, a Spanish national, has been a director since January 2000. Mr. Colomer is the general managing director of BBVA Banco
Continental and general managing director of Holding Continental S.A., among others. He has held the positions of president and executive president of Banco Bilbao Vizcaya Puerto Rico and has been entrusted with many positions of responsibility
within Grupo BBVA. Mr. Colomer holds a degree in Corporate Business Management and in Leadership and Innovation from IESE, Universidad de Navarra, Spain, and in Marketing from ESADE, among others.

Luis Javier Bastida Ibargüen, a Spanish national, has been a director and a member of the Audit Committee since October 2003. He has been the chief
financial officer and general sub-director of Banco Bilbao Vizcaya, as well as the general director of that group and a member of the direction committee of Banco Bilbao Vizcaya Argentaria. He is a non-executive director and independent consultant
of different companies. He is also a member of the Instituto Español de Analistas Financieros and founding member of the Asociación Española de Planificación. Mr. Bastida graduated in business science from E.S.T.E (San
Sebastián), holds a master in business administration from Columbia University and had several courses in executive education at I.M.I. (Ginebra) and I.E.S.E. (Madrid).

Javier Nadal Ariño, a Spanish national, was chairman of the board of directors from January 2003 to November 2004. Currently he is a director of
Telefónica del Perú and General Manager of Institutional Relations and Group Origins. He has been the adjunct general director of corporate regulations of Telefónica, S.A. since November 2002 and was the chairman of the board of
directors of Telefónica de Argentina, S.A. between 1995 and 1997. Between 1985 and 1995, he was the General Telecommunications Director (Spanish Public Administration). During that period, he also worked as the Spanish governments
delegate at Telefónica. He was the chairman of Retevisión between 1989 and 1994. He has performed professional activities in the industrial sector at Telettra

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Española in Milan, Italy and at Torrejón de Ardoz, Spain between 1972 and 1977, and has contributed, as an expert, to the United Nations Development Programme in Latin America. Mr. Nadal is a
telecommunications engineer from Universidad Politécnica in Madrid, Spain and holds a certificate of advanced studies in political science and Sociology from Universidad Complutense in Madrid, Spain.

Juan Revilla Vergara, a Peruvian national, has been the chief executive officer since January 2003. Previously, he was the corporate acquisitions
director of the Telefónica Group. He was vice president of Administration and Finance of Telesp (Brazil) and our control vice president. He spent part of his professional career as a senior analyst responsible for issuances at the Stock
Exchange National Commission in Spain. Mr. Revilla holds a degree in business administration from Universidad del Pacífico, Lima, Perú.

Executive Officers

Our executive officers oversee our business operations and are responsible for the execution of the policy decisions of the board and of the shareholders meetings. Our executive officers
as of March 31, 2005, their respective positions with us, and the year they became executive officers are set forth below. All executive officers serve at the discretion of the board of directors.

The employment histories of our executive officers other than Mr. Valente and Mr. Revilla, who are directors, are set forth below:

|Name                               |  | Title                                                                  |  | Year
|---------------------------------- |  | ---------------------------------------------------------------------- |  | ----
|                                   |  |                                                                        |  |     
|Antonio Carlos Valente Da Silva    |  | President of the Board of Directors                                    |  | 2004
|Juan Revilla Vergara               |  | Chief Executive Officer                                                |  | 2004
|Luis Delamer                       |  | Managing Director of Wholesale Business                                |  | 2004
|Vicente Arnaiz Muñoz               |  | Managing Director of Small Business and Professionals                  |  | 2004
|Carlos Oviedo Valenzuela           |  | Managing Director of Communications                                    |  | 2005
|Séneca De la Puente Estremadoyro   |  | Managing Director of Resources and Customer Services                   |  | 2003
|Ludwig Allan Vicente Meier Cornejo |  | Managing Director of Institutional Relations                           |  | 2001
|Álvaro Badiola Guerra              |  | Managing Director of Control                                           |  | 2004
|Manual Plaza Martín                |  | Managing Director of Networks and Operations                           |  | 1999
|Gabriel Frías Garcia               |  | Managing Director of Commercial Business                               |  | 2004
|Julia María Morales Valentín       |  | General Counsel and Secretary of the Board                             |  | 2002
|José Fermín Álvarez Carril         |  | Chief Financial Officer                                                |  | 2004
|Michael Duncan Cary-Barnard        |  | Managing Director of Residential Communications                        |  | 2004
|Manuel Lara Gómez                  |  | Managing Director of Internal Audit                                    |  | 2004
|Renán Oliveira de Barros Leal      |  | Managing Director of Planning and Development of Products and Services |  | 2003

Luis Delamer, an Argentine national, has served as the Managing Director of Wholesale Business Unit for Telefónica del Perú S.A.A. since
June 16, 2004. In this capacity he is responsible for the commercial relationship between the Company and the operators and providers of telecommunications services in Perú, in addition to the development of new products and services that
comprise the Wholesale Business Unit. He joined Grupo Telefónica in 1997, specifically Telefónica de Argentina, S.A., where he was responsible for wholesale prices, interconnection, tax and competition regulation, among other things.
Mr. Delamer is an industrial engineer and earned his degree from the Universidad de Buenos Aires, in Argentina. He has a post-graduate degree in strategic marketing.Currently, he is finishing his masters in economics at the Universidad del CEMA.

Vicente Ricardo Arnaiz Muñoz, a Peruvian national, has been the Managing Director of Small Business and Professionals at Telefónica del
Perú since June 16, 2004. He joined Grupo Telefónica in 2000. Mr. Arnaiz has fifteen years of experience in business, with leading financial firms such as Grupo Crédito, Orión (Grupo Carsa) and Banco Santander
Perú. In recent years he has served as commercial manager. Mr. Arnaiz studied law and political science at the Universidad Particular San Martín de Porres in Lima. He is also a member of the second installment of the Executive Program
(Programa de Dirección) at UPC, and has participated in the INSEAD Leadership Program developed last year in Buitrago, Spain.

Carlos Oviedo Valenzuela, a Peruvian national, is the Managing Director of Communications at Telefónica del Perú since January 1, 2005, and
he is in charge of the public image of the Company and of the businesses owned by

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Grupo Telefónica. He is responsible for the strategies of communication designed to promote a positive perception of the business practices of the Company among our diverse audiences. He also guides the
Companys relationship with the media. He joined the Company in September of 2003, after a long professional career. He is a communications specialist with a degree from the Pontificia Universidad Católica del Perú, having earned
post graduate degrees from the Universidad de Navarra, and he is also the author of various publications in his area of specialty.

Séneca De la Puente Estremadoyro, a Peruvian national, joined us in April 1998. He has been the managing director of Resources and Customer
Services since April 2004; before that, he was the Managing Director of Resources from March 25, 2003. Previously, he has served as the customer services director at Telefónica Móviles S.A.C., the invoicing and collection deputy
manager of Telefónica Móviles S.A.C., and our administration and management control head of mobile services. Mr. De la Puente studied business administration at the Universidad de Lima and took up several specialization courses in
Lima, Barcelona and in Stockholm, Sweden.

Ludwig Allan Vicente Meier Cornejo, a Peruvian national, is our Managing Director of Public Relations since August 23, 2001. He was Minister of State in
the portfolio of Fisheries during the transitional government, and Minister of the same portfolio from July 1997 to December 1998. He has held several executive positions at various business organizations and governmental bodies. Mr. Meier studied
law at Pontificia Universidad Católica in Perú and business administration at Universidad de Lima.

Álvaro Badiola Guerra, a Spanish national, is the Controller since he joined the Company on August 18, 2004. He has served as General Manager of
Finance and Controlling at Telefónica Datacorp, S.A. (Madrid), Director of Telefónica Empresas Perú S.A.A., Deputy General Manager of Financial Management and member of the Management Committee at Banco de Crédito Local
(Madrid). He has held various positions in Argentaria, in Madrid as well as in New York. Mr. Badiola is licensed in Business Administration from the Universidad Pontificia de ComillasICADE and he earned a Master in Business Administration from
the University of Chicago.

Manuel Plaza Martín, a Spanish national, is the Central Manager of Networks and Operations, as of January 2005, and since November 2001, the
General Manager of Telefónica Servicios Técnicos. He became part of the Group in 1978, and has held different positions in the Planning and Engineering area in Telefónica of Spain. As of 1994, he has been in charge, in
Telefónica del Perú, of Programming and Investments as well as of Operations of Access Networks and Clients. He is an Industrial Technical Engineer from the Universidad de Valladolid (Spain) and has completed post graduate courses at
the Universidad de Piura and at the Instituto de Estudios Superiores de Empresa de Barcelona.

Gabriel Frías García, a Spanish national, was appointed Managing Director of Commercial Business on May 19, 2004. Mr. Frías joined
the Telefónica Group in 1978. He joined Telefónica de Argentina, S.A. in which he held different roles such as director of marketing and strategic planning. In 1997, he became the director of business communications (large clients,
small businesses and operators) and in 2000 he assumed the position of general manager of Telefónica Data Argentina. At the end of 2001, he joined Telefónica Data España as general director of the Business and Internet
Communications Unit. Mr. Frías is an engineer in telecommunications.

Julia María
Morales Valentín, a Peruvian national,
has been the General Counsel and Secretary of the Board since September 18, 2002.
From  January 1988 to September 2002, she was the adjunct legal counsel for Unión
de Cervecerías Peruanas Backus y Johnston S.A.A. She is a lawyer who obtained
her degree from PontificiaUniversidad Católica
del Perú and who did postgraduate studies in civil and business law at
Instituto de Estudios de Iberoamérica y Portugal-Universidad de Salamanca,
Spain. She also completed  masters studies in business law at Universidad
de Lima.

José Fermín Álvarez Carril, a Spanish national, has been the Managing Director of Finance since October 20, 2004. He has served as
Director of Management and Financial Risk Auditing at Telefónica, S.A. (Madrid). He has worked as Director of New Products in the Office of the Treasury and Joint Director of the Department of Global Risk Management at Banco Santander
(Spain). Mr. Álvarez is a senior engineer of telecommunications of the E.T.S.I.T.M.Universidad Politécnica de Madrid. He earned an MBA in economics and business leadership from the Instituto de Estudios Superiores de la Empresa
(IESE) at the Universidad de Navarra in Spain.

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Michael Duncan Cary-Barnard, a Peruvian national, has been the managing director of residential communications since January 1, 2004. Since December
2003, he has also been the general manager of Servicios Globales de Telecomunicaciones S.A.C. He also was an alternate director of Telefónica del Perú S.A.A., director of Transporte Urgente de Mensajería S.A.C. and the general
manager of Telefónica Multimedia S.A.C. He has a business administration degree from the University of Northampton, England.

Manuel Lara Gómez, a Spanish national, has been the managing director of internal control since January 21, 2004. Before that, he was the manager
in audit procedures of business in Spain and our internal audit manager. He joined the Telefónica Group in 1989. He is a graduate in economics and business sciences from the Universidad de Málaga, Spain.

Renán Oliveira de Barros Leal, a Brazilian national, has been, since October 2003, the managing director of planning and development of products
and services. He is in charge of the areas of strategic planning, regulation, product committee, development of products and the investment office. He has worked in the Telefónica Group since 1998, at Telesp (Brazil), working first in the
commercial area of residential and small business and later in strategic planning. Mr. Oliveira is an engineer from Universidad Federal de Pernambuco (Brazil) and has a postgraduate degree from the Universidades Federal de Rio de Janeiro and from
the Georgia Institute of Technology (USA).

B. Compensation

For the year ended December 31, 2004, the aggregate amount of compensation paid to all directors and executive officers as a group was approximately 0.28% of the total operating revenues of the
company. No allocations have been made for pensions, retirement plans or similar benefits for our directors and executive officers.

Our employees were eligible to participate in the Telefónica S.As Incentive Employee Shares (TIES) compensation plan. The TIES, which was directed to all employees of
the Telefónica Group, required eligible employees to purchase Telefónicas shares at below market prices and to receive options, based on the number of shares purchased by each eligible employee, whose value would depend on any
increase in the value of Telefónicas shares over an initial reference price. The TIES plan had a duration of four years from the date of delivery of the options on January 2001.

On the third and final date of the exercise of the TIES program, due as of February 15, 2005, the value of the stock of the Company did not reach the reference price set forth under the
program, which had also occurred on the prior two exercise dates. Therefore, the options issued with respect to the program automatically were cancelled and expired, and the program officially concluded.

C. Board Practices

Board of Directors

The board of directors is responsible for the management and legal representation necessary for the administration of our Company. According to the bylaws, the boards responsibilities
include, among other things, directing all operational and financial matters, establishing and modifying our organizational structure by appointing officers and delegating power to them, entering into contracts and making decisions regarding our
operations and disposition of funds and other property.

The board of directors consists of a minimum of nine and a maximum of fourteen directors. Pursuant to our bylaws, each Class of stock is entitled to appoint a different number of directors. The
holders of Class A-1 shares appoint a simple majority of directors and the holders of Class B shares appoint the number of remaining directors needed to complete the number of directors approved by the shareholders for such term. Class C
shareholders will have the right to appoint one director if and when Class C shares represent three percent or more of the capital stock and from then on will maintain that right indefinitely, even if this percentage decreases. In such case, Class B
shareholders will have the right to appoint one less director. Class C shareholders do not currently have the right to appoint any directors.

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According to our bylaws, directors are appointed at shareholders meetings for each Class by the use of cumulative voting. The alternate director is appointed for each director in the same
manner as for the directors. Directors serve for a term of three years and may be re-appointed. Cumulative voting gives each shareholder the right to as many votes as there are directors to be appointed by that Class. Each shareholder may pool his
votes in favor of one person or distribute them among various persons. On March 26, 2003, the general shareholders meeting established that there would be nine directors on the board of directors. The Class A-1 shareholders meeting
appointed five directors and the Class B shareholders meeting appointed four directors. On March 28, 2005, the Class A-1 shareholders appointed three (3) alternate directors and the Class B shareholders appointed four (4) alternate directors.

The board appoints one president and one or more vice presidents among its members. In addition, the board appoints a Secretary and Vice Secretary, and if no one is appointed to these
positions, the General Manager performs their functions. Directors remain in their positions until a new election takes place, even if their terms have expired. If a directors position is vacant, it will be filled by an alternate director, and
in case the latter position is vacant, the board can fill this position.

The board need not meet in person and may use means that allow communication and assure authenticity of their actions. Similarly, agreements can be adopted outside of a meeting by the unanimity
of its members and confirmed in writing. If a director or a third party has an interest contrary to ours, he or she should disclose the conflict and abstain from participating in deliberation and resolution concerning the matter.

As of December 31, 2004, no member of our board of directors has entered into service contracts with us or with any of our subsidiaries providing for benefits upon termination of employment.

Executive Committee

The boards executive committee consists of five directors appointed by the board on April 23, 2003 and on November 24, 2004. The executive committee acts as the main executive body
responsible for business decisions not requiring full actions by the board. Our executive committee members as of March 2005 are Javier Nadal Ariño, Juan Revilla Vergara, José María Alvarez Pallete López, José
Antonio Colomer Guiu and Antonio Carlos Valente Da Silva.

Audit Committee

In February 2002, we created an audit committee. The audit committee is responsible for providing support to the board of directors in supervising the correct application of generally accepted
accounting principles, reviewing compliance with internal control systems and maintaining the integrity of the preparation of individual and consolidated audits. The members of the committee as of March 2005 are Alfonso Ferrari Herrero, Enrique Used
Aznar and Luis Javier Bastida Ibargüen.

Appointment, Retribution and Good Governance Committee

This committee consists of three directors which were appointed by the board of directors on June 16, 2004. It is responsible for implementing good corporate practices and for maintaining the
integrity of the process of hiring executive officers of the Company. The committee members as of February 28, 2005 are Alfonso Ferrari Herrero, Enrique Used Aznar and Luis Javier Bastida Ibargüen.

Chief Executive Officer

The chief executive officer executes the resolutions of the board and of the general meeting of shareholders and is vested in representing us. The chief executive officers duties include,
among others, organizing our internal schedule and directing our operations, inspecting our books and operations, managing expenses, assets and capital stock, and reporting to the board the condition and progress of our business and operations, its
collection, investments and available funds, and hiring and firing workers.

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D. Employees

Since the privatization in 1994, we have effected a substantial reduction in our workforce primarily through our early retirement program. As of December 31, 2004, we had 3,153 employees (not
including employees of our subsidiaries, affiliates or temporary programs). The continued reduction in the workforce, coupled with an aggressive line installation program has led to a corresponding increase in the number of lines per employee. By
the end of 2004, there were 684 lines in service per employee compared to 87 lines in service per employee in 1994.

As of December 31, 2004 approximately 1,975 of our employees were union members. We recently completed our collective bargaining negotiations with the three unions that represent our workforce
and entered into agreements that will be in effect through November 30, 2006.

We deduct each year approximately 11% from each employees salary for contribution to a pension plan of the employees choosing, which, since 1993, may be either a privately
administered pension fund or a fund managed by the Peruvian government. We also contribute an amount equal to 9% of each employees salary to a government-administered health care program and, until November 2004, an additional 2% for the
extraordinary solidarity tax (previously payable to the National Housing Fund). In December 2004 the solidarity tax was eliminated. In addition, pursuant to Peruvian law, employees who work in telecommunications companies have the right to receive
10% of our adjusted taxable income before taxes as profit sharing. See Item 5: Operating and Financial Review and ProspectsComparison of Results of Operations for the Fiscal Years Ending December 31, 2003 and 2002Workers
Profit Sharing Expense and Income Tax.

For a discussion regarding TIES, the employee incentive compensation plan, see Compensation above.

The following table provides the number of our management, non-management and temporary employees for the fiscal years ended December 31, 2002, 2003 and 2004.

|                    |  | 2002  |  | 2003  |  | 2004 
|------------------- |  | ----- |  | ----- |  | -----
|                    |  |       |  |       |  |      
|Management          |  | 557   |  | 503   |  | 488  
|Employees           |  | 2,809 |  | 2,813 |  | 2,665
|Temporary Employees |  | 898   |  | 805   |  | 738  
|                    |  |       |  |       |  |      
|Total(1)            |  | 4,264 |  | 4,121 |  | 3,891
|                    |  |       |  |       |  |      

|   
|---
|(1)

E. Share ownership

None of our current directors and executive officers beneficially own shares or hold options in respect of shares of the Company.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

Our capital stock as of April 30, 2005 was represented by three Classes of common stock: (i) Class A-1 shares, representing 38.895% of our capital stock, (ii) Class B shares, representing
61.089% of our capital stock, and (iii) Class C shares, representing 0.016% of our capital stock. Class B shares trade on the Lima Stock Exchange.

The following table sets forth certain information as of April 30, 2005 with respect to the ownership of our share capital by each shareholder and group of affiliated shareholders known to us
who own more than 5% of any Class of our ordinary shares:

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|                                     | At April 30, 2005 | 
|------------------------------------ | ----------------- | 
|                                     |                   | 
|                                     | Number of Shares  | 
|                                     |                   | 
|A-1 shares                           |                   | 
|Telefónica Perú Holding S.A.C.(1)(2) | 669,762,378       | 
|B shares                             |                   | 
|Telefónica Perú Holding S.A.C        | 148,693,350       | 
|Telefónica Internacional S.A.(1)(2)  | 852,821,462       | 
|Total B shares(3)                    | 1,051,926,625     | 
|C shares(4)                          | 275,414           | 
|                                     |                   | 
|Total shares                         | 1,721,964,417     | 
|                                     |                   | 

|   
|---
|(1)
|   
|(2)
|   
|(3)
|   
|(4)

Other than with respect to the number of directors each Class may appoint as discussed in Item 6: Directors, Senior Management and EmployeesA. Directors and senior
managementBoard of Directors, none of our major shareholders have different voting rights.

As of December 31, 2004, 0.74% of our Class B
shares were held by record holders of such shares within the United States.

Significant Changes


On March 28, 2005, our shareholders approved a program to reduce our capital stock in an amount not to exceed S/.1,350 million to be carried out within the twelve-month period following the
date of the meeting. Our shareholders delegated the implementation of this program to our board of directors. On May 25, 2005, the board authorized a reduction in our capital stock from S/.2,152,455,521.25 to S/.1,377,571,533.80, through a reduction
of the nominal par value of its shares equivalent to S/.0.45 per share, or from S/.1.25 to S/.0.80. Furthermore, the board authorized the Company to maintain the same number of outstanding shares and thus, the amount of the capital reduction will be
distributed on apro ratabasis amongst shareholders in the amount of S./0.454608494004588 per share. These changes to our capital stock will become effective on July 26, 2005.

B. Related Party Transactions

Management Contract

We believe that our relationship with Telefónica Internacional provides us with important competitive advantages due to Telefónica Internacionals experience in developing
telecommunications businesses in Latin America. Some of our executive officers were employed by Telefónica prior to joining our Company. Under this management team, we have implemented a plan to increase the number of lines in service,
modernize the network, increase employee productivity, consolidate operations and introduce new management control and planning systems. In addition to the transfer of managerial and operational expertise, Telefónica Internacional provides us
with increased purchasing and negotiating power through alliances with its other affiliates, as well as access to technology, research and product development.

Pursuant to the terms of the share purchase agreement, we entered into management contracts with Telefónica Internacional, dated as of May 16, 1994, in which Telefónica
Internacional agreed to manage our businesses and

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provide technical and operational expertise with respect to our entire range of activities. On September 30, 2004 this contract was amended. The share purchase agreement also provides that any transaction between
Telefónica Internacional or any of its affiliates and us must be on terms no less favorable than those that would be entered into with independent entities. In order to ensure that independent directors review transactions between us and
Telefónica Internacional or any of its affiliates, our bylaws provide that all such transactions must be approved by a majority of the boards directors.

The basic terms and conditions of the management contract are set forth below.

> Telefónica Internacionals Responsibilities.

Under the new terms of the management contract, Telefónica Internacional has responsibility for transmission of technical capacity which includes use of brands, patents and all other
elements of intellectual and industrial property, development and implementation of general policies, design of organization, personnel and compensation structures, provision or hiring of necessary personnel, transfer and application of state of the
art technology and expertise, and development of detailed annual plans and budgets, to be provided by consultants.

> Technology Transfer and Management Fees.

Under the management contracts, Telefónica Internacional is entitled to invoice quarterly fees payable in U.S. dollars for technology transfer and management.

With respect to technology transfer, the fees that Telefónica Internacional receives are equal to one percent of the quarterly income for services billed by the Company. For management,
until the second quarter of 2004, the fee was equal to nine percent over the operational gain (without taking into account depreciation, amortization and payment of fees, or taxes, rights, rates and royalties set forth in the concession agreements).
As of the third quarter, in light of an addendum executed with Telefónica Internacional on September 30, 2004, this fee is based on professional and specialized consulting and advisory personnel appointed by Telefónica Internacional,
who provide services on a fixed rate basis. Such addendum eliminated the application of the aforementioned nine percent fee.

The valuation of each item included in the management fee formula is made in accordance with Peruvian GAAP and is subject to review by a recognized independent accounting firm designated by
both us and Telefónica Internacional.

Technology transfer fees amounted to S/.36.9 million, S/.47.2 million and S/.30.4 million in 2002, 2003 and 2004, respectively, and management fees amounted to S./209.5 million, S/.262.7
million and S/.127.4 million in 2002, 2003 and 2004, respectively.

Duration. The management contract has a five year term and will be automatically extended for additional periods of five years each, up to a maximum of
20 years, after which the parties may, at their option, negotiate a new contract. Telefónica Internacional may terminate the management contract for any of the following reasons:

- a delay of more than 90 days in the payment of the management fee,
- breach of a material term by us of the management contract, or
- termination of a concession granted by the State Contracts.

In the event Telefónica Internacional terminates the management contract for any of the reasons listed above, we may be liable for damages suffered by Telefónica Internacional as
a result of such termination. We may also terminate the management contract in the event of:

- breach of a material term of the contract by Telefónica Internacional,
- the liquidation or bankruptcy of Telefónica Internacional, or
- termination of a concession granted by the State Contracts.

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Contracts with Telefónica Móviles S.A.C.

In December 1999, we entered into several contracts with Telefónica Móviles whereby Telefónica Móviles agreed to make monthly payments to us of approximately:

- U.S.$300,000 for leasing space, which in 2004 amounted to U.S.$167.000;
- U.S.$100,000 for electricity, which in 2004 amounted to U.S.$79,000;
- U.S.$55,000 for use of antenna towers, which in 2004 was reduced to approximately U.S.$30,000; and
- U.S.$79,000 for use of group capacity.

In January 2003, we entered into a 10-year term Circuit Lease Agreement with Telefónica Móviles S.A.C. During 2004 we received U.S.$12,039,266 as consideration under such
agreement.

Contracts with Telefónica Multimedia S.A.C.

After we spun off Telefónica Multimedia S.A.C., which occurred on August 2004, we have executed several Service Agreements with them, relating to, among other things (i) network lease,
(ii) value added services and (iii) space lease. From the date of the spin-off to December 31, 2004, we have paid out as consideration thereunder to Telefónica Multimedia S.A.C. approximately U.S.$8,400,000.

Contracts with Terra Networks Perú S.A.

In October 1999, Terra Networks S.A., a company also controlled by our controlling shareholder, acquired the Internet client base of one of our subsidiaries, Telefónica Servicios
Internet del Perú, S.A.C., which provides Internet access to the residential market in Perú. We agreed that we would not provide Internet services to residential customers in Perú without Terra Networks S.A.s prior written
consent. In return, Terra Networks S.A. agreed to pay U.S.$25 million and also gave us an option to purchase their ordinary shares for U.S.$30 million. We also granted Terra Networks S.A. a right of first refusal and agreed to provide Terra Networks
S.A. with telecommunications services in Perú subject to payment for such services.

In March 2003, we entered into several agreements with Terra Networks Perú S.A. whereby it agreed to provide certain services to us with respect to its broadband Internet services such
as:

- electronic mail accounts and Internet access to our clients, and
- programming of our broadband services home page (website).

Contract with Telefónica Empresas Perú S.A.A.

In 2001, we entered into a Network Capacity Agreement with Telefónica Empresas Perú S.A.A., whereby we agreed to provide them with certain network capacity and, during 2004, we
received approximately U.S.$15,250,000 under such agreement.

In January 2001, we executed an Agency Agreement with Telefónica Empresas Perú S.A.A., and during 2004 we paid out approximately U.S.$12,515,000 under such agreement.

In January 2001, we executed a Service Agreement with Telefónica Empresas Perú S.A.A., whereby it agreed to provide operation and management services to our digital network, known
as Digired. During 2004 we paid approximately U.S.$1,600,000 for such services.

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Contract with Teleatento del Perú

Pursuant to a Share Purchase Agreement dated September 30, 1999, we are a partner with Atento N.V., a subsidiary of Telefónica, in Teleatento del Perú S.A.C., which provides call
center services in Perú. Atento N.V. owns 70% of Teleatento del Perú S.A.C. and we hold the remaining 30%.

We have executed a Service Agreement with Teleatento del Perú, whereby it agreed to operate our call center. During 2004 we paid out approximately U.S.$10,300,000 for such
services.

Contract with Telefónica Publicidad e Informacion Perú S.A.C.

In December 2001, we executed with Telefónica Publicidad e Informacion Perú S.A.C. an agreement for the editing, distribution and marketing of our telephone guide. During 2004 we
paid out approximately U.S.$6,958,000 for such services.

Contract with Telefónica Gestión de Servicios Compartidos Perú S.A.C.

On April 1, 2001, we entered into a contract with a subsidiary of Telefónica, Telefónica Gestión de Servicios Compartidos Perú S.A.C. (TGSC), to receive
services such as accounting, systems, human resources, security, logistics and computer services. TGSC provides these common services to all business lines of Telefónica within Perú. The contract is for an initial term of five years,
renewable for successive three-year periods thereafter, absent notice of withdrawal. The contract provides that payments for services be determined on the basis of schedules containing criteria for each service. Payments and services provided are
renegotiated annually.

Loans to Employees

Loans are granted to our employees and officers for terms ranging from one to twenty-four months. There are two types of loans: one that does not have an interest rate and another that does.
Such rates are generally below existing market rates, depending on the type of loan. Other than reduced interest rates, the terms are substantially similar to those in the market. As of December 31, 2003 and 2004, loans outstanding to employees and
officers amounted to approximately S/.4.6 million and S/.6.6 million, respectively.

No member of the board of directors or member of the Audit Committee or any of the officers responsible for implementing our policies, has incurred any material indebtedness to us.

C. Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

See Item 18 to our Annual Report.

Legal Proceedings

We are involved in various claims and legal actions arising in the ordinary course of business. We have recorded provisions against these claims. We believe that the ultimate disposition of
these matters will not have a consolidated material adverse effect on our financial position or results of operations.

Dividend Policy and Dividends

The Annual Shareholders Meeting held on March 28, 2005 modified the dividend policy of the Company as follows: 100% of the total net profit may be paid out as dividend after deducting (as
set forth herein) the following amounts: (i) employee profit sharing, (ii) any applicable taxes, and (iii) the corresponding legal reserve. Such dividend can be distributed as an interim or final dividend for any fiscal year. It will be distributed
at the time deemed convenient and always considering the investment requirements and the financial condition of the

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Company. Furthermore, the board of directors will determine the amount, percentage and conditions for the dividend distribution, and is authorized to establish the registration and delivery dates.

All outstanding shares of common stock at the record date of a dividend or other distribution are entitled to share equally in any such dividend. The annual dividend shall be approved at the
Annual Shareholders Meeting. Our net profit for the fiscal year may be distributed as an annual dividend which can be paid out as an interim or as a final dividend. According to the Peruvian Companies Law, dividends may be distributed only
from earnings actually obtained or from cash reserves at our disposal, provided that the value of the assets is equal to or greater than the paid-in capital stock. The interim dividend is declared at the boards discretion. The declaration and
payment of final dividends are subject to approval by a majority vote of the outstanding shares of common stock present at the annual general shareholders meeting, and the actual amount paid, after such shareholder approval, will be the
balance of the final dividend after deducting the interim dividend. The annual general shareholders meeting is required by Peruvian law to be held during the first quarter of each fiscal year and generally takes place in March. The final
dividend generally will be paid during the fiscal year following the fiscal year to which such dividend relates.

Any dividend and future dividends will depend on our legal reserve, results of operations, financial position, cash requirements, capital expenditure needs, future prospects and other factors
which may be deemed relevant by the board of directors and our shareholders.

The distribution of dividends of up to 50% of the net profits, after deducting the legal reserve, is mandatory if shareholders representing at least 20% of the subscribed voting shares have
voted in favor of a dividend distribution. Available earnings are subject to the following priorities:

(1) the mandatory employee profit sharing of 10% of pre-tax profits must be paid. Under Peruvian labor law, any telecommunications company with more than 20 employees is required to distribute
among its employees 10% of its annual pre-tax profits. Fifty percent of the funds are distributed based on attendance,i.e., the number of days worked during the preceding
year, and the balance is distributed based on relative salary levels. Profit sharing payments are made irrespective of any holdings in Class C shares or any other shares of our capital stock;

(2) at least 10% of the net profits must be allocated to a legal reserve, which is not thereafter available for use except to cover losses in the profit and loss statement when no profit or
special reserve is available for such purpose. The legal reserve must be reconstituted following any such use. Amounts reserved are nevertheless included in taxable income. The obligation to fund this reserve remains in place until the reserve
constitutes 20% of the capital stock. After the reserve has been funded, the shareholders can then allocate any portion of the net profits not required to be distributed to shareholders to any other special reserve; and

(3) the remainder of the net profits is available for distribution.

Dividends on our three classes of shares of common stock are distributed on apro ratabasis in accordance with the
number of shares of common stock held by each shareholder. The right to receive dividends expires ten years after the date on which payment of such dividends was due if not claimed by the holder of shares within that time.

The table below sets forth the interim, final and total cash dividends paid per share in the periods indicated therein:

Cash Dividends Per Share

|        | Interim |  | Final    |  | Total  | 
|------- | ------- |  | -------- |  | ------ | 
|        |         |  |          |  |        | 
|        | S/.(1)  |  | U.S.$(2) |  | S/.(1) | 
|        |         |  |          |  |        | 
|2001    | 0.000   |  | 0.000    |  | 0.059  | 
|2002    | 0.000   |  | 0.000    |  | 0.000  | 
|2003(3) | 0.058   |  | 0.017    |  | 0.037  | 
|2004(4) | 0.000   |  | 0.000    |  | 0.000  | 

|   
|---
|(1)

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|(2) | Dollar amounts calculated by converting nominal (not inflation adjusted) nuevos soles at the SBS Exchange Rate for the initial payment date of the dividend.                                                                                                                                                 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                              
|(3) | Reflects retained earnings accumulated as of December 31, 2002.                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                              
|(4) | Please note that the board of directors has the power to authorize, if deemed convenient, the payment of dividends from the net profits of 2004, in full or in part. As of the date hereof, such dividend has not been
authorized. However, the board may authorize it at any time during the course of 2005.
|    |                                                                                                                                                                                                                                                                                                              

Significant Changes


There have been no significant changes since
the date of our Consolidated Annual Financial Statements.

Item 9. The Offer and Listing

A. Offer and Listing Details

Delisting of ADSs Traded on the NYSE

On December 17, 2003, the board of directors approved a resolution to delist the ADSs from the NYSE. On January 8, 2004, we asked for approval from the NYSE and the SEC to delist from the NYSE.
The SEC approved the request and on March 1, 2004, the ADSs ceased trading on the NYSE. From March 1, 2004 to April 12, 2004, holders of ADSs had the right to exchange their ADSs for the underlying Class B shares. The Class B shares trade on the
Lima Stock Exchange.

The table below sets forth, for the periods indicated, the reported high and low sale prices of ADSs on the NYSE until delisting on March 1, 2004.

|                 | Per ADS       
|---------------- | --------------
|                 |               
|                 | High          
|                 |               
|                 | (U.S. dollars)
|1999             | 157/8         
|2000             | 211/8         
|2001             | 611/16        
|2002             | 315/16        
|2003             | 412/16        
|                 |               
|2002:            |               
|First Quarter    | 314/16        
|Second Quarter   | 315/16        
|Third Quarter    | 215/16        
|Fourth Quarter   | 115/16        
|2003:            |               
|First Quarter    | 114/16        
|Second Quarter   | 215/16        
|Third Quarter    | 42/16         
|Fourth Quarter   | 412/16        
|                 |               
|September 2003   | 42/16         
|October 2003     | 412/16        
|November 2003    | 46/16         
|December 2003    | 45/16         
|January 2004     | 411/16        
|February 2004(1) | 32/16         

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|   
|---
|(1)

Class B shares and Class C shares traded on the Lima Stock Exchange

The following table sets forth the outstanding shares of our capital stock as of April 30, 2005.

|                |  |                  |  | Percentage of     |  
|--------------- |  | ---------------- |  | ----------------- | -
|                |  |                  |  | Outstanding Share |  
|Class of Shares |  | Number of Shares |  | Capital           |  
|                |  |                  |  |                   |  
|A-1             |  | 669,762,378      |  | 38.895            | %
|B               |  | 1,051,926,625    |  | 61.089            | %
|C               |  | 275,414          |  | 0.016             | %
|Total           |  | 1,721,964,417    |  | 100.000           | %

Only Class B shares and Class C shares trade on the Lima Stock Exchange. The following table shows the reported high and low trading price in nominal nuevos soles and the average daily trading
value of our Class B shares and Class C shares on the Lima Stock Exchange for the indicated periods:

|               |  |                        |  |      |  | Average Daily    
|-------------- |  | ---------------------- |  | ---- |  | -----------------
|Period(1)      |  | High                   |  | Low  |  | Trading Volume(3)
|               |  |                        |  |      |  |                  
|               |  | (nominal nuevos soles)
|2000           |  |                        |  |      |  |                  
|B shares       |  | 7.23                   |  | 2.07 |  | 15,085,199       
|C shares       |  | 7.21                   |  | 2.30 |  | 410,360          
|2001           |  |                        |  |      |  |                  
|B shares       |  | 2.29                   |  | 0.77 |  | 37,574           
|C shares       |  | 2.22                   |  | 1.28 |  | 11,125           
|2002           |  |                        |  |      |  |                  
|B shares       |  | 1.20                   |  | 0.47 |  | 14,152           
|C shares       |  | 0.92                   |  | 0.58 |  | 30,560           
|2003           |  |                        |  |      |  |                  
|B shares       |  | 1.60                   |  | 0.55 |  | 23,395           
|C shares       |  | 0.60                   |  | 0.61 |  | 1,972            
|2004           |  |                        |  |      |  |                  
|B shares       |  | 2.4                    |  | 0.82 |  | 170,269          
|C shares       |  |                       |  |     |  |                 
|2003:          |  |                        |  |      |  |                  
|First Quarter  |  |                        |  |      |  |                  
|B shares       |  | 0.68                   |  | 0.55 |  | 16,772           
|C shares       |  | 0.60                   |  | 0.60 |  | 1,415            
|Second Quarter |  |                        |  |      |  |                  
|B shares       |  | 0.98                   |  | 0.63 |  | 22,814           
|C shares(2)    |  | 0.61                   |  | 0.61 |  | 5,316            
|Third Quarter  |  |                        |  |      |  |                  
|B shares       |  | 1.31                   |  | 0.80 |  | 23,043           
|C shares       |  |                       |  |     |  |                 
|Fourth Quarter |  |                        |  |      |  |                  
|B shares       |  | 1.60                   |  | 1.18 |  | 20,380           
|C shares       |  |                       |  |     |  |                 
|2004:          |  |                        |  |      |  |                  
|First Quarter  |  |                        |  |      |  |                  
|B shares       |  | 1.57                   |  | 0.82 |  | 80,265           
|C shares       |  |                       |  |     |  |                 
|Second Quarter |  |                        |  |      |  |                  

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|                              |  |                                                 |  |      |  | Average Daily    
|----------------------------- |  | ----------------------------------------------- |  | ---- |  | -----------------
|Period(1)                     |  | High                                            |  | Low  |  | Trading Volume(3)
|                              |  |                                                 |  |      |  |                  
|                              |  | (nominal
                         nuevos soles)
|B shares                      |  | 1.40                                            |  | 1    |  | 113,268          
|C shares (2)                  |  |                                                |  |     |  |                 
|Third Quarter                 |  |                                                 |  |      |  |                  
|B shares                      |  | 1.27                                            |  | 1.09 |  | 488,419          
|C shares                      |  |                                                |  |     |  |                 
|Fourth Quarter                |  |                                                 |  |      |  |                  
|B shares                      |  | 2.4                                             |  | 1.28 |  | 32,510           
|C shares                      |  |                                                |  |     |  |                 
|Recent Six Months (B shares): |  |                                                 |  |      |  |                  
|December 2004                 |  | 2.4                                             |  | 1.51 |  | 45,047           
|January 2005                  |  | 1.85                                            |  | 1.44 |  | 22,779           
|February 2005                 |  | 1.85                                            |  | 1.61 |  | 22,317           
|March 2005                    |  | 2.30                                            |  | 1.65 |  | 57,351           
|April 2005                    |  | 2.25                                            |  | 2.13 |  | 33,665           
|May 2005                      |  | 2.43                                            |  | 1.90 |  | 74,908           

|                           
|---------------------------
|Source: Lima Stock Exchange
|(1)                        
|(2)                        
|(3)                        
|                           

As of June 21, 2005, the last reported sale price of the Class B shares on the Lima Stock Exchange was S/.2.45 per share.

B. Plan of Distribution

Not applicable.

C. Markets

The Peruvian Securities Market.

Background


As of December 31, 2004, there were 230 companies
    listed on the Lima Stock Exchange, Perús only securities exchange. Trading on the Lima
    Stock Exchange takes place from 9 a.m. to 2 p.m. local time, Monday through Friday, and is conducted
electronically in theRueda de Bolsa(stock exchange trading).

The transactions are executed through local brokerage firms on behalf of their clients. Brokers submit their orders in strict accordance with written instructions, following the chronological
order of receipt. The orders specify the type of security ordered or offered, the amounts and the price of the sale or purchase, as the case may be.

TheIndice General de la Bolsa de Valores de Lima, or the General Index, is composed of 32 of the most representative
stocks on the market. Due to the high levels of inflation during the 1980s, it has been necessary to reset the base index several times, most recently on December 30, 1991, when it was reset at 100. The composition of the General Index was
last changed in December 2004. The selection of stocks and their weight within the General Index depends on trading volume, number of trades and frequency of trades. Another index, theIndice
Selectivo, or the Selective Index, is composed of 15 stocks deemed to be the most representative of the Peruvian market as a whole based on the same criteria. In addition, the Lima Stock Exchange calculates
indices that measure the price of stocks in seven economic sectors.

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Stock Market Performance

The Peruvian stock market capitalization decreased by 21.6% in 2000, increased by 3.3% in 2001, increased by 15.9% in 2002, increased by 27.7% in 2003 and increased by 25% in 2004. Such
increase in 2004 was a result of the higher valuation of the banking, industrial and service stocks. The banking index gained 38% and the industrial and service indexes grew 47% in comparison to 2003.

The following table shows the traded volumes, market capitalization and performance of the General Index and Selective Index of the Lima Stock Exchange for the years indicated:

|                         | 2002                                                |  | 2003      |  | 2004     
|------------------------ | --------------------------------------------------- |  | --------- |  | ---------
|                         |                                                     |  |           |  |          
|                         | (in thousands of nuevos soles, except as indicated)
|Traded Volumes(1)(2)     | 2,873.68                                            |  | 2,254.52  |  | 2,466.87 
|Market Capitalization(2) | 12,592.88                                           |  | 16,083.80 |  | 20,107.93
|General Index(3)         | 1,391.97                                            |  | 2,435.04  |  | 3,710.39 
|Selective Index(3)       | 2,202.32                                            |  | 3,993.86  |  | 6,159.63 

|                           
|---------------------------
|Source: Lima Stock Exchange
|(1)                        
|(2)                        
|(3)                        

Market Regulation


TheComisión
      Nacional Supervisora de Empresas y Valores(the Peruvian Securities Commission or
CONASEV) regulates the securities market in Perú. It is a public entity under the responsibility of the Ministry of Economy and Finance, governed by a nine-member board appointed by the government. It was established by its own
organic law, as approved by Decree Law No. 26126. CONASEV has broad regulatory powers, including supervision of all companies incorporated in Perú, as well as Peruvian branches or agencies of foreign corporations, admission of members to the
Peruvian stock exchange, authorization of the creation of exchanges and approval of the registration of securities offerings. CONASEV also supervises the operation of securities markets and the dissemination of information to investors, governs the
operations of the Public Registry of Securities and Brokers, controls the activity of mutual funds and their management companies, monitors compliance with accounting regulations by companies under its supervision and the accuracy of their financial
statements, and registers and supervises the auditors providing accounting services to companies under CONASEVs
supervision.

In October 1996, the Fujimori administration published Legislative Decree No. 861 (the Securities Market Law of 1996) to improve investment conditions in the Peruvian securities
market. This decree contained several provisions intended to improve the efficiency and transparency of the Peruvian capital markets, including restrictions on insider trading, protections for holders of minority investments in companies, increases
in certain stock market reserve and capitalization requirements, and regulations permitting market stabilization activities by brokers under certain circumstances.

Selling Shareholders

Not applicable.

Dilution

Not applicable.

Expenses of the Issue

Not applicable.

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Item 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

Summaries of various provisions of our Memorandum
and Articles of Association and other related information are set forth herein below. Our bylaws were
last amended on November 8, 2004, when  our shareholders approved to amend them in order to reflect the
new capital structure of the Company as well as the nominal value of its shares. In 1999, 2000 and 2002,
the bylaws were partially amended, in order to reflect (i) the reduction of the  capital stock as a result
of the amortization of our own shares, and of the multiple reorganization transaction in which Telefónica
del Perú participated and (ii) the new structure of the board of directors.

Companys Object and Purpose; Registration and Transfer


Our object and purpose as a company, as stated in Article 2 of our bylaws, includes, but is not limited to, the following: operate and provide all types of telecommunications services and
engage in any activity related to lines, satellites, equipment and systems, including databases, software and technical telecommunications facilities; operate and provide international telecommunications services through satellites, underwater
cables and other technological media; perform data processing and research related to telecommunications components and equipment; market all types of goods and services and edit, print and market telephone directories; acquire and hold shares,
interests or securities of other entities, regardless of their object or activity.

Shares of common stock are evidenced by share certificates or in registered form. We maintain the share registry for shares evidenced by physical certificates at our executive office in Lima,
Perú. The Peruvian clearing institution keeps the share registry for shares evidenced by book entry. Transfers, encumbrances and liens on shares must be registered in the share registry and are only enforceable against us and third parties
after such registration has taken place.

Currently, all securities traded on the Lima
Stock Exchange must be registered in the Peruvian clearing institution, a book-entry settlement system.
Any holder of securities that holds a  physical certificate must convert to the Peruvian clearing institution
system before effecting a transaction on the Lima Stock Exchange in such securities. A holder may request
us to issue a new physical certificate. We are required to report  transfers of shares of common stock
to the Peruvian tax authority within the first ten business days of the calendar month following such
transfer.

Directors


Our board of directors
    consists of nine (9) directors appointed at a Special Shareholders Meeting
    held by each Class of shares. The quorum for meetings of our board is a simple
    majority of the members of the board.Resolutions
    can normally be passed with the vote of more than half of the number of directors
    present at a meeting. Nevertheless, certain resolutions must be approved
    by a majority of the board of directors, including among  others:

- the disposition of assets with an individual market value of at least U.S.$15,000,000;
- any transaction with an individual or entity with a value greater than the lesser of 15% of the gross income of the applicable fiscal year or U.S.$100,000,000;
- the performance of any type of operation with holders of our Class A-1 shares and their affiliates or subsidiaries, holders of shares representing more than 1% of our capital stock, or
directors of our company and the companies in which such directors hold a majority interest; and
- the determination of the amount of the final dividends to be distributed and agreement upon the distribution of interim dividends, see Item 8: Financial InformationDividend
Policy and Dividends.

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According to Peruvian law, a director who, in
any matter, has a conflict of interest with our company must inform the board of directors and abstain
from discussing and voting upon any  resolution related to the subject. Directors are liable to us for
any damage caused by their breach of this duty and may be removed during a shareholders meeting
at the request of any shareholder or other directors, upon the vote of a majority  of those present.

Rights, Preferences and Restrictions of Shares


Holders of shares of common stock are entitled to one vote per share on all votes submitted for voting by shareholders, except that:

- holders of the Class A-1 shares are entitled to appoint a simple majority of the members of the board for each term,
- holders of the Class B shares are entitled to appoint as many directors as are required to complete the number of members of the board determined by the general shareholders meeting
for each term, taking into account the number of directors appointed by holders of Class A-1 shares and holders of Class C shares, if applicable, and
- holders of the Class C shares are not currently entitled to appoint any member of the board.

In the event that holders of the Class C shares hold an aggregate of at least 3% of our fully subscribed capital stock of the Company, the holders of the Class C shares will have the right to
appoint one director. In this case, holders of Class B shares are entitled to appoint one less board member.

The Peruvian Companies Law requires that all corporations provide for the representation of minority shareholders on their boards of directors. As a result, each share of our common stock gives
the holder the right to as many votes as there are directors to be appointed by that Class. Each holder may pool his votes in favor of one person or distribute them among various persons.

Under Peruvian law, a shareholder who has a conflict of interest with our company is not entitled to exercise its voting right in any shareholders meeting on issues relating to such
conflict. A conflict of interest arises when a shareholder has a direct or indirect interest in the matter or matters being submitted to a vote of the shareholders and, therefore, would not be considered impartial to any decision taken by the
shareholders with respect to the matter or matters. In the event that this mandatory rule is not observed, any resolutions that may harm our company may be challenged only if such resolutions would not have been approved without the interested
shareholders vote. Although those shares of which the voting rights are limited under this provision of Peruvian law are counted to establish a quorum, they are not considered in establishing the voting majorities.

In the event of a liquidation, dissolution or winding-up of our company, the Peruvian Companies Law provides that our assets are to be applied to satisfy our liabilities. If any surplus
remains, holders of shares are entitled to receive and share proportionally in all net assets available for distribution to shareholders. The net assets will be set forth in the final balance sheet that the liquidators will submit to the
shareholders meeting for approval.

There are currently no restrictions under Peruvian
law on the rights of non-resident stockholders to own, hold or exercise voting rights on securities.
There are also no limitations on the  rights of non-resident or foreign stockholders to own, hold or
vote stock under the bylaws or other of our constituent documents.

Shareholders Meeting


Pursuant to Peruvian law and our bylaws, shareholders meetings may be general or special. A mandatory general shareholders meeting must be called by the board of directors and be
held during the three-month period after the end of each fiscal year. If the board of directors fails to call the mandatory meeting, or if so called it is not held for the required purposes, then, pursuant to Peruvian law, a meeting may be called by
the Peruvian securities commission by its own decision or at the request of any holder of a subscribed voting share. Other general shareholders meetings
may be called at any other time the board of directors deems necessary or upon the request of the holders
of at least 5% of our subscribed voting shares.

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A special shareholders meeting of holders of a particular Class of common stock must be held in order to approve the elimination of that Class or any amendment to the rights or
obligations of that Class. In addition, 5% of the holders of any Class of common stock may require the board of directors to convene a special shareholders meeting of holders of that Class. If the board of directors does not call the
shareholders meeting when required by law or within 15 days of the request of the shareholders, under Peruvian law, the shareholders will be entitled to request from the Peruvian securities commission an order to call such meeting. Our bylaws
provide that any disagreement between the shareholders and our company must be submitted to arbitration.

Notice of shareholders meetings must be given by publication thereof, with the last publication occurring at least 25 calendar days prior to the meeting, in theDiario Oficial El Peruanoand in a widely circulated newspaper in Lima. Shareholders meetings are generally subject to two quorum calls, the second to occur upon failure of the first. First
call quorum requires the assistance of shareholders that hold at least 50% of our subscribed voting shares. For the second call, whichever number of shareholders are present will constitute quorum.

Notwithstanding the foregoing, in order to approve:

- an increase or reduction of the capital stock,
- an issuance of debt securities,
- the transfer in a single operation of assets with a book value of more than 50% of our capital stock,
- the transformation, merger, spin-off, reorganization, dissolution and winding-up of the Company, or
- any modification of our bylaws,

a quorum for the first call requires the assistance of shareholders that hold 50% of the subscribed voting shares of the company, for the second call, a quorum of 25% of the holders of our subscribed voting shares is
required. If the second quorum call is not met, a third quorum call is required, in such case, any number of holders of subscribed voting shares will constitute a quorum. According to Peruvian law, decisions at shareholders meetings must be
approved by the majority of the votes of the subscribed voting shares present at such meeting.

A mandatory general shareholders meeting shall be held for the following purposes:

- review of our management and financial statements;
- the application of earnings;
- determination of compensation of the directors;
- appointment of the external auditors or authorization of the board of directors to appoint them; and
- in general, taking action on any other matters within its scope that were included in the notice.

Directors are appointed at a special shareholders meeting of holders of each Class of common stock.

Pursuant to Peruvian law and our bylaws, shareholder resolutions which breach the law or our bylaws, or that are against our interests and for the direct or indirect benefit of one or more
shareholders, are subject to review by an arbitrator upon the demand of any shareholder. Under the Peruvian Companies Law, a petition to void a particular resolution adopted by the shareholders meeting can be brought by shareholders who
either:

- stated their opposition to such resolution at the shareholders meeting at which it was adopted;
- were absent from such meeting; or
- were unlawfully prohibited from voting.

The action may be brought within:

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- two months as of the date of the resolution, if the plaintiff is a shareholder who attended the meeting in which the resolutions were approved;
- three months as of the date of the resolution, if the plaintiff is a shareholder who did not attend the meeting in which the resolutions were approved; or
- one month after registration, if the resolution has to be recorded in the public registry.

In addition, according to the Peruvian Companies Law, a petition to nullify a particular resolution adopted by the shareholders meeting which is contrary to law or considered null
pursuant to the Peruvian civil code can be brought by any person, including shareholders, who has a legitimate interest. The action may be brought within one year as of the date of the resolution.

Under Peruvian law, the creation of preferred
shares or the conversion of ordinary shares into preferred shares with the rights as are set forth for
the preferred shares may be approved by a  shareholders meeting. The meeting must be held with
the same quorum required to modify our bylaws and the decision regarding preferred shares must be approved
by the same majority required to modify our bylaws. In addition, Peruvian law  requires that matters
which relate to preferred shares be expressly mentioned in the agenda published in the call notice and
be previously approved by the special shareholders meeting of the holders of such shares.

Withdrawal Rights and Appraisal Procedure


Whenever certain extraordinary actions are adopted at a shareholders meeting,
such as:

- a change of corporate purpose,
- a transfer of the domicile of our company outside of Perú,
- a change in corporate form, or
- a merger or an acquisition,

any shareholder not voting in favor of the extraordinary resolution, any shareholder absent from the meeting, any shareholder not permitted to vote at the meeting and any shareholder of non-voting shares may withdraw from
our company and receive the average market price per share over the prior six months as recorded on the Lima Stock Exchange. If our shares are not listed, the shareholder will receive the book value of the shares as of the last day of the preceding
month. A shareholder must exercise its appraisal rights within ten calendar days following the notice that must be published by us to that effect. Payment on the appraisal rights must be made within two months and must include interest accrued as of
the date the withdrawal right was exercised by the shareholder, except:

- when payment for such term could endanger our stability, or
- if we have insufficient immediately available funds.

In such case payment will be made pursuant
to the terms and conditions determined by arbitration.

Increases and Reductions in Capital; Preemptive Rights


We may increase our capital stock upon resolution
    of a shareholders meeting. Capital reductions may be voluntary or mandatory and must be approved by a shareholders meeting.
    Under Peruvian law, capital reductions are mandatory when losses have decreased our capital by more
    than 50% and an entire fiscal year has passed without offsetting such decrease, except in the case
    that we hold legal and/or freely available reserves or we make new contributions in the amounts as
may be necessary to compensate for such loss.

Capital increases and reductions must be communicated to the Peruvian securities commission, the Lima Stock Exchange and the Peruvian tax authority and published in theDiario Oficial El Peruanoand in another widely circulated newspaper in Lima.

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According to Peruvian law, shareholders may give the board of directors the power to approve capital increases up to a maximum authorized amount which cannot exceed 100% of our capital stock at
the time the shareholders meeting approved such delegation to the board. Within the authorized limit, the board of directors may decide the amount of the successive capital increases to be executed. This authorization will remain in force for
a maximum period of five years. Until the subscription of the shares arising from the increase in capital occurs, the shares may not be included as capital of our Company or on our balance sheet. We are permitted to issue new certificates resulting
from capital increases only after such increase has been recorded in public registry. Exceptionally, we can issue provisional share certificates if at least 25% of the shares have been issued and paid for.

The Peruvian Companies Law and the Securities Market Law grant preemptive rights to shareholders by requiring every Peruvian company to offer its shareholders the right to subscribe and pay for
a sufficient number of shares to maintain their existing ownership percentage whenever the company issues new shares. In addition, the Peruvian Companies Law grants those persons who exercise preemptive rights the right to acquire a percentage of
the unsubscribed shares remaining after the end of the rights offering. The percentage is based on the proportion that the total amount of shares held by such person prior to the rights offering, together with the shares subscribed by such person in
the rights offering, bears to the total amount of shares held prior to the rights offering by all persons exercising preemptive rights, together with all shares subscribed in the rights offering. These are referred to as accretion rights. Preemptive
rights are freely transferable to third parties.

In the event of a capital increase with new contributions, the preemptive rights of the shareholders may be cancelled through a resolution adopted by the shareholders, provided that:

- the resolution is approved by holder of at least 40% of the subscribed voting shares, unless the shares are offered publicly. In such case the resolution must be approved by a majority of
the votes of the subscribed voting shares present at the shareholders meeting, subject to the quorum restrictions set forth hereinabove; and
- the capital increase is not intended, directly or indirectly, to enhance the holdings of any individual shareholder.

In addition, shareholders do not have preemptive rights:

- in the case of the conversion of bonds into shares of stock;
- with respect to newly issued shares, if the shareholders have unanimously agreed to grant to a shareholder or a third party an option to subscribe the shares; and
- in the case of companys reorganization under the Peruvian Companies Law.

Acquisition of Its Own Shares


The Peruvian Companies Law provides that a Peruvian company may acquire shares it has issued only to cancel them to reduce its capital. However, if a company has realized profits or free
reserves, it may acquire its own shares:

(1) to cancel them without reducing its capital, increasing the face value of the remaining shares;

(2) to cancel them without reducing its capital, but giving the holders in exchange rights to participate in the profits of the corporation;

(3) without the need to cancel them, if the acquisition is done to avoid significant damage to the corporation; or

(4) to keep them as treasury stock, up to an equivalent of 10% of its subscribed capital; provided, however, that in the case of clauses (3) and (4), such shares must be resold within two years
of their acquisition or redeemed in accordance with the Securities Market Law.

In any event, the acquisition needs to be approved by the general shareholders meeting. A company can only purchase fully paid shares, unless the acquisition is done to avoid significant
damage to the corporation.

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The acquisition will be made on apro ratabasis, except:

- in the case of clause (3);
- if the shares are acquired for free;
- the shares are acquired on the stock exchange; or
- a shareholders meeting unanimously approves otherwise.

During the period in which a company holds treasury stock, the rights to such shares will be suspended and such shares will not be considered for the calculation of the quorum or other voting
purposes.

During 2004, the Company re-purchased its own shares pursuant to the terms and conditions of a resolution adopted by the Shareholders of the Company on March 26, 2004, see Item 16E.

C. Material Contracts

For information on our material contracts, see Item 7: Major Shareholders and Related Party TransactionsRelated Party Transactions.

D. Exchange Controls

There are currently no restrictions under Peruvian law on the export or import of capital, including foreign exchange controls, or restrictions on the remittance of dividends, interest or other
payments to non-resident stockholders.

E. Material Tax Considerations

The following discussion is a summary of the material Peruvian and U.S. federal income tax consequences to you with respect to the acquisition, ownership and disposition of our shares.

The discussion of Peruvian tax consequences below applies to you only if you are a non-resident of Perú and your ownership of our shares is not effectively connected with a permanent
establishment or fiscal base in Perú. The discussion of material U.S. federal income tax consequences below applies only if you are a U.S. Holder (as defined below).

You should consult your own tax advisor regarding the particular tax consequences to you of owning and disposing of our shares, including your eligibility for the benefits of any treaty between
Perú and the country of your residence for the avoidance of double taxation, the applicability or effect of any special rules to which you may be subject, and the applicability and effect of state, local, foreign and other tax laws and
possible changes in tax law.

Peruvian Tax Considerations

We believe that the following accurately summarizes the principal Peruvian tax consequences of the acquisition, ownership and disposition of Class B shares by non-Peruvian holders. This summary
is based on the tax laws of Perú in effect on the date hereof. It does not discuss all of the tax consequences that may be relevant to a purchaser in light of such persons particular circumstances. Persons considering the purchase of
Class B shares should consult their own tax advisors with regard to the application of Peruvian tax law to their particular situations as well as any tax consequences arising under the laws of any other jurisdiction.

In general, Peruvian income tax legislation utilizes the concept of domicile to differentiate between classes of taxpayers. Individuals are considered to be domiciled in Perú if:

> (i) they are Peruvian citizens and are resident in Perú, or
>   (ii) they are non-Peruvian citizens and have lived in Perú for two years or have lived in Perú for at least six months and elected to be treated as domiciled for tax purposes.

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The determination of whether an individual is resident in Perú is made on the first day of each year, and is effective thereafter and until the individual becomes domiciled in another
country. A business entity is considered to be domiciled in Perú if:

> (i) it is created under the laws of Perú, in which case it is subject to Peruvian taxes on its worldwide income, or
>   (ii) it is a branch, agency or permanent
>       establishment of a non-Peruvian entity or individual, in which case it is subject to Peruvian taxes
>       only on its Peruvian source income.

Taxation of Dividends


From January 1, 2003, dividends paid to domiciled
    or non-domiciled individuals or non-domiciled entities are subject to Peruvian withholding income
    tax, at the rate of 4.1% thereon.

Taxation of Capital Gain


Gains on the sale of Class B shares by an entity regardless of domicile, are exempted from Peruvian income tax until December 31, 2006 if the sale is effected on the trading floor of a
recognized stock exchange under Peruvian regulation.

Gains on the Class B sale of shares by an individual regardless of domicile and whether effected on the trading floor of a recognized stock exchange under Peruvian regulation or not, are
exempted from Peruvian income tax until December 31, 2006.

Gain on the sale or other disposition of Class
B shares by holders who are individuals, regardless of their domicile, will not be subject to Peruvian
income tax, provided that no more than ten  purchases and ten sales of Peruvian securities are consummated
by such a holder within the same fiscal year. If more than ten sales and ten purchases are consummated
by such a holder within the same fiscal year, gains on the sale or other  disposition of the Class B
shares, in excess of such ten sales and ten purchases, will be subject to taxation at a rate of 30%,
calculated on the basis of the difference between the acquisition price, in nuevos soles, and the sale
price, in nuevos  soles.

Other Peruvian Tax Considerations


Peruvian tax law does not impose a gift tax
    on descendants, donors, legatees or donation recipients. There are no Peruvian stamp, issue, registration,
    transfer or similar taxes or duties payable by holders of Class B shares, with the exception of a
    19% VAT that applies to all fees and commissions paid upon the sale, disposition or transfer of such
    Class B shares. Such fees and commissions include commissions payable by the seller and the buyer
to the Lima Stock Exchange, fees payable to the CONASEV (0.05%) and brokers fees.

Tax Treaties


There is currently no income tax treaty or convention in effect between
Perú and the United States.

U.S. Federal Income Tax Considerations

The following discussion is a summary of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our Class B shares or our ADSs by U.S. Holders, as
defined below. This summary is based on the Internal Revenue Code of 1986, as amended (referred to herein as the Code), final, temporary and proposed Treasury regulations, administrative pronouncements of the U.S. Internal Revenue
Service (the IRS) and judicial decisions, all as currently in effect and all of which are subject to change (possibly with retroactive effect), and to different interpretations. It is also based in part on representations by the
depositary and assumes that each obligation under the Deposit Agreement and any related agreement will be performed in accordance with its terms. This discussion deals only with Class B shares and ADSs held as capital assets (generally, for
investment purposes). It does not discuss all of the tax consequences that may be relevant to a U.S. Holder in light of the U.S. Holders particular circumstances or to U.S. Holders subject to special rules, such as financial institutions,
insurance companies, tax-exempt entities, dealers in securities or foreign currencies, partnerships and other pass-through

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entities, investors liable for the alternative minimum tax, persons who hold Class B shares or ADSs as part of an integrated investment (including a hedge, straddle or conversion transaction), persons whose functional
currency is not the U.S. dollar or persons who actually or constructively own (directly or indirectly) 10% or more of our voting stock or persons who acquired Class B shares or ADSs pursuant to the exercise of any employee stock option or otherwise
as compensation. Holders of Class B shares or ADSs should consult their own tax advisors with regard to the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any
state, local or non-U.S. taxing jurisdiction.

As used herein, the term U.S. Holder means a beneficial owner of Class B shares or ADSs that is, for U.S. federal income tax purposes, (1) a citizen or individual resident of the
United States, (2) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized under the laws of the United States or of any political subdivision thereof or (3) an estate or trust the income of which is
subject to U.S. federal income taxation regardless of its source. The U.S. federal income tax treatment of a partner in a partnership that holds our Class B shares or ADSs will depend on the status of the partner and the activities of the
partnership. Partners in such partnerships should consult their own tax advisors.

THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES
SET OUT BELOW IS INTENDED FOR GENERAL INFORMATION PURPOSES ONLY. PROSPECTIVE PURCHASERS OF CLASS B SHARES
OR ADSs ARE URGED TO CONSULT WITH  THEIR OWN TAX ADVISORS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES
TO THEM OF ACQUIRING, OWNING OR DISPOSING OF CLASS B SHARES OR ADSs, INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS AND POSSIBLE CHANGES IN  TAX LAWS.

General


In general, for U.S. federal income tax purposes,
    holders of ADSs will be treated as the beneficial owners of the Class B shares represented by those
    ADSs. Deposits and withdrawals of Class B  shares in exchange for ADSs will not result in the realization
    of gain or loss for U.S. federal income tax purposes. The U.S. Treasury Department has expressed
    concerns that parties to whom depositary shares such as the ADSs are released may be  taking actions
    that are inconsistent with the claiming of foreign tax credits by U.S. Holders of the ADSs. Such
    actions would also be inconsistent with the claiming of the reduced rate of tax, described below,
    applicable to dividends received by  certain non-corporate holders. Accordingly, the analysis of
    the creditability of Peruvian taxes and the availability of the reduced tax rate for dividends received
    by certain non-corporate holders, each described below, could be affected by actions  taken by parties
    to whom the ADSs are released.

Taxation of Dividends


Distributions made by us of cash or property generally will constitute a taxable dividend to the extent paid out of our current or accumulated earnings and profits, as determined under U.S.
federal income tax principles. The full amount of any dividend paid in respect of our Class B shares or ADSs (including the amount of Peruvian withholding taxes imposed on such dividend) will be included in the gross income of a U.S. Holder as
foreign source dividend income.

The amount of any dividend paid in nuevos soles generally will be measured by reference to the spot rate for converting nuevos soles into U.S. dollars in effect on the date that the dividend is
received by the U.S. Holder, in the case of our Class B shares, or by the depositary, in the case of ADSs. A U.S. Holder may recognize foreign currency gain or loss, which would be treated as ordinary gain or loss, upon a subsequent conversion of
nuevos soles into U.S. dollars. U.S. Holders should consult their own tax advisors regarding the calculation and U.S. federal income tax treatment of foreign currency gain or loss. The amount of any distribution of property other than cash will be
the fair market value of such property on the date of distribution. Dividends paid by us will not be eligible for the dividends received deduction allowed to corporations under the Code.

Subject to applicable limitations and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid to noncorporate U.S. Holders in taxable years beginning prior to
January 1, 2009 will be subject to taxation at a maximum rate of 15% if the dividends represent qualified dividend income. Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an
established securities

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market in the United States and (ii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a passive foreign investment company (PFIC),
foreign personal holding company (FPHC) or foreign investment company (FIC). Since the ADSs are no longer listed on the NYSE, any dividends paid after March 1, 2004 will not represent qualified dividend income.

Based on existing guidance, it is not entirely clear whether dividends received with respect to the Class B shares prior to March 1, 2004 will be treated as qualified dividends, because the
Class B shares were not themselves listed on a United States exchange. In addition, the United States Treasury Department has announced its intention to promulgate rules pursuant to which holders of ADSs or Class B shares and intermediaries though
whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends. Because such procedures have not yet been issued, we are not certain that we will be able to
comply with them. U.S. Holders of ADSs and Class B shares should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.

Subject to certain limitations and restrictions,
and subject to the discussion above regarding concerns expressed by the U.S. Treasury, a U.S. Holder
will be entitled to a foreign tax credit  against its U.S. federal income tax liability, or a deduction
in computing its U.S. federal taxable income, for Peruvian income taxes withheld by us. The limitation
on foreign taxes eligible for credit is determined separately with respect to  specific classes of income.
The rules relating to the calculation of foreign tax credits and the applicable limitations are complex.
U.S. Holders should consult their own advisors concerning the implications of the foreign tax credit
rules in light  of their particular circumstances. Instead of claiming a credit, you may, at your election,
deduct such otherwise creditable Peruvian taxes in computing your taxable income, subject to generally
applicable limitations under U.S. law.

Taxation of Capital Gains or Losses


Upon a sale or other taxable disposition of
    Class B shares or ADSs, a U.S. Holder will recognize capital gain or loss for U.S. federal income
    tax purposes equal to the difference, if any, between the amount realized on the sale or other taxable
    disposition and the U.S. Holders adjusted tax basis in the Class B shares or ADSs. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S.
Holders holding period in the Class B shares or ADSs exceeds one year at the time of the sale or
other taxable disposition. Certain U.S. Holders (including individuals) may be eligible for preferential
rates of U.S. federal income tax in respect of long-term capital gains. The deductibility of capital
losses is subject to limitations under the Code.

Gain or loss derived from the sale or other disposition
of our Class B shares or ADSs generally will be treated as U.S. source income or loss for foreign tax
credit purposes. Consequently, if a  Peruvian tax is imposed on the sale or disposition of Class B shares
or ADSs, and a U.S. Holder does not receive significant foreign source income from other sources or if
the Peruvian tax is determined without regard to the U.S. Holders basis
in the Class B shares or ADSs, such U.S. Holder may not be able to derive effective U.S. foreign tax
credit benefits in respect of such Peruvian tax. See Peruvian Tax ConsiderationsTaxation
of Gains for a description of when
a disposition may be subject to taxation by Perú.

Passive Foreign Investment Company Rules


We believe that we will not be considered
    a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. However, because the determination of whether the
Class B shares or ADSs constitute shares of a PFIC will be based upon the composition of our income and assets, and entities in which we hold a 25% interest, from time to time, there can be no assurance that the Class B shares or ADSs will not be
considered shares of a PFIC for any taxable year. If we were treated as a PFIC for any taxable year during which a U.S. Holder held a Class B share or ADS, certain adverse consequences could apply to the U.S. Holder, including the imposition of
higher amounts of tax than would otherwise apply to a U.S. Holder and additional tax form filing requirements. U.S. Holders are urged to consult their tax advisors regarding the consequences to them if we were considered to be a PFIC, as well as the
availability and advisability of making an election to avoid the adverse United States federal income tax consequences of PFIC status should we be classified as a PFIC for any taxable year. Moreover, dividends on our ADSs would no longer be
qualified dividend income subject to preferential rates of U.S. federal income tax, as described
above. Based on our operations and business plans, we do not believe that we are currently a PFIC and
do not expect to become a PFIC in the foreseeable future.

85

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Information Reporting and Backup Withholding


Payment of dividends and
      sales proceeds that are made within the United States or through certain U.S.-related financial
      intermediaries generally are subject to information reporting and to backup withholding unless
      (i) you are a corporation or other exempt recipient or (ii) in the case of backup withholding,
      you provide a correct taxpayer identification number and certify that you are not subject to backup
      withholding. Backup withholding is not an additional tax. The amount of any backup withholding
      from a payment to a U.S. Holder will be allowed as a credit against such U.S. Holders U.S.
      federal income tax liability, if any, and may entitle such U.S. Holder to a refund, provided that
      the required information is timely furnished to the IRS.

U.S. HOLDERS AND PROSPECTIVE PURCHASERS OF OUR CLASS B SHARES OR ADSs SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PERUVIAN, U.S. FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR CLASS B SHARES OR ADSs BASED UPON THEIR PARTICULAR CIRCUMSTANCES.

Dividends and Paying Agents

Not applicable.

Statement by Experts

Not applicable.

Documents on Display

We file annual and special reports and other information with the SEC. You may read and copy any document that we file at the Public Reference Room of the SEC at 450 Fifth Street, N.W.,
Washington, DC 20549. Copies of such material can be obtained at prescribed rates from the Public Reference Room or by calling the SEC at 1-800-SEC-0330. Such material can also be obtained from the SECs website at http://www.sec.gov. You may
also obtain filings by writing us at Telefónica del Perú, Avenida Arequipa 1155 Santa Beatriz, Lima, Perú, Attention: Investors Relations Office, or telephoning us at (511) 265-7555. You can also access our website at
www.telefonica.com.pe for further information about our business operations.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

The following discussion of our risk management activities includes forward-looking statements that involve certain risks and uncertainties. Actual results could differ materially
from those projected in the statements.

Our financial debt, in terms of nuevos soles
at December 31, 2004, decreased by S/.129 million, compared to the end of the previous fiscal year. At
December 31, 2004, our financial debt was S/.1,708 million, including the value of those derivatives
designated as accounting hedges. We face three main categories of primary market risk exposure: interest
rate variations, changes in the Peruvian CPI and exchange rate fluctuations. The principal interest rate
risk we face is an increase in short-term interest rates. As of December 31, 2004, we had S/.767 million
in short-term liabilities. The risk we face in the Peruvian CPI is an increase in the CPI since there
were S/.335 million of VAC (Constant Purchasing Value) denominated bonds outstanding as of December 31,
2004. The principal exchange rate risk we face is the depreciation of the nuevo sol against the U.S.
dollar, since we have, as of December 31, 2004, U.S.$176 million in dollar-denominated liabilities outstanding
while approximately 75% of our revenues are denominated in nuevos soles. In addition, each year we spend
significant amounts of foreign currency, mainly U.S. dollars, to purchase certain equipment from foreign
suppliers.

In order to control these risk factors, we have managed our exchange rate and interest rate risk through our participation in the local capital markets and by partially hedging our U.S. dollar
exposure. This risk management strategy has improved our debt structure and company risk profile. On December 31, 2004, we had nuevo sol-Dollar exchange rate net forward contracts for U.S.$112 million and cross currency swaps nuevo sol-Dollar for
U.S.$36 million. At December 31, 2004, our consolidated assets in foreign currency were higher than our consolidated commercial and financial liabilities in foreign currency by U.S.$31 million.

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Interest Rate Risk

At the end of 2004, long-term debt was 54% of our total debt while in 2003 it was 70%. The total payments due in 2005 are S/.767 million (46% of our interest-bearing liabilities, including both
long- and short-term and dollar and nuevo sol-denominated debt) and will have an exposure to interest rate variations in case they are renewed.

As of December 31, 2004, we have inflation-linked bonds which are exposed to changes in the Peruvian Wholesale Price Index.

The following table summarizes the short- and long-term debt obligations held by us on December 31, 2004 bearing interest rate risk.

|                                           |  |                            |   | At December 31, 2004 Expected Maturity Date | 
|------------------------------------------ |  | -------------------------- | - | ------------------------------------------- | 
|                                           |  |                            |   |                                             | 
|                                           |  |                            |   |                                             | 
|                                           |  | Interest                   |   |                                             | 
|                                           |  | Rate as of                 |   |                                             | 
|On-Off Balance Sheet Financial Instruments |  | Dec., 2004                 |   | 2005                                        | 
|                                           |  |                            |   |                                             | 
|                                           |  | (nuevos soles in millions) |  
|Financial Liabilities                      |  |                           |   | 767.45                                      | 
|                                           |  |                            |   |                                             | 
|Fixed Rate                                 |  |                            |   |                                             | 
|Nuevo sol                                  |  | 5.69                       | % | 501.85                                      | 
|Dollar                                     |  | 3.61                       | % | 257.98                                      | 
|Euro                                       |  | 3.04                       | % | 7.62                                        | 
|                                           |  |                            |   |                                             | 
|Total                                      |  | 4.97                       | % | 767.45                                      | 
|Floating Rate                              |  |                            |   |                                             | 
|Nuevo sol(1)                               |  | VAC +                      |   | 0.00                                        | 
|                                           |  | 6.378                      | % |                                             | 
|Cross Currency Swap USD/PEN                |  |                            |   |                                             | 
|Receiving fixed USD                        |  | 3.13                       | % | 0.00                                        | 
|Receiving Floating USD                     |  | LIBOR                      |   | 0.00                                        | 
|Paying Fixed PEN                           |  | 7.24                       | % | 0.00                                        | 
|                                           |  |                            |   |                                             | 
|Total                                      |  |                            |   | 0.00                                        | 

|(1) | Total obligations differ from the S/.1,708 million financial debt as a result of including the value of those derivatives designated as accounting hedges.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                           
|(2) | VAC: Constant purchasing value.                                                                                                                           

Foreign Currency Exchange Rate Risk

As of December 31, 2004, U.S.$176 million (or
34%) of our debt was denominated in dollars and U.S.$8 million (or 2%) of our debt was denominated in
foreign currencies other than U.S. dollars,  while approximately 75% of our revenues was denominated
in nuevos soles. Even though the nuevo sol registered an appreciation during 2004, the Company has continued
managing its exchange rate risk by entering into forward contracts, pursuant to  which we agreed to purchase
dollars for nuevos soles at an agreed upon exchange rate on a particular date, and cross currency swaps
which involve exchanging principal and fixed/floating-rate interest payments on a loan in dollars for
principal and  fixed-rate interest payments in nuevos soles.

The purpose of our foreign-currency hedging activities
is to protect us from the risk of depreciation of the nuevo sol against the dollar. Usually, our derivative
contracts match certain of our  foreign exchange-denominated liabilities, in order to hedge such liabilities.
As of December 31, 2004, U.S.$112 million and U.S.$36 million of our debt was hedged through forward
and currency swaps contracts, respectively; U.S.$73 million and  U.S.$20 million corresponded, respectively,
to forwards and swaps designated as accountnig hedges, and the remaining U.S.$39 million and U.S.$16
million corresponded to our global position hedges through forwards and swaps, respectively. Though we
 prefer to enter only into perfect hedge transactions because the Peruvian market is extremely illiquid
and does not have a medium- or long-term derivative market, we are required to hedge long-term U.S. dollar-denominated
liabilities with short-term  forward contracts and roll them over until the liability matures.

87

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We purchase equipment from foreign suppliers
and, therefore, we must pay significant amounts each year in foreign currencies, principally in dollars.
In light of the 2004  performance, we can estimate that approximately 36% of our capital expenditures
in 2005 will be made in dollars. Consequently, fluctuations in the nuevo sol-dollar exchange rate will
cause the nuevo sol value of these expenses to fluctuate.

As of December 31, 2004, our consolidated assets
plus derivatives in foreign currency were U.S.$31 million higher than our consolidated commercial and
financial liabilities in foreign currency, while in 2003 we had a positive balance of U.S.$13 million.
With the reduction in our net monetary position, the impact of foreign exchange variation and exposure
to inflation resulted in a gain of U.S.$25 million in 2004, mainly resulting to exposure to inflation,
compared to a gain of U.S.$2 million in 2003.

The table below provides information about our borrowings that are sensitive to foreign currency exchange rates. Taking into account only financial liabilities plus derivatives and cash in foreign currency, the exposure to foreign exchange rates would be U.S.$ 15.8 million of net financial liabilities, with maturities as follows:

|                                           |  |                                |   | At December 31, 2004 Expected Maturity
          Date
|------------------------------------------ |  | ------------------------------ | - | -----------------------------------------------------
|                                           |  |                                |   |                                                      
|                                           |  |                                |   |                                                      
|                                           |  |                                |   |                                                      
|                                           |  |                                |   |                                                      
|On-Off Balance Sheet Financial Instruments |  | 2005                           |   | 2006                                                 
|                                           |  |                                |   |                                                      
|                                           |  | (U.S.$ equivalent in millions)
|Financial Liabilities                      |  | 80.9                           |   | 13.09                                                
|                                           |  |                                |   |                                                      
|Fixed Rate                                 |  |                                |   |                                                      
|Dollar                                     |  | 78.58                          |   | 12.55                                                
|Euro                                       |  | 2.32                           |   | 0.54                                                 
|                                           |  |                                |   |                                                      
|Total                                      |  | 80.9                           |   | 13.09                                                
|                                           |  |                                |   |                                                      
|Variable Rate                              |  |                                |   |                                                      
|Dollar                                     |  | 0.00                           |   | 0.00                                                 
|                                           |  |                                |   |                                                      
|Less Foreign Exchange Hedges               |  |                                |   |                                                      
|Forward Exchange Agreements                |  | 109.65                         |   | 2.33                                                 
|Cross Currency Swap                        |  | 0.00                           |   | 0.00                                                 
|                                           |  |                                |   |                                                      
|Total                                      |  | 109.65                         |   | 2.33                                                 
|                                           |  |                                |   |                                                      
|Less Cash (U.S. dollars)                   |  | 20.54                          |   | 0.00                                                 
|                                           |  |                                |   |                                                      
|Total Foreign Exchange Exposure            |  | (49.34                         | ) | 10.73                                                

Item 12. Description of Securities Other Than Equity Securities

Not applicable.

88

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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

No events that are required to be reported have occurred.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

Item 15. Disclosure Controls and Procedures

(a)Disclosure Controls and Procedures.Our Chief Executive Officer and our Chief Financial Officer, after evaluating
the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Annual Report, have concluded that, as of such date, our disclosure controls and procedures were
effective.

(b)Internal Control Over Financial Reporting.There were no changes in our internal control over financial reporting
that occurred during the year ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

We have not appointed a member of our audit committee as a financial expert because we are no longer a listed company in the NYSE and thus are not required to have an audit committee financial
expert. For information about our audit committee, see Item 6C. Board of DirectorsAudit Committee.

Item 16B. Code of Ethics

We have adopted a code of ethics which applies to the President of the board of directors, the Chief Executive Officer, the Chief Financial Officer, the Managing Controller Director, and any
other individuals performing similar functions. A copy of our code of ethics is filed as an Exhibit to this Annual Report.

Item 16C. Principal Accountant Fees and Services

Gris Hernandez y Asociados, member firm of Deloitte & Touche LLP (Deloitte), has served as our independent public accountants for each of the financial years in the two-year
period ended December 31, 2004, for which audited financial statements appear in this Annual Report.

The following table presents the aggregate fees for professional services and other services rendered by Deloitte to us in 2004 and 2003.

|                      |  | 2004   |  | 2003 
|--------------------- |  | ------ |  | -----
|                      |  |        |  |      
|                      |  | S/.000
|Audit fees(1)         |  | 1,366  |  | 1,358
|Audit-related fees(2) |  | 184    |  |     
|Tax fees(3)           |  |       |  |     
|All other fees(4)     |  | 31     |  | 112  
|                      |  |        |  |      
|Total                 |  | 1,581  |  | 1,470
|                      |  |        |  |      

|(1) | Consists of fees billed for the annual audit services engagement and other audit services, which are those services that only the external auditor reasonably can provide, and includes the group audit, statutory audits,
comfort letters and consents, attest services, and assistance with and review of documents filed with the SEC.                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(2) | Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements or that are traditionally performed by the external auditor, and
includes consultations concerning financial accounting and reporting standards, internal control reviews of new systems, programs and projects, review of security controls and operational effectiveness of systems, review of

89

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|    | plans and controls for shared service centers, due diligence related to acquisitions, accounting assistance and audits in connection with proposed or completed acquisitions, and employee benefit plan audits.                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(3) | Consists of fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refund, tax consultations, such as assistance and representation in connection with tax
audits and appeals, tax advice related to mergers and acquisitions, transfer pricing, and requests for rulings or technical advice from taxing authorities, tax planning services, and expatriate tax planning and services.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(4) | Consists of fees billed for process improvement and consulting.                                                                                                                                                                                                                                                                                                                                                                                       

> Audit Committee Pre-approval Policies and Procedures

Below is a summary of the current policies and procedures. Telefónica del Perú has created an Audit Committee composed of independent directors. The committee has the following
responsibilities:

- to propose the appointment of an external auditor, determine its contractual obligations as well as the extent, revocation and extension of its professional obligations;
- to review the Companys books, monitor compliance with legal requirements and the correct application of generally accepted accounting principles, and report on the proposed
modification of the accounting principles and criteria suggested by management;
- to serve as a communication channel among the board of directors, the external auditor and management, evaluate the operating results of each auditing period and respond to the
recommendations of management and the external auditors, and mediate and arbitrate between the parties to ensure compliance with generally accepted accounting principles in preparing
financial statements;
- to verify the adequacy and integrity of the internal control systems for individual and consolidated accounts;
- to supervise the fulfillment of the audit contract, obtain the audit report and ensure that it is clear and precise; and
- to review the books and financial information that are submitted to the markets and the supervisory bodies.

As of March 31, 2005, the Audit Committee consists of the chairman, Alfonso Ferrari Herrero, Enrique Used Aznar and Luis Javier Bastida Ibargüen. The committee has recommended the external
auditor for 2004 and has approved the engagement conditions and the extent of its professional scope; has reviewed the agreement for any services for the external auditor, whether or not they are audit-related and established the level of
compensation; has reviewed the quarterly and annual books; and discussed related matters with the team of management and the external auditor. In the same regard, the committee also informed itself of the main activities of the internal auditor and
the corrective actions implemented in each case.

The committee has reviewed the annual and quarterly financial statements and performed an exhaustive review with the members of the management team. The President has informed the board of
directors on a quarterly basis, of any changes in the financial information of the corporation and recommended their approval, as applicable. The audit committee has also met on a quarterly basis. In compliance with such standards, the Audit
Committee has reviewed the principals auditor agreement. When the agreement requires something from the auditor, the committee has evaluated each case in order to determine if the delivery of such services will not affect the independence of
the principal auditor and is within the scope of the agreement. The resolutions of the committee are reviewed and approved by the President and the Secretary of the Audit Committee.

In 2004, All Other Fees were approved by the Audit Committee pursuant to the de minimis exception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

90

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|Item 16E.
Purchases of Equity Securities by Issuer and Affiliated Purchasers
|----------------------------------------------------------------------------
|                                                                            
|                                                                            
|ISSUER PURCHASES OF CLASS B SHARES                                          

|          |  |                  |     |                    |  |                     |  | Maximum number     
|--------- |  | ---------------- | --- | ------------------ |  | ------------------- |  | -------------------
|          |  |                  |     |                    |  |                     |  | (or approximate    
|          |  |                  |     |                    |  | Total number of     |  | dollar value) of   
|          |  |                  |     |                    |  | shares purchased as |  | shares that may yet
|          |  |                  |     |                    |  | part of publicly    |  | be purchased under 
|          |  | Total number of  |     | Average price paid |  | announced plans or  |  | the plans or       
|Period    |  | shares purchased |     | per share          |  | programs            |  | programs           
|          |  |                  |     |                    |  |                     |  |                    
|January   |  |                 |     |                   |  |                    |  |                   
|February  |  |                 |     |                   |  |                    |  |                   
|March     |  |                 |     |                   |  |                    |  |                   
|April     |  |                 |     |                   |  |                    |  |                   
|May       |  |                 |     |                   |  |                    |  |                   
|June      |  |                 |     |                   |  |                    |  |                   
|July      |  | 221              | (1) |                   |  |                    |  |                   
|August    |  | 16,435,060       | (2) | S/.1.25            |  |                    |  |                   
|September |  | 1,020,756        | (2) | S/.1.25            |  |                    |  |                   
|October   |  |                 |     |                   |  |                    |  |                   
|November  |  |                 |     |                   |  |                    |  |                   
|December  |  |                 |     |                   |  |                    |  |                   
|          |  |                  |     |                    |  |                     |  |                    
|Total:    |  | 17,456,037       |     | S/.1.25            |  |                    |  |                   
|          |  |                  |     |                    |  |                     |  |                    

|(1) | Acquired as a result of an adjustment to the capital stock of the Company.                                                                                                                                                                                                                        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                   
|(2) | Purchases made pursuant to a resolution adopted at the general shareholders meeting of the Company held on March 26, 2004. Pursuant to such resolution, the Company may purchase up to 10% of the shares of its capital
stock within a period not to exceed two (2) years as of the date thereof.

91

---

PART III

Item 17. Financial Statements

The registrant has responded to Item 18 in lieu of responding to this Item.

Item 18. Financial Statements

The following financial statements are filed as part of this Annual Report:

Independent Auditors Report for years ended December 31, 2004, 2003 and
2002 
Consolidated Balance Sheets as of December 31, 2004 and 2003 
Consolidated Statements of Income for years ended on December 31, 2004, 2003
and 2002Consolidated Statements of Changes in Shareholders Equity
for years ended on December 31, 2004, 2003 and 2002 
Consolidated Statements of Cash Flows for years ended
on December 31, 2004, 2003 and 2002

Item 19. Exhibits

|Exhibit
Number |  | Description                                                                                                      
|-------------- |  | -----------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                  
|1.1            |  | Amended and Restated Articles of Association(3)                                                                  
|1.2            |  | Amended and Restated Articles of Association (English translation)(3)                                            
|1.3            |  | Article 5 of the Articles of Association as amended on November 8, 2004 and currently in effect                  
|4.3            |  | Option Agreement for the Subscription for Shares, dated October 20, 1999, Telefónica del Perú S.A.A. and Terra   
|               |  | Networks, S.A. (English version)(2)                                                                              
|4.4            |  | Option Agreement for the Subscription for Shares, dated October 20, 1999, between Telefónica del Perú S.A.A. and 
|               |  | Terra Networks, S.A. (Spanish version)(2)                                                                        
|4.5            |  | Asset Purchase Agreement, dated October 20, 1999, between Telefónica Servicios Internet S.A.C. and Terra         
|               |  | Networks Perú S.A. (English version)(2)                                                                          
|4.6            |  | Asset Purchase Agreement, dated October 20, 1999, between Telefónica Servicios Internet S.A.C. and Terra         
|               |  | Networks Perú S.A. (Spanish version)(2)                                                                          
|4.7            |  | Agreement for Provision of Services, dated October 20, 1999, among Telefónica del Perú S.A.A., Telefónica        
|               |  | Servicios Internet S.A.C. and Terra Networks S.A. (English version)(2)                                           
|4.8            |  | Agreement for Provision of Services, dated October 20, 1999, among Telefónica del Perú S.A.A., Telefónica        
|               |  | Servicios Internet S.A.C. and Terra Networks S.A. (Spanish version)(2)                                           
|4.9            |  | Share Purchase Agreement, dated September 30, 1999, between Telefónica del Perú S.A.A. and Atento Holding        
|               |  | Telecomunicaciones S.A. (English version)(2)                                                                     
|4.10           |  | Share Purchase Agreement, dated September 30, 1999, between Telefónica del Perú S.A.A. and Atento Holding        
|               |  | Telecomunicaciones S.A. (Spanish version)(2)                                                                     
|4.11           |  | Transfer Contract of Technical and Management Capacity, dated May 16, 1994, between T.I. Telefónica              
|               |  | Internacional de España, S.A. and Empresa Nacional de Telecomunicaciones del Perú S.A. (English version)(1)      
|4.12           |  | Transfer Contract of Technical and Management Capacity, dated May 16, 1994, between T.I. Telefónica              
|               |  | Internacional de España, S.A. and Empresa Nacional de Telecomunicaciones del Perú S.A. (Spanish version)(1)      
|4.13           |  | Transfer Contract of Technical and Management Capacity, dated May 16, 1994, between T.I. Telefónica              
|               |  | Internacional de España, S.A. and Compañía Peruana de Telefonos, S.A. (English version)(1)                       
|4.14           |  | Transfer Contract of Technical and Management Capacity, dated May 16, 1994, between T.I. Telefónica              
|               |  | Internacional de España, S.A. and Compañía Peruana de Telefonos, S.A. (Spanish version)(1)                       
|4.15           |  | Contract for Recognition of Debt and Payment Commitment Subject to Variable Interest Rate, dated January 11,     
|               |  | 2000, between Telefónica del Perú S.A.A. as Creditor and Telefónica Móviles S.A.C. as Debtor(2)                  
|4.16           |  | Contract for Services, dated April 1, 2001 between Telefónica del Perú S.A.A. and Telefónica Gestión de Servicios
|               |  | Compartidos S.A.C. (English version)(3)                                                                          
|4.17           |  | Contract for Services, dated April 1, 2001 between Telefónica del Perú S.A.A. and Telefónica Gestión de Servicios
|               |  | Compartidos S.A.C. (Spanish version)(3)                                                                          
|4.18           |  | Share Purchase Agreement, dated February 8, 2002, between Telefónica del Perú S.A.A. and Telefónica Publicidad e 
|               |  | Información S.A. (English version)(3)                                                                            
|4.19           |  | Share Purchase Agreement, dated February 8, 2002, between Telefónica del Perú S.A.A. and Telefónica Publicidad e 
|               |  | Información S.A. (Spanish version)(3)                                                                            
|4.21           |  | Additional Clause to Technical Capacity and Management Transfer Agreement, dated May 23, 1995, between           
|               |  | Telefónica del Perú S.A.A. and Telefónica Internacional S.A.(4)                                                  

92

---

|Exhibit
Number |  | Description                                                                                                     
|-------------- |  | ----------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                 
|4.22           |  | Addendum to the Technical Capacity and Management Transfer Contract, dated September 30, 2004                   
|4.23           |  | Addendum to the Concession Agreement for the Provision of Carrier Service and Local Telephone Service at the    
|               |  | Department of Lima and at the Callao Constitutional Province, dated November 22, 1999, between Telefónica del   
|               |  | Perú S.A.A. and the Ministry of Transport, Communications, Housing and Construction(4)                          
|4.24           |  | Addendum to the Concession Agreement for the Provision of Carrier Service and Local Telephone Service at the    
|               |  | Department of Lima and at the Callao Constitutional Province, dated May 18, 2001, between Telefónica del Perú   
|               |  | S.A.A. and the Ministry of Transport, Communications, Housing and Construction(4)                               
|4.25           |  | Addendum to the Concession Agreement for the Provision of Carrier Service, Local Telephone Service and National 
|               |  | and International Long Distance Service within the Republic Perú, dated November 22, 1999, between Telefónica   
|               |  | del Perú S.A.A. and the Ministry of Transport, Communications, Housing and Construction(4)                      
|4.26           |  | Addendum to the Concession Agreement for the Provision of Carrier Service, Local Telephone Service, and National
|               |  | and International Long Distance Service within the Republic of Perú, dated May 18, 2001, between Telefónica del 
|               |  | Perú S.A.A. and the Ministry of Transport, Communications, Housing and Construction(4)                          
|4.27           |  | Addendum to the Concession Agreement, dated July 25, 2000, between Telefónica del Perú S.A.A. and the Ministry  
|               |  | of Transport, Communications, Housing and Construction(4)                                                       
|4.28           |  | Amended and Restated Trust Agreement, dated as of December 16, 1998, amended and restated as of December 17,    
|               |  | 2001, between Telefónica del Perú S.A.A. and The Bank of New York(4)                                            
|4.29           |  | Amendment No. 1, dated January 21, 2004 to Deposit Agreement dated as of July 1, 1996 among Telefónica del Perú 
|               |  | S.A.A. and JPMorgan Chase Bank(5)                                                                               
|8.1            |  | List of Subsidiaries                                                                                            
|11.1           |  | Code of Ethics(6)                                                                                               
|12.1           |  | Section 302 CEO Certification of the Annual Report                                                              
|12.2           |  | Section 302 CFO Certification of the Annual Report                                                              
|13.1           |  | Section 906 CEO Certification of the Annual Report                                                              
|13.2           |  | Section 906 CFO Certification of the Annual Report                                                              

|(1) | Incorporated by reference to the registration statement of Telefónica del Perú S.A.A. on Form F-1, registration number 333-4768 filed on June 28, 1996.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                        
|(2) | Incorporated by reference to the registration statement of Telefónica del Perú S.A.A. on Form 20-F for the fiscal year ended December 31, 2000.        
|    |                                                                                                                                                        
|(3) | Incorporated by reference to the registration statement of Telefónica del Perú S.A.A. on Form 20-F for the fiscal year ended December 31, 2001.        
|    |                                                                                                                                                        
|(4) | Incorporated by reference to the registration statement of Telefónica del Perú S.A.A. on Form 20-F for the fiscal year ended December 31, 2002.        
|    |                                                                                                                                                        
|(5) | Incorporated by reference to the post-effective amendment No. 1 of Telefónica del Perú S.A.A. on Form F-6, registration number 333-04842.              
|    |                                                                                                                                                        
|(6) | Incorporated by reference to the Annual Report of Telefónica del Perú S.A.A. on Form 20-F for the fiscal year ended December 31, 2003.                 

93

---

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report hereby on its
behalf.

| | TELEFÓNICA DEL PERÚ S.A.A.
| | --------------------------
| |                           
| |                           
| | By:                       
| |                           
| |                           
| |                           

Date: June 27, 2005

94

---

| | Telefónica del Perú S.A.A. and Subsidiaries 
| | --------------------------------------------
| |                                             
| | Consolidated Financial Statements           
| | Years Ended December 31, 2002, 2003 and 2004
| | together with Independent Auditors Report  

---

Telefónica del Perú S.A.A. and Subsidiaries

Index to consolidated financial statements



|                                                                               | Page
|------------------------------------------------------------------------------ | ----
|                                                                               |     
|Independent auditors report as of December 31, 2002, 2003 and 2004            | F-2 
|Consolidated balance sheets as of December 31, 2003 and 2004                   | F-4 
|Consolidated statements of income for the years ended December 31, 2002,       |     
|2003 and 2004                                                                  | F-5 
|Consolidated statements of changes in shareholders equity for the years ended |     
|December 31, 2002, 2003 and 2004                                               | F-7 
|Consolidated statements of cash flows for the years ended December 31, 2002,   |     
|2003 and 2004                                                                  | F-8 
|Notes to the consolidated financial statements                                 | F-9 

F - 1

---

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

To the Shareholders of Telefónica del Perú S.A.A.

|1. | We have audited the accompanying consolidated balance sheets of Telefónica del Perú S.A.A. (hereinafter the Company, a telecommunications company established in Peru, subsidiary of Telefónica, S.A. from Spain) and
Subsidiaries as of December 31, 2003 and 2004, and the related consolidated statements of income, changes in shareholders equity, and cash flows for the years then ended December 31, 2002, 2003 and 2004, all expressed in constant Peruvian
Nuevos Soles. These consolidated financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2. | We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. The Company is not require to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures there are appropriate in the circumstances, but not for the purposes of expressing an opinion of the effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3. | In our opinion, the 2002, 2003 and 2004 consolidated financial statements referred to above, present fairly, in all material respects, the financial position of the Company and Subsidiaries as of December 31, 2003 and 2004, and the results of their
operations and their cash flows for the years then ended December 31, 2002, 2003 and 2004 in conformity with accounting principles generally accepted in Peru.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F - 2

---

|4. | Accounting principles generally accepted in Peru vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of consolidated
net loss for the fiscal years ended December 31, 2002, 2003 and 2004 and the determination of shareholders equity at December 31, 2002, 2003 and 2004 to the extent summarized in Note 35 to the consolidated financial statements.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                               
|-------------------------------------------------------------------------------
|Countersigned by:                                                              
|                                                                               
|                                                                               
|/s/ Eduardo Gris Percovich (Partner)                                           
|Eduardo Gris Percovich                                                         
|CPC Register No.12159                                                          
|                                                                               
|February 8, 2005, except for Notes 35 and 36, as which the date is June 9, 2005
|                                                                               
|Lima, Peru                                                                     

F - 3

---

TELEFONICA DEL PERU S.A.A. AND SUBSIDIARIES

CONSOLIDATEDBALANCESHEETSAS OFDECEMBER31, 2003 AND 2004 
Inconstantcurrency

|ASSETS                                     | Note |  | 2003      |  | 2004      |  | 2004      |  | LIABILITIES AND SHAREHOLDERS' EQUITY            | Note |     | 2003      |   | 2004      |  | 2004     
|------------------------------------------ | ---- |  | --------- |  | --------- |  | --------- |  | ----------------------------------------------- | ---- | --- | --------- | - | --------- |  | ---------
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  | S/.000    |  | S/.000    |  | US$000    |  |                                                 |      |     | S/.000    |   | S/.000    |  | US$000   
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|CURRENT ASSETS:                            |      |  |           |  |           |  |           |  | CURRENT LIABILITIES:                            |      |     |           |   |           |  |          
|Cash and banks                             | 8    |  | 52,457    |  | 63,332    |  | 19,297    |  | Bank loans and overdrafts                       | 16   |     | 171,625   |   | 206,847   |  | 63,025   
|Marketable securities (Trust fund)         | 9    |  | 48,622    |  | 37,325    |  | 11,373    |  | Trade accounts payable                          | 17   |     | 477,535   |   | 478,260   |  | 145,722  
|Trade accounts receivable, net             | 10   |  | 664,226   |  | 569,592   |  | 173,550   |  | Accounts payable to related companies           | 22   |     | 213,338   |   | 32,958    |  | 10,042   
|Accounts receivable from related companies | 22   |  | 262,206   |  | 134,280   |  | 40,914    |  | Other accounts payable                          | 18   |     | 700,073   |   | 1,023,037 |  | 311,711  
|Other accounts receivable, net             | 11   |  | 111,731   |  | 53,950    |  | 16,438    |  | Promissory notes                                | 19   |     | 265,254   |   | 95,000    |  | 28,946   
|Materials and supplies                     |      |  | 29,370    |  | 37,558    |  | 11,444    |  | Current portion of bonds                        | 20   |     | 27,541    |   | 398,496   |  | 121,419  
|Prepaid expenses                           | 12   |  | 71,376    |  | 41,307    |  | 12,586    |  | Current portion of long-term debt               | 21   |     | 89,702    |   | 90,211    |  | 27,486   
|Investments                                | 13   |  | 84,527    |  | 95,205    |  | 29,008    |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  | Total current liabilities                       |      |     | 1,945,068 |   | 2,324,809 |  | 708,351  
|Total current assets                       |      |  | 1,324,515 |  | 1,032,549 |  | 314,610   |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  | NON - CURRENT LIABILITIES:                      |      |     |           |   |           |  |          
|NON - CURRENT ASSETS:                      |      |  |           |  |           |  |           |  | Bonds                                           | 20   |     | 952,724   |   | 582,522   |  | 177,490  
|Investments, net                           | 13   |  | 6,266     |  | 9,197     |  | 2,802     |  | Long-term debt                                  | 21   |     | 329,736   |   | 335,144   |  | 102,116  
|Property, plant and equipment, net         | 14   |  | 6,294,500 |  | 5,814,491 |  | 1,771,630 |  | Guarantee deposits                              |      |     | 109,333   |   | 102,475   |  | 31,223   
|Intangibles and other assets, net          | 15   |  | 236,321   |  | 225,141   |  | 68,599    |  | Deferred income tax and workers' profit sharing | 30   | (c) | 1,061,405 |   | 1,009,042 |  | 307,447  
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|Total non - current assets                 |      |  | 6,537,087 |  | 6,048,829 |  | 1,843,031 |  | Total non - current liabilities                 |      |     | 2,453,198 |   | 2,029,183 |  | 618,276  
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  | TOTAL LIABILITIES                               |      |     | 4,398,266 |   | 4,353,992 |  | 1,326,627
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  | SHAREHOLDERS' EQUITY                            | 23   |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  | Share capital                                   |      |     | 3,098,199 |   | 2,333,190 |  | 710,905  
|                                           |      |  |           |  |           |  |           |  | Legal reserve                                   |      |     | 369,957   |   | 372,365   |  | 113,457  
|                                           |      |  |           |  |           |  |           |  | Retained earnings (accumulated losses)          |      |     | (4,820    | ) | 21,831    |  | 6,652    
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  | TOTAL SHAREHOLDERS' EQUITY                      |      |     | 3,463,336 |   | 2,727,386 |  | 831,014  
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          
|TOTAL ASSETS                               |      |  | 7,861,602 |  | 7,081,378 |  | 2,157,641 |  | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      |      |     | 7,861,602 |   | 7,081,378 |  | 2,157,641
|                                           |      |  |           |  |           |  |           |  |                                                 |      |     |           |   |           |  |          

Theaccompanyingnotes are anintegralpart of theseconsolidatedfinancialstatements.

F - 4

---

TELEFONICA DEL PERU S.A.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
2002, 2003 AND 2004 
In constant currency


---

|                                                      |      |     |           |   |           |   |           |   |             |  
|----------------------------------------------------- | ---- | --- | --------- | - | --------- | - | --------- | - | ----------- | -
|                                                      | Note |     | 2002      |   | 2003      |   | 2004      |   | 2004        |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|                                                      |      |     | S/.000    |   | S/.000    |   | S/.000    |   | US$000      |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|OPERATING REVENUES:                                   |      |     |           |   |           |   |           |   |             |  
|Fixed local telephone services                        |      |     | 1,709,482 |   | 1,607,148 |   | 1,485,202 |   | 452,530     |  
|International long distance telephone services        |      |     | 190,718   |   | 173,801   |   | 109,367   |   | 33,323      |  
|Domestic long distance telephone services             |      |     | 267,383   |   | 204,062   |   | 209,042   |   | 63,693      |  
|Public and rural telephone services                   |      |     | 798,038   |   | 736,650   |   | 677,378   |   | 206,392     |  
|Interconnection with others operators                 |      |     | 94,965    |   | 160,435   |   | 150,603   |   | 45,888      |  
|Business communications                               |      |     | 213,504   |   | 238,253   |   | 311,699   |   | 94,972      |  
|Cable television                                      |      |     | 314,906   |   | 335,683   |   | 338,582   |   | 103,163     |  
|Others                                                |      |     | 110,014   |   | 160,008   |   | 177,422   |   | 54,059      |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|TOTAL OPERATING REVENUES                              |      |     | 3,699,010 |   | 3,616,040 |   | 3,459,295 |   | 1,054,020   |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|OPERATING EXPENSES:                                   |      |     |           |   |           |   |           |   |             |  
|General and administrative                            | 25   |     | 965,335   |   | 1,026,383 |   | 923,140   |   | 281,274     |  
|Personnel                                             | 26   |     | 443,651   |   | 423,911   |   | 383,739   |   | 116,922     |  
|Depreciation                                          |      |     | 906,385   |   | 916,693   |   | 910,327   |   | 277,369     |  
|Amortization                                          |      |     | 136,617   |   | 135,027   |   | 83,365    |   | 25,401      |  
|Technology transfer and Management fee                | 27   |     | 246,421   |   | 309,905   |   | 157,843   |   | 48,094      |  
|Materials and supplies                                |      |     | 59,019    |   | 63,515    |   | 69,692    |   | 21,235      |  
|Shared services centre expenses                       |      |     | 118,140   |   | 102,989   |   | 93,529    |   | 28,497      |  
|Provision for impairment of assets                    |      |     | -         |   | -         |   | 27,073    |   | 8,249       |  
|Capitalization of personnel costs for telephone plant |      |     |           |   |           |   |           |   |             |  
|construction                                          | 4    | (i) | (50,117   | ) | (47,311   | ) | (38,293   | ) | (11,668     | )
|                                                      |      |     |           |   |           |   |           |   |             |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|TOTAL OPERATING EXPENSES                              |      |     | 2,825,451 |   | 2,931,112 |   | 2,610,415 |   | 795,373     |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|OPERATING INCOME                                      |      |     | 873,559   |   | 684,928   |   | 848,880   |   | 258,647     |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|                                                      |      |     |           |   |           |   |           |   |             |  
|                                                      |      |     |           |   |           |   |           |   | (Continued) |  

F - 5

---

TELEFONICA DEL PERU S.A.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOMEFOR THE YEARS ENDED DECEMBER 31, 2002,
2003 AND 2004 
In constant currency

---

|                                       |      |     |          |   |          |   |          |   |          |  
|-------------------------------------- | ---- | --- | -------- | - | -------- | - | -------- | - | -------- | -
|                                       | Note |     | 2002     |   | 2003     |   | 2004     |   | 2004     |  
|                                       |      |     |          |   |          |   |          |   |          |  
|                                       |      |     | S/.000   |   | S/.000   |   | S/.000   |   | US$000   |  
|                                       |      |     |          |   |          |   |          |   |          |  
|OTHER INCOME (EXPENSES):               |      |     |          |   |          |   |          |   |          |  
|Interest income                        | 28   |     | 56,087   |   | 32,284   |   | 24,472   |   | 7,456    |  
|Interest expense                       | 28   |     | (243,624 | ) | (145,570 | ) | (123,058 | ) | (37,494  | )
|Other expenses, net                    | 29   |     | (363,386 | ) | (295,092 | ) | (298,848 | ) | (91,057  | )
|                                       |      |     |          |   |          |   |          |   |          |  
|                                       |      |     |          |   |          |   |          |   |          |  
|Total                                  |      |     | (550,923 | ) | (408,378 | ) | (397,434 | ) | (121,095 | )
|                                       |      |     |          |   |          |   |          |   |          |  
|                                       |      |     |          |   |          |   |          |   |          |  
|Gain (loss) from exposure to inflation |      |     | (17,186  | ) | 7,146    |   | 78,689   |   | 23,976   |  
|                                       |      |     |          |   |          |   |          |   |          |  
|                                       |      |     |          |   |          |   |          |   |          |  
|INCOME BEFORE WORKERS' PROFIT          |      |     |          |   |          |   |          |   |          |  
|SHARING AND INCOME TAX                 |      |     | 305,450  |   | 283,696  |   | 530,135  |   | 161,528  |  
|                                       |      |     |          |   |          |   |          |   |          |  
|Workers' profit sharing                | 30   | (a) | (73,832  | ) | (69,868  | ) | (128,309 | ) | (39,095  | )
|Income tax                             | 30   | (a) | (198,834 | ) | (190,807 | ) | (350,922 | ) | (106,923 | )
|                                       |      |     |          |   |          |   |          |   |          |  
|                                       |      |     |          |   |          |   |          |   |          |  
|NET INCOME                             |      |     | 32,784   |   | 23,021   |   | 50,904   |   | 15,510   |  
|                                       |      |     |          |   |          |   |          |   |          |  
|                                       |      |     |          |   |          |   |          |   |          |  
|                                       |      |     |          |   |          |   |          |   |          |  
|                                       |      |     | S/.      |   | S/.      |   | S/.      |   | US$      |  
|BASIC AND DILUTED EARNINGS             |      |     |          |   |          |   |          |   |          |  
|PER SHARE                              | 31   |     | 0.019    |   | 0.013    |   | 0.030    |   | 0.009    |  

The accompanying notes are an integral part of these consolidated financial statements.

F - 6

---

TELEFONICA DEL PERU S.A.A. AND SUBSIDIARIES

CONSOLIDATED  STATEM ENTS OF CHANGES IN SHAREHOLDERS'  EQUITY FOR THE YEARS ENDED DECEMBER
31, 2002, 2003 AND 2004 
In constant currency


---

|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|----------------------------------------------- | ---- | --- | ---------------- |  | ------------- | - | ------------- |  | -------------------------------------- | - | --------- | -
|                                                | Note |     | Number of Shares |  | Share Capital |   | Legal Reserve |  | Retained Earnings (Accumulated Losses) |   | Total     |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|                                                |      |     |                  |  | S/.000        |   | S/.000        |  | S/.000                                 |   | S/.000    |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|Balance as of January 1, 2002                   |      |     | 1,721,964,417    |  | 3,098,199     |   | 366,572       |  | 168,533                                |   | 3,633,304 |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|Amortization of accumulated deferred income tax |      |     | -                |  | -             |   | -             |  | (26,073                                | ) | (26,073   | )
|Net income                                      |      |     | -                |  | -             |   | -             |  | 32,784                                 |   | 32,784    |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|Balance as of December 31, 2002                 |      |     | 1,721,964,417    |  | 3,098,199     |   | 366,572       |  | 175,244                                |   | 3,640,015 |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|Transference                                    |      |     | -                |  | -             |   | 3,385         |  | (3,385                                 | ) | -         |  
|Dividend declared                               |      |     |                  |  |               |   | -             |  | (174,076                               | ) | (174,076  | )
|Amortization of accumulated deferred income tax | 30   | (c) | -                |  | -             |   | -             |  | (25,624                                | ) | (25,624   | )
|Net income                                      |      |     | -                |  | -             |   | -             |  | 23,021                                 |   | 23,021    |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|Balance as of December 31, 2003                 |      |     | 1,721,964,417    |  | 3,098,199     |   | 369,957       |  | (4,820                                 | ) | 3,463,336 |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|Amortization of accumulated deferred income tax | 30   | (c) | -                |  | -             |   | -             |  | (21,845                                | ) | (21,845   | )
|Treasury shares                                 | 23   | (b) | -                |  | (21,896       | ) | -             |  | -                                      |   | (21,896   | )
|Share capital reduction                         | 23   | (a) | -                |  | (743,113      | ) | -             |  | -                                      |   | (743,113  | )
|Transference                                    |      |     | -                |  | -             |   | 2,408         |  | (2,408                                 | ) | -         |  
|Net income                                      |      |     | -                |  | -             |   | -             |  | 50,904                                 |   | 50,904    |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  
|Balance as of December 31, 2004                 |      |     | 1,721,964,417    |  | 2,333,190     |   | 372,365       |  | 21,831                                 |   | 2,727,386 |  
|                                                |      |     |                  |  |               |   |               |  |                                        |   |           |  

The accompanying notes are an integral part of these consolidated financial statements.

F - 7

---

TELEFONICA DEL PERU S.A.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
2002, 2003 AND 2004 
In constant currency and US dollars


---

|                                                                |            |   |           |   |           |   |          |  
|--------------------------------------------------------------- | ---------- | - | --------- | - | --------- | - | -------- | -
|                                                                | 2002       |   | 2003      |   | 2004      |   | 2004     |  
|                                                                |            |   |           |   |           |   |          |  
|                                                                | S/.000     |   | S/.000    |   | S/.000    |   | US$000   |  
|                                                                |            |   |           |   |           |   |          |  
|CASH FLOW FROM OPERATING ACTIVITIES                             |            |   |           |   |           |   |          |  
|Net income                                                      | 32,784     |   | 23,021    |   | 50,904    |   | 15,510   |  
|RECONCILIATION OF NET INCOME TO CASH                            |            |   |           |   |           |   |          |  
|PROVIDED BY OPERATING ACTIVITIES                                |            |   |           |   |           |   |          |  
|Depreciation and amortization                                   | 1,043,002  |   | 1,051,720 |   | 993,692   |   | 302,770  |  
|Deferred income tax and workers profit sharing                  | (16,325    | ) | (32,305   | ) | (72,822   | ) | (22,188  | )
|Provision for doubtful accounts                                 | 170,510    |   | 235,877   |   | 112,128   |   | 34,165   |  
|Loss (gain) from exposure to inflation/deflation                | 17,186     |   | (7,146    | ) | (78,689   | ) | (23,976  | )
|Sundry provisions                                               | 283,321    |   | 184,389   |   | 222,412   |   | 67,767   |  
|Provision for obsolescence of materials and supplies            | 21,400     |   | -         |   | -         |   | -        |  
|Provision for impairment of investments                         | 44,960     |   | 17,858    |   | -         |   | -        |  
|Provision for impairment of property, plant, equipment,         |            |   |           |   |           |   |          |  
|materials and supplies                                          | -          |   | -         |   | 27,073    |   | 8,249    |  
|Loss (income) in sale of property, plant and equipment          | 2,543      |   | (5,945    | ) | (9,549    | ) | (2,910   | )
|Loss (income) in sale of permanent investments                  | (35,189    | ) | 1,000     |   | (211      | ) | (64      | )
|Participations in result of related companies, net of cash      |            |   |           |   |           |   |          |  
|dividends received                                              | 2,228      |   | (421      | ) | (2,960    | ) | (902     | )
|Income for appreciation of investments available for sale       | -          |   | -         |   | (36,295   | ) | (11,059  | )
|Others, net                                                     | -          |   | 14,304    |   | (13,139   | ) | (4,003   | )
|Net changes in current assets and liabilities accounts:         |            |   |           |   |           |   |          |  
|Increase in trade accounts receivable, from related             |            |   |           |   |           |   |          |  
|companies and other accounts receivable                         | (202,056   | ) | (253,312  | ) | (92,808   | ) | (28,278  | )
|Decrease (increase) in materials and supplies                   | 13,538     |   | 779       |   | (17,410   | ) | (5,305   | )
|Decrease in prepaid expenses                                    | 62,047     |   | 22,997    |   | 31,120    |   | 9,482    |  
|Increase (decrease) in trade accounts payable                   | (66,425    | ) | 87,987    |   | 54,320    |   | 16,551   |  
|Increase (decrease) in other accounts payable                   | 343,691    |   | (109,648  | ) | 129,831   |   | 39,559   |  
|                                                                |            |   |           |   |           |   |          |  
|                                                                |            |   |           |   |           |   |          |  
|Cash provided by operating activities, net                      | 1,717,215  |   | 1,231,155 |   | 1,297,597 |   | 395,368  |  
|                                                                |            |   |           |   |           |   |          |  
|                                                                |            |   |           |   |           |   |          |  
|CASH FLOW FROM INVES TING ACTIVITIES                            |            |   |           |   |           |   |          |  
|Sale of property, plant and equipment                           | -          |   | 18,532    |   | 15,819    |   | 4,820    |  
|Purchase of property, plant, equipment, materials and supplies  |            |   |           |   |           |   |          |  
|and intangibles                                                 | (349,108   | ) | (450,233  | ) | (494,002  | ) | (150,519 | )
|Sale of investments and other assets                            | 90,104     |   | 61,652    |   | 24,536    |   | 7,476    |  
|Acquisition of Antena 3 Producciones S.A., net of acquired cash | -          |   | -         |   | (12,660   | ) | (3,857   | )
|                                                                |            |   |           |   |           |   |          |  
|                                                                |            |   |           |   |           |   |          |  
|Cash used in investing activities, net                          | (259,004   | ) | (370,049  | ) | (466,307  | ) | (142,080 | )
|                                                                |            |   |           |   |           |   |          |  
|                                                                |            |   |           |   |           |   |          |  
|CASH FLOW FROM FINANCING ACTIVITIES                             |            |   |           |   |           |   |          |  
|Bank loans and overdraft                                        | (757,018   | ) | (324,709  | ) | 12,660    |   | 3,857    |  
|Issuance of long-term debt                                      | -          |   | 73,334    |   | 115,749   |   | 35,268   |  
|Payment of long term debt                                       | (885,136   | ) | (581,378  | ) | (49,519   | ) | (15,088  | )
|Payment of promissory notes                                     | (41,280    | ) | (63,083   | ) | (158,093  | ) | (48,170  | )
|Issuance of bonds                                               | 210,491    |   | 509,589   |   | 60,000    |   | 18,282   |  
|Payments of bonds                                               | (147,368   | ) | (310,844  | ) | (26,255   | ) | (8,000   | )
|Collection from other accounts receivable and accounts          |            |   |           |   |           |   |          |  
|payable to related companies                                    | 90,509     |   | -         |   | -         |   | -        |  
|Dividends in advance and payment of dividends                   | (34,388    | ) | (169,602  | ) | (375      | ) | (113     | )
|Repurchase of own-issuance shares                               | -          |   | -         |   | (21,896   | ) | (6,672   | )
|Paymento due to reduction of share capital                      | -          |   | -         |   | (743,113  | ) | (226,421 | )
|                                                                |            |   |           |   |           |   |          |  
|                                                                |            |   |           |   |           |   |          |  
|Cash used in financing activities, net                          | (1,564,190 | ) | (866,693  | ) | (810,842  | ) | (247,057 | )
|                                                                |            |   |           |   |           |   |          |  
|                                                                |            |   |           |   |           |   |          |  
|Cash inflation loss due to cash                                 | (1,221     | ) | (1,111    | ) | (9,573    | ) | (2,917   | )
|                                                                |            |   |           |   |           |   |          |  
|                                                                |            |   |           |   |           |   |          |  
|INCREASE (DECREASE) IN CASH AND BANKS                           | (107,200   | ) | (6,698    | ) | 10,875    |   | 3,314    |  
|                                                                |            |   |           |   |           |   |          |  
|Balance of cash and banks at the beginning of the year          | 166,355    |   | 59,155    |   | 52,457    |   | 15,983   |  
|                                                                |            |   |           |   |           |   |          |  
|                                                                |            |   |           |   |           |   |          |  
|Balance of cash and banks at the end of the year                | 59,155     |   | 52,457    |   | 63,332    |   | 19,297   |  
|                                                                |            |   |           |   |           |   |          |  

Supplemental information:Interest paid during years ending December 31, 2002, 2003 and 2004 
  amounted to S/.112,026, S/.110,846 and S/.85,584, respectively. 
Income tax payments during the years ending December 31, 2002, 2003 
  and 2004 amounted to S/.106,157,
S/.291,500 and S/.325,960, respectively.The accompanying notes are an integral part of these consolidated financial statements.

F - 8

---

TELEFONICA DEL PERU S.A.A. AND SUBSIDIARIES




---

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | ECONOMIC ACTIVITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Telefónica del Perú S.A.A., hereinafter the Company, is a telecommunications corporation, subsidiary of Telefónica, S.A (a company incorporated in Spain), that offers fixed local telephone services, public telephone
services, data transmission, and both domestic and international long-distance telephone services throughout Peru. The Company is the major telecommunications operator of Peru and its activities are supervised by OSIPTEL, the Supervisory Board for
Private Telecommunications Investments.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The number of employees of Telefónica del Perú S.A.A. and its Subsidiaries as of December 31, 2004 and 2003 was 5,179 and 4,920, respectively. The Companys legal address is Av. Arequipa 1155, Lima, Peru.                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The consolidated financial statements as of December 31, 2003 were approved at the General Shareholders Meeting held on March 26, 2004. The consolidated financial statements for the year ended December 31, 2004 will be submitted for approval
to the General Shareholders Meeting to be held within the period established by law. In Managements opinion, the accompanying consolidated financial statements will be approved by the General Shareholders meeting without
significant changes.                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | As of December 31, 2004, the Subsidiaries of the Company are:                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | Telefónica Servicios Integrados S.A.C.         
| | -----------------------------------------------
| | Telefónica Multimedia S.A.C.                   
| | Transporte Urgente de Mensajería S.A.C.        
| | Telefónica Servicios Comerciales S.A.C.        
| | Telefónica Servicios Digitales S.A.C.          
| | Servicios Editoriales del Perú S.A.C.          
| | Telefónica Soluciones Globales Holding S.A.C.  
| | Antena 3 Producciones S.A.                     
| | Telefónica Servicios Técnicos S.A.C.           
| | Servicios Globales de Telecomunicaciones S.A.C.

F - 9

---

Following,are shown theactivitiesand the mostimportantfinancialdata as ofDecember31, 2002, 2003 and 2004 of theCompanysmainsubsidiaries:

|Entity                           |  | Business activity                      |  | Percentage of ownership |  | Total assets |  | Total liabilities |  | Total shareholders' equity |  | Net income (loss) | 
|-------------------------------- |  | -------------------------------------- |  | ----------------------- |  | ------------ |  | ----------------- |  | -------------------------- |  | ----------------- | 
|                                 |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|                                 |  |                                        |  | 2002                    |  | 2003         |  | 2004              |  | 2002                       |  | 2003              | 
|                                 |  |                                        |  | %                       |  | %            |  | %                 |  | S/.000                     |  | S/.000            | 
|                                 |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|                                 |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|Telefónica Servicios             |  | Advanced information and               |  | 99.99                   |  | 99.99        |  | 99.99             |  | 6                          |  | -                 | 
|Integrados S.A.C.                |  | telecommunications system services.    |  |                         |  |              |  |                   |  |                            |  |                   | 
|                                 |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|Telefónica Multimedia S.A.C. (*) |  | Cable television services.             |  | 99.99                   |  | 99.99        |  | 99.99             |  | 180,086                    |  | 198,068           | 
|                                 |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|Transporte Urgente de            |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|Mensajería S.A.C.                |  | Courier services.                      |  | 99.99                   |  | 99.99        |  | 99.99             |  | 13,873                     |  | 13,900            | 
|                                 |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|Telefónica Servicios             |  | Telecommunication related              |  | 99.90                   |  | 99.90        |  | 99.90             |  | 9,517                      |  | 28,912            | 
|Comerciales S.A.C.               |  | administrative services.               |  |                         |  |              |  |                   |  |                            |  |                   | 
|                                 |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|Telefónica Servicios             |  | Services of converting and processing  |  | 51.00                   |  | 51.00        |  | 51.00             |  | 9,008                      |  | 6,308             | 
|Digitales S.A.C.                 |  | documentary images; as well as         |  |                         |  |              |  |                   |  |                            |  |                   | 
|                                 |  | electronic consulting of converted and |  |                         |  |              |  |                   |  |                            |  |                   | 
|                                 |  | stored images.                         |  |                         |  |              |  |                   |  |                            |  |                   | 
|                                 |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|Servicios Editoriales            |  | Production, distribution and sale of   |  | 99.99                   |  | 99.99        |  | 99.99             |  | 9,518                      |  | 7,788             | 
|del Perú S.A.C.                  |  | various printed publications.          |  |                         |  |              |  |                   |  |                            |  |                   | 
|                                 |  |                                        |  |                         |  |              |  |                   |  |                            |  |                   | 
|Antena 3 Producciones S.A. (**)  |  | Production, distribution and sale of   |  | -                       |  | -            |  | 99.99             |  | -                          |  | 25,680            | 
|                                 |  | television programms.                  |  |                         |  |              |  |                   |  |                            |  |                   | 

|(*)  | On March 26, 2004, the General Shareholders Meeting of the Company approved the reorganization of the Company in benefit of its subsidiary Telefónica Multimedia S.A.C. As a result , in August 2004, the Company spun-off and
transferred to Telefónica Multimedia S.A.C. the equity block composed by assets and liabilities related to the cable television business. The transferred assets and liabilities amounted to approximately S/.205,994,000 and S/.51,204,000
respectively. The segregation and transfer mentioned above does affect the consolidated financial statements of the Company and Subsidiaries.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(**) | In November 2004, the Company acquired 99.99% of the capital share from Antena 3 Producciones S.A. valued in US$3,850,000 which belonged to Antena 3 Television S.A., company domiciled in Spain. At the acquisition date, the
shareholders equity of Antena 3 Producciones S.A. did not significantly differ from the acquisition cost.                                                                                                                                                                                                                                                                                

F - 10

---

|2. | CONCESSION CONTRACT AND RATES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | CONCESSION CONTRACT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The
    Company subscribed with the Peruvian State, represented by the Ministry of Transportation, Communications,
    Housing and Construction (MTC), concession agreements to provide (i) carrier and fixed local telephone
    services in Lima department and Callao Province and (ii) carrier, fixed local telephone services
    and long-distance telephone services in the Republic of Perú. These contracts have the nature of law and were previously approved by Supreme Decree No11-94-TCC, dated May
13, 1994; subsequently Supreme Decree No21-98-MTC dated August 4, 1998 and Ministerial Resolutions No 272- 99-MTC/15.03 and No157-2001-MTC/15.03
modified the concession agreements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The
    concession contracts, considering the modifications approved by Supreme Decree No21-98-MTC,
    contain, among others, the following provisions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| | (a) | The services provided include fixed local telephone services, public telephone services and both domestic and international long-distance services, as well as telex and telegraphy services.                                                                                                                                                                                                                                                                                                                                                                             
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (b) | The concession
            term is 20 years, which may be renewed gradually at the Companys request for periods of up
            to five (5) additional years to the concession term. In this case, the renewal must be agreed each
    five-year period counted as from the effective date, up to a maximum of 20 years.                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | By means of Ministerial
    Resolution No 272-99-MTC/15.03 dated June 23, 1999, the Peruvian Stated granted the first partial
    renewal, extending the concession term until 2019.                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | In conformity with the concession contracts, in December 2003, the Company applied to the MTC for the second partial renewal of the term for an additional period of five (5) years. In June 2004, after receiving the evaluation report prepared by
OSIPTEL and the comments of the interested parties, the MTC announced its preliminary decision to deny the request mentioned above. The Company presented its objections to the content of the report in a proper and timely manner. As of the date of
this report, the MTC has not yet announced its final decision.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (c) | Fixed local telephone services, and domestic and international long-distance carrier telephone services are under a maximum rate regime.                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (d) | The obligation to enter, with the approval of the Supervisory Board for Private Telecommunications Investments, OSIPTEL, into interconnection agreements with other companies engaged in providing carrier and final services, as well as with those
providing telecommunications services.                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (e) | The Company is obliged o fulfill, among others, quality and expansion goals related to fixed local telephone services and domestic and international long distance services as                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F - 11

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> of the date of this report, the Peruvian State has acknowledged that all the goals assigned to the Company had been satisfactorily fulfilled.

|   | RATES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In March, 2004
    Telefónica del Perú S.A.A. increased the existing rate plans approved by OSIPTEL, from
    4 to 11 plans, which by means of a combination of fixed monthly rate, minute or second pricing and
    free units, among others, offer a wide range of total prices for each client needs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | As a result of the changes indicated in the paragraph above, as of December 31, 2003, there were about 550,000 plan migrations, and sales of about 204,000 new plans. In 2004, there were 130,000 additional plan migrations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The rates of fixed local telephone and international long-distance services are adjusted quarterly according to the service ranges, and are calculated with the price caps formula established based on a mix of inflation and a productivity factor.
According to the concession contracts, the value of the productivity factor must be reviewed every three years. The first productivity factor, in force from September, 2001 to August, 2004 was fixed by OSIPTEL in -6% per year.                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In the first half of 2004, OSIPTEL reviewed the value of the productivity factor. As a result of this process, the regulating entity fixed this factor in -10.07% per year for installation charge, fixed monthly rate and fixed local telephone service;
and -7.80% per year for domestic and international long-distance services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Due to OSIPTELs decision, the Company filed a Request for Reconsideration,
    asking for reformulation of the productivity factor in order to decrease its value. The Company indicated
    that when a variable called operating economic surplus is added to the productivity factor, the said
    value is overestimated. The Request was rejected; however, the Company has the right to submit this
    case to arbitration. As of the date of this report, the Management of the Company is evaluating different
    actions that could be taken.                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3. | OPENING OF THE TELECOMMUNICATIONS MARKET TO COMPETITION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Supreme Decree
    No20-98-MTC approved the policy that outlines the opening of the telecommunications market to
    competition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Accordingly, by
    Directory Resolution No001-98-CD/OSIPTEL of January 16, 1998, the Interconnection Regulations were approved in order to ensure the free and fair competition of operators in the telecommunications market, within the framework of
the international commitments to which Peru is a party. There were subsequent modifications to the law, that were finally consolidated in the Compiled Unique Text on Interconnection Regulations, approved by Resolution No 043-2003-CD/OSIPTEL.
The above Resolution establishes that operators of public telecommunications services may not deny interconnection
to other operators, outlines the principles to which interconnection must adjust, and specifies the conditions
for the signing of interconnection contracts and for the issuance of
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F - 12

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|   | interconnection orders by the regulating agency in the absence of agreement between parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The operators of
    networks or interconnected services will pay each other interconnection charges, which include the
    interconnection costs, contributions to the total costs of the local service provider, and a reasonable
    profit margin. If the parties do not reach an agreement on the interconnection charges, these will
    be established by OSIPTEL. As of December 31, 2004 and 2003, Telefónica del Perú S.A.A.
    is interconnected to 29 active operators.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The maximum average interconnection charge for the completion of calls in the local fixed network was US$0.01208 per minute, priced by the second, as of December 31, 2004 and 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4. | SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The significant
    accounting principles and practices used by Telefónica del Perú S.A.A. and its Subsidiaries
    are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | (a) Basis of preparation and presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The accompanying
    consolidated financial statements were prepared based on the accounting records of Telefónica del Perú S.A.A. and its Subsidiaries accounting records, which are carried at the nominal values of the
transactions date and include the adjustment to reflect the effect of the changes in the Nation-wide Wholesale Price Index (WPI). The methodology used for the adjustment is that approved by the National Accounting Council (CNC) by the
Resolutions No002-90-EF/93.01 and No003-93-EF/93.01. In accordance with such methodology: (a)
non monetary items in the consolidated financial statements have been adjusted, (b) monetary assets and
liabilities in foreign currency are not adjustable because they are stated in Peruvian nuevos soles of
purchasing power at the consolidated balance sheet date, and (c) the inflation exposure result (IER)
is taken to the consolidated statement of income. The inflation/deflation net gain or loss resulting
from said adjustment is included in the consolidated statements of income. According to the above-mentioned
index, inflation was 4.9 percent in 2004 (1.7 percent and 2.0 percent in 2002 and 2003, respectively).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The figures corresponding
    to the previous years consolidated financial statements, shown for comparative purposes, are
    expressed at the level of wholesale prices as of December 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in Peru, which comprise the International Accounting Standards (IAS) and the pronouncements of the Interpretations Committee
(SIC), authorized by the National Accounting Council (CNC). As of December 31, 2004, the CNC has authorized the IAS 1 to 41, and the SIC 1 to 33, which are currently in force.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F - 13

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> In April 2002, the International Accounting Standards
>     Board (IASB) approved the publication of the preface to the International Financial Reporting Standards
>     (IFRSs), in which it is stated that, when term IFRS is used it includes standards and interpretations
>     approved by the IASB, and International Accounting Standards (IAS), and SIC interpretations issued
>     under previous Constitutions. To date, IASB is making certain changes and issuing new versions of
>     the IAS to replace those previously used; as well as issuing various IFRS. At the international level,
>     the said changes and some updated versions of the IAS are currently in force, or will become effective
>     jointly with the IFRS, as from January 1, 2005. These changes and the new standards issued, will
>     be applicable in Peru when approved and rendered official by CNC. According to Management it is not
>     possible to determine, to date, the effect such changes could have on the Companys consolidated
>   financial statements, because the date of their approval has not been determined.
> In the preparation and presentation of the consolidated
>     financial statements, Telefónica del Perú S.A.A and its Subsidiaries have used the
>   applicable IASs and SICs authorized by the CNC in force in Peru in 2002, 2003 and 2004.
> On the other hand, Resolution No031-2004-EF/93.01 of the CNC, dated May 11, 2004, and Law No28394
>     dated November 22, 2004, have suspended as from fiscal year 2005 the adjustment of financial statements
>     for the effect of inflation, for both accounting and tax purposes. Both legal norms contemplate that
>     the inflation-adjusted final balances as of December 31, 2004, must be considered as initial historical
>   balances as from January 1, 2005.
> The preparation of the consolidated financial statements
>     requires Management to make estimates that could affect the amount of assets and liabilities reported,
>     the disclosure of asset and liability contingencies at the date of the consolidated balance sheets,
>     and the disclosure of significant facts included in the notes to the consolidated financial statements;
>     as well as the amounts of revenues and expenses reported during the current period. Final outcomes
>     could vary from those estimates. The most significant estimates included in the accompanying consolidated
>     financial statements relate to the provision for doubtful accounts, property, plant and equipment
>     depreciation, provision for impairment of investments, fair value of financial stocks available for
>     sale, provision for impairment of fixed assets and intangibles, assets and liabilities for deferred
>     income tax and workers profit sharing, as well as the provision for other accounts payable.
>     These estimates are in accordance with generally accepted accounting principles in Peru and they
>   are described in the paragraphs below.
> (b) Consolidation principles
> The consolidated financial statements as of December 31,
>     2002, 2003 and 2004 include the financial statements of Telefónica del Perú S.A.A.
>   and its Subsidiaries in which the Company has control, and are the same as listed in Note 1.
> All significant accounts and transactions between these companies, including unrealized profits or losses have been eliminated in the accompanying consolidated financial statements.  Consolidated financial statements are prepared using uniform
> accounting

F - 14

---

> policies for similar transactions and other events. The minority interest resulting from the consolidation process is not material for the consolidated financial statements.
> As described in Note 1 to the consolidated financial statements, in November 2004, the Company acquired 99.99% of the shares representative of the capital of Antena 3 Producciones S.A. The balances of assets and liabilities incorporated to the
> accompanying consolidated financial statements, have been considered as an addition of the year and are not material for the consolidated financial statements taken as a whole. The income and expenses incorporated correspond to November and December
> 2004 and are not material either, for the consolidated financial statements taken as a whole.
> (c) Assets and liabilities in foreign currency
> Foreign currency assets and liabilities are stated in local currency at free market exchange rates prevailing at the date of the consolidated balance sheet. The gain or loss related to transactions in foreign currency is recorded in the consolidated
> statement of income.
> (d) Financial instruments
> Financial assets and financial liabilities presented in
>     the consolidated balance sheet include cash and banks, marketable securities (trust fund), trade
>     accounts receivable, accounts receivable from related companies, other accounts receivable and investments
>     and all liabilities except for deferred income tax and workers profit sharing. The accounting
>     principles and practices on recognition and measurement of these items are disclosed in the respective
>   accounting policies described herein.
> Financial instruments are classified as liabilities or
>     equity in accordance with the substance of the underlying contractual arrangement. Interest, dividends,
>     gains and losses relating to a financial instrument classified as a liability are reported as expense
>     or income. Distributions to holders of financial instruments classified as equity are charged directly
>     to equity. Financial instruments are offset when Telefónica del Perú S.A.A. and its
>     Subsidiaries have a legally enforceable right to offset them and Management intends to settle them
>   either on a net basis or to realize the asset and settle the liability simultaneously.
> Telefónica del Perú S.A.A. has exposure
>     to market risks resulting from changes in interest rates and exchange rates, and uses financial derivatives
>     to partially mitigate these risks. When contracts are qualified as hedge, the accounting of the financial
>     instruments is symmetric to the accounting of the hedged items. Therefore, the changes in the fair
>     value of the hedge are included in the statement of income in the same period in which the gains
>   and losses from the hedged item are recognized.
> Additionally, Telefónica del Perú S.A.A.
>     uses exchange rate forward contracts and currency swap to mitigate exposure to exchange risk. The
>     forwards and swaps used are for coverage and macro-coverage. These financial derivatives are recorded
>     at their estimated market value, with the gains and losses being recognized in the results for the
>   period in which they are determined.

F - 15

---

> (e) Marketable Securities (Trust fund)
> The trust fund consists of investments in debt instruments of the United States of America Treasury that guarantee the operation of securitization explained in Note 21 (b). They are stated at the lower of cost or market value. Adjustments resulting
> from the valuation of these investments are included in the consolidated statement of income. Interest received is reported as interest income. On a disposal of an investment, the difference between the net disposal proceeds and the carrying amount
> is included in the consolidated statements of income, in the interest income or expense caption, as it may correspond.
> (f) Trade accounts receivable
> Trade accounts receivable are recorded as described in paragraph (n) below.
> The provision for doubtful accounts is charged to income
>     and is determined for the mass customers portfolio based upon the aging of the accounts receivables
>     overdue in over four months as from the invoicing date; and on the basis of specific evaluations
>     in the case of non-mass customers. The allowance is recorded in the general and administrative expenses
>     caption of the consolidated statement of income. In Managements opinion, this procedure permits to reasonably estimate the
> allowance for doubtful accounts, considering the clients characteristics in Peru.
> (g) Materials and supplies
> Materials and supplies are stated at the lower of cost or net realizable value.
> Cost is determined by using the average-cost method.
> Materials and supplies in transit are recorded at their specific purchase cost.
> The allowance for impairment is determined considering an analysis of the turnover of materials and supplies, and is charged to the outcome of the year when Management determines the necessity for said allowance.
> (h) Permanent investments
> The investments in international telecommunications organizations
>     are stated as investments available for sale and are recorded at their fair value, in accordance
>     with the IAS 39 Financial Instruments: Recognition and Measurement,
> authorized by the CNC and in force in Peru as from December 31, 2003 and 2004; the profit or loss of a financial asset available for sale is recorded in the results of the fiscal year in which it has arisen, and is shown in the Other income
> (expense) caption of the consolidated statement of income.
> Other investments correspond to participations in non-consolidated related companies, which are recorded at cost, less the provision for loss in value deemed to be permanent.

F - 16

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> (i) Property, plant and equipment
> Property, plant and equipment are stated at cost less
>     accumulated depreciation and impairment loss, see paragraph (p). Certain assets originally belonging
>     to ENTEL Perú were revalued according to appraisal values determined by independent
> experts as of December 31, 1992.  The higher value arising from this revaluation was credited to shareholders equity.
> Depreciation is computed on a straight-line basis over the following estimated useful lives:
> YearsBuildings and premises
>         33Telephone plant
>         5, 10, 15 and 20Equipment
>         5 and 10Vehicles
>         5Furniture and fixtures
>         10The useful life and the depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property, plant and equipment.
> Subsequent disbursements incurred after fixed assets have already been placed in use are capitalized as additional cost of the assets, only when it is likely that such disbursements will contribute to the generation of future economic benefit beyond
>   the originally assessed standard performance of the assets.  Maintenance and minor renewals are charged to expenses as incurred.
> Payroll and allocated direct costs related to the construction of the telephone plant are capitalized as part of the cost of the related assets. Construction in progress represents the telephone plant and data transmission assets under construction
>     and is stated at cost. This includes the cost of construction, plant and equipment, and other direct costs. Construction in progress also includes the cost of important spare parts directly identifiable with specific assets. Construction in progress
>   is not depreciated until the relevant assets are completed and placed in operational use.
> (j) Finance leases
> Finance leases are recognized, at the beginning of the contract, as assets and liabilities in the consolidated balance sheet at amounts equal to the fair value of the leased property or, if lower, at the present value of the lease payments. In
> calculating the present value of the lease payments, which excludes the insurance cost, the discount factor used is the implicit interest rate in the lease. Initial direct costs incurred are included as part of the asset. Lease payments are
> apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability
> for each period.

F - 17

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> A finance lease gives rise to depreciation expenses for the asset as well as financing expenses for each accounting period. The depreciation policy for leased assets is consistent with that for other depreciable assets.
> (k) Intangible assets
> Intangible assets are measured initially at cost.  An intangible asset is recognized if it is probable that the future economic benefits that are attributable to the asset will flow to the Company and its subsidiaries; and the cost of the asset can
> be reliably measured. After initial recognition, intangible assets are measured at cost less accumulated amortization, and any accumulated loss for impairment, see paragraph (p). Intangible assets are amortized on a straight-line basis over their
> estimated useful lives, which is mainly 5 years. The amortization period and the amortization method are reviewed by the end of each year.
> (l) Goodwill
> Goodwill is included in the account Intangibles and other assets, net and corresponds to the excess of acquisition cost of the subsidiary Telefónica Multimedia S.A.C. over the share of Telefónica del Perú S.A.A.
>     in the fair value of the acquired net assets. Goodwill is carried at cost less accumulated amortization
>     and any accumulated loss for impairment, see paragraph (p). Goodwill is amortized on a straight-line
>   basis over a 10-year period.
> (m) Provisions
> A provision is recognized only when Telefónica del Perú S.A.A.
>     and its Subsidiaries have a present obligation (legal) as a result of a past event, it is probable
>     that an outflow of resources embodying economic benefits will be required to settle the obligation,
>     and this amount is able to be determined. Provisions are reviewed at each consolidated balance sheet
>   date and adjusted to reflect the current best estimate then available.
> When the effect of the value of money over time is important, the amount of the provision is the present value of the disbursements that the Company expects to incur to settle the obligation.
> Possible contingencies are not recognized in the consolidated financial statements. They are disclosed in notes to the consolidated financial statements, unless the possibility of an outflow of resources embodying economic benefits is remote.
> (n) Revenues, costs and expenses recognition
> Revenues for telephone services are recognized in the period in which the services are provided, as measured mainly by the minutes of traffic processed.
> Fixed telephone and domestic and international long distance services are recorded on a cyclical system. Services not billed from the closing day of the billing to the last day in the month, are included in the next cyclical billing and the
> corresponding estimate of income is recorded.
> Revenues and costs from telephone line installation are
>     recognized at the time the related contracts are signed; except for the Popular Telephone service,
>   the installation revenues

F - 18

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> and costs of which are recognized over the contract term. Other income, costs and expenses are recognized as accrued independently of their realization, and are recorded in their corresponding periods.
> 
> (o) Income tax and workers profit sharing
> Income tax and workers profit sharing are determined in accordance with tax and legal regulations applicable in Peru.  Telefónica del Perú S.A.A. determines income tax and workers profit sharing by applying rates of 30% and
> 10%, respectively. Additionally, deferred income tax and workers profit sharing are recognized
> using the balance sheet method. According to said method:
> Deferred assets and liabilities are recognized for the
>     future tax effects of temporary differences, at the tax rate and the percentage of workers
>   profit sharing, the Company and its Subsidiaries expect to settle said taxes.
> The deferred assets are reduced, if necessary, in the amount of those tax benefits which, according to available evidence, are estimated as not realizable.Temporary differences are defined as any difference between
>     the financial reporting basis and the tax basis of an asset or liability that at some future date
>     will be reversed, thereby resulting an income or expense for income tax and workers profit
> sharing.
> Temporary differences ordinarily become taxable or deductible
>     when the related liability is settled or the related asset is recovered. A deferred tax liability
>     or asset for income tax and workers profit sharing represents the amount of taxes
> refundable or payable in future years, respectively.
> In accordance with the corresponding accounting standard,
>     the Company determines its deferred tax and sharing based on the tax rate applicable to their non-distributed
>     profits and the percentage of the workers profit sharing; any additional
> tax on profit distribution is recorded on the date in which such distribution is agreed.
> In accordance with Resolution 110-99-EF/94.10 of CONASEV
>     (National Supervisory Commission of Companies and Securities), the Company choose to record over
>     six years on a straight-line basis starting 1999, the effect of the deferred tax liability as of
>     December 31, 1997. The accumulated liability effect amounted to approximately S/.160,035,000 as of
>     December 31, 1997 (values as of December 31, 2004). On December 31, 2004 the Company completed the
>     registration of the balance pending registration of such accumulated effect disclosed in the retained earnings of
> the consolidated balance sheet.
> As of December 31, 2002 and 2003, approximately S/.112,570,000 and S/.138,190,000 have been recognized, respectively, for this concept (values as of December 31, 2004).
> (p) Impairment of assets
> Periodically, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, Management reviews the long-term value of its

F - 19

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|   | assets basically of property, plant and equipment, intangible assets and goodwill for impairment. When the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized in the consolidated statements of income.                                                                                                                                                                                                                                                                                                                                                           
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The recoverable amount is the higher
    of an assets net selling price or value in use. The net selling price is the amount obtainable from the sale of an asset in an arms
    length transaction while value in use is the present value of estimated future cash flows expected
    to arise from the continuing use of an asset and from its disposal at the end of its useful life.
    Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating
    unit.                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (q) Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Cash and cash equivalents shown in the consolidated statement of cash flows consist of the cash and bank balance shown in the consolidated balance sheet.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (r) Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Basic and diluted earnings per share have been calculated based on the weighted average of common shares outstanding at the date of the consolidated balance sheets. Capital shares that may be issued or cancelled due to the capital restatement
resulting from the adjustment for inflation of the consolidated financial statements are considered a division of capital shares and, therefore, for the determination of the weighted average number of shares, it has been considered as if they always
were outstanding.                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (s) Business segments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | For Management purposes, Telefónica
    del Peru S.A.A. and Subsidiaries are organized into five major operating businesses (fixed local
    telephone services, long distance services, cable television services, equipment supply and other
    services) and two geographical areas (Lima and Provinces). The divisions are the basis upon which
    the Company and its Subsidiaries report their primary segment information. Financial information
    on business and geographical segments is presented in Note 32.                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|5. | TRANSLATION OF NUEVOS SOLES AMOUNTS INTO U.S. DOLLAR AMOUNTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The consolidated financial statements are stated in constant nuevos soles. The translation of the nuevos soles amounts into U.S. dollars is included solely for the convenience of the reader, using the exchange rate as of December 31, 2004 published
by the Peruvian Superintendencia de Banca y Seguros (the Superintendency of Banks and Insurance), which was S/.3.282 to US$1.00. The translation should not be construed as a representation that the nuevos soles amounts have been, could have been, or
could in the future be converted into U.S. dollars at this or any other rate of exchange.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F - 20

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|6. | NET RESULTS FROM EXPOSURE TO INFLATION                                                                                            
|-- | ----------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                   
|   | Net results from exposure to inflation for the periods indicated are included in the statements of income and detailed as follows:
|   |                                                                                                                                   

| |                                                               | Year ended December
    31, |  
| | ------------------------------------------------------------- | --------------------------- | -
| |                                                               |                             |  
| |                                                               | 2002                        |  
| |                                                               |                             |  
| |                                                               | S/.000                      |  
| |                                                               |                             |  
| | Net monetary liabilities
              at the                 |                             |  
| | beginning of the
              year                           | (5,059,662                  | )
| | Changes due to                                                |                             |  
| | Additions of non-monetary
            assets                  | (430,879                    | )
| | Current income and expenses,
            net                  | 1,822,681                   |  
| | Dividends paid                                                | (34,388                     | )
| |                                                               |                             |  
| |                                                               |                             |  
| |                                                               | (3,702,248                  | )
| |                                                               |                             |  
| | Net monetary liabilities
              at the end of the year | (3,719,434                  | )
| |                                                               |                             |  
| |                                                               |                             |  
| | Gain (loss) from exposure
            to inflation            | (17,186                     | )
| |                                                               |                             |  

F - 21

---

|7. | TRANSACTIONS IN FOREIGN CURRENCY                                                                                                                                                                                                                                                              
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                               
|   | Foreign currency transactions are carried
    out at free market exchange rates. As of December 31, 2003 and 2004, Telefónica del Perú S.A.A.
    and Subsidiaries had assets and liabilities in foreign currencies denominated as follows (amounts
    expressed in thousands of U.S. dollar:
|   |                                                                                                                                                                                                                                                                                               

| |                                                                                                                                                                                                                                                                                                                                                                                                                                               | Original     |  |         |  |        
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ |  | ------- |  | -------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               | currency     |  | 2003    |  | 2004   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  | US$000  |  | US$000 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| | Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                       |              |  |         |  |        
| | Cash and banks                                                                                                                                                                                                                                                                                                                                                                                                                                | U.S. dollars |  | 1,551   |  | 9,162  
| | Marketable securities (trust fund)                                                                                                                                                                                                                                                                                                                                                                                                            | U.S. dollars |  | 13,392  |  | 11,380 
| | Trade accounts receivable, net                                                                                                                                                                                                                                                                                                                                                                                                                | U.S. dollars |  | 38,323  |  | 38,563 
| | Accounts receivable from related companies                                                                                                                                                                                                                                                                                                                                                                                                    | U.S. dollars |  | 46,574  |  | 63,706 
| | Other accounts receivable, net                                                                                                                                                                                                                                                                                                                                                                                                                | U.S. dollars |  | 824     |  | 1,602  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| | Total                                                                                                                                                                                                                                                                                                                                                                                                                                         |              |  | 100,664 |  | 124,413
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| | Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                  |              |  |         |  |        
| | Bank loans and overdrafts                                                                                                                                                                                                                                                                                                                                                                                                                     | U.S. dollars |  | -       |  | 449    
| | Trade accounts payable                                                                                                                                                                                                                                                                                                                                                                                                                        | U.S. dollars |  | 33,160  |  | 50,491 
| | Accounts payable to related companies                                                                                                                                                                                                                                                                                                                                                                                                         | U.S. dollars |  | 12,381  |  | 2,833  
| | Other accounts payable                                                                                                                                                                                                                                                                                                                                                                                                                        | U.S. dollars |  | 3,093   |  | 3,193  
| | Promissory notes                                                                                                                                                                                                                                                                                                                                                                                                                              | U.S. dollars |  | 24,125  |  | -      
| | Bonds                                                                                                                                                                                                                                                                                                                                                                                                                                         | U.S. dollars |  | 102,847 |  | 102,847
| | Long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                | U.S. dollars |  | 87,152  |  | 73,397 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               | Others       |  | 7,981   |  | 8,046  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| | Total                                                                                                                                                                                                                                                                                                                                                                                                                                         |              |  | 270,739 |  | 241,256
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| | Purchase position of hedge derivatives                                                                                                                                                                                                                                                                                                                                                                                                        |              |  |         |  |        
| | (reference value)                                                                                                                                                                                                                                                                                                                                                                                                                             |              |  | 38,000  |  | 92,975 
| | Purchase position of hedges (macro coverage)                                                                                                                                                                                                                                                                                                                                                                                                  |              |  |         |  |        
| | derivatives (reference value)                                                                                                                                                                                                                                                                                                                                                                                                                 |              |  | 145,500 |  | 55,000 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| | Total                                                                                                                                                                                                                                                                                                                                                                                                                                         |              |  | 183,500 |  | 147,975
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| | Net asset position                                                                                                                                                                                                                                                                                                                                                                                                                            |              |  | 13,425  |  | 31,132 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| | Telefónica del Perú S.A.A.
      uses forward exchange and currency swaps contracts to reduce its exposure to foreign currency risks.
      As of December 31, 2003 and 2004, Telefónica del Perú S.A.A. entered into forward
      exchange and currency swaps contracts to purchase U.S. dollars, for hedge and hedge (macro-coverage)
    purposes, for a nominal amount of approximately US$183,500,000 and US$147,975,000, respectively.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               |              |  |         |  |        
| | As of December 31, 2004, the estimated
      market value for the hedge and hedge (macro-coverage) operations corresponds to unrealized losses
    of approximately S/.5,967,000 and                                                                                                                                                                                                                                                         

F - 22

---

S/.13,373,000 respectively (unrealized losses of approximately S/.616,000 and S/.15,722,000, respectively as of December 31, 2003).

In prior years, devaluation (revaluation) of the local currency with regard to the U.S. dollar and inflation (deflation) as per the Nation-wide Wholesale Prices Index, published by the National Statistics and Informatics Institute (INEI), were as
follows (in percentages):

| |      |  | Devaluation   |   | Inflation   |  
| | ---- |  | ------------- | - | ----------- | -
| | Year |  | (revaluation) |   | (deflation) |  
| |      |  |               |   |             |  
| | 2001 |  | (2.30         | ) | (2.20       | )
| | 2002 |  | 2.00          |   | 1.70        |  
| | 2003 |  | (1.45         | ) | 2.00        |  
| | 2004 |  | (5.23         | ) | 4.90        |  

|8. | CASH AND BANKS
|-- | --------------
|   |               

| | (a) | Cash and banks consist of the following:
| | --- | ----------------------------------------
| |     |                                         

| |                                  | 2003   |  | 2004  
| | -------------------------------- | ------ |  | ------
| |                                  |        |  |       
| |                                  | S/.000 |  | S/.000
| |                                  |        |  |       
| | Cash                             | 3,234  |  | 2,701 
| | Petty cash                       | 511    |  | 578   
| | Current and savings accounts (b) | 48,712 |  | 46,044
| | Time deposits (c)                | -      |  | 14,009
| |                                  |        |  |       
| |                                  |        |  |       
| | Total                            | 52,457 |  | 63,332
| |                                  |        |  |       

| | (b) | Current and savings accounts are maintained in local banks; are denominated in local currency and U.S. dollars. The savings accounts earn interests at market rates.     
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                          
| | (c) | As of December 31, 2004 time deposits are denominated in local currency and U.S. dollars, earn interests at average local market rates and have maturity in January 2005.
| |     |                                                                                                                                                                          

|9. | MARKETABLE SECURITIES (TRUST FUND)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Consist of short-term investments in
    U.S. Treasury Papers amounting to approximately US$11,380,000 (equivalent to approximately S/.37,325,000)
    and approximately US$13,392,000 (equivalent to approximately S/.48,622,000, values as of December
    31, 2003) as of December 31, 2004 and 2003, respectively, purchased through The Bank of New York.
    The funds used in the purchase of these investments were provided by the collection accounts of the
    securitization operation explained in Note 21 (b).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F - 23

---

|    | The market values of these investments as per their quoted price in the over the counter (OTC) market, added to value of the cash deposits originated by the accounts of the securitization as of December 31, 2004 and 2003, amount to approximately
US$11,380,000 and US$14,680,000, respectively. There have been no significant fluctuations in market value of these securities as of the date of this report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                    
|10. | TRADE ACCOUNTS RECEIVABLE, NET                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                    

| | (a) | Trade accounts receivable consist of the following:
| | --- | ---------------------------------------------------
| |     |                                                    

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 2003      |  | 2004     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- |  | ---------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |           |  |          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | S/.000    |  | S/.000   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |           |  |          
| | Fixed local and public telephone services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 1,224,884 |  | 1,165,804
| | Cable television                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 147,207   |  | 144,166  
| | Data transmission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 108,620   |  | 107,290  
| | Interconnection                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 97,730    |  | 69,825   
| | Foreign telecommunications carriers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 52,230    |  | 47,375   
| | Others                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 84,097    |  | 80,430   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |           |  |          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 1,714,768 |  | 1,614,890
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |           |  |          
| | Less:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |           |  |          
| | Allowance for doubtful accounts (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 1,050,542 |  | 1,045,298
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |           |  |          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |           |  |          
| | Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 664,226   |  | 569,592  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |           |  |          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |           |  |          
| | Trade accounts receivable have current maturities.
          The accounts receivable related to local and public fixed telephone services are billed in Nuevos
            Soles. The accounts receivable related to data transmission services, interconnection, foreign telecommunications
            carriers and cable television are billed in U.S. dollars. Other accounts receivable are mainly billed
            in U.S. dollars.
          As of December 31, 2004, Telefónica del Perú S.A.A. has approximately 2,151,000
            lines of fixed local telephone and public telephone in service (1,964,000 as of December 31, 2003).
            Additionally, as of December 31, 2004, Telefónica del Perú S.A.A. and subsidiaries
            have approximately 205,000 and 90,700 broad band (speedy and cablenet) respectively.

F - 24

---

| | (b) | Changes in the provision for doubtful accounts as of December 31, 2003 and 2004 were as follows:
| | --- | ------------------------------------------------------------------------------------------------
| |     |                                                                                                 

| |                                                                                                                                                                                                                                              | 2003      |   | 2004      |  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | - | --------- | -
| |                                                                                                                                                                                                                                              |           |   |           |  
| |                                                                                                                                                                                                                                              | S/.000    |   | S/.000    |  
| |                                                                                                                                                                                                                                              |           |   |           |  
| | Balance as of January 1,                                                                                                                                                                                                                     | 944,328   |   | 1,050,542 |  
| |                                                                                                                                                                                                                                              |           |   |           |  
| | Add (less)                                                                                                                                                                                                                                   |           |   |           |  
| | Provision for the year, Note 25 (a)                                                                                                                                                                                                          | 131,632   |   | 49,624    |  
| | Write  offs                                                                                                                                                                                                                                 | (3,925    | ) | -         |  
| | Loss from exposure to inflation                                                                                                                                                                                                              | (21,493   | ) | (54,868   | )
| |                                                                                                                                                                                                                                              |           |   |           |  
| |                                                                                                                                                                                                                                              |           |   |           |  
| | Balance as of December 31,                                                                                                                                                                                                                   | 1,050,542 |   | 1,045,298 |  
| |                                                                                                                                                                                                                                              |           |   |           |  
| |                                                                                                                                                                                                                                              |           |   |           |  
| | In the opinion of Management of Telefónica del Perú S.A.A. and its Subsidiaries,
      the balance of this provision adequately covers any risk of loss in trade accounts receivable as
      of the date of the consolidated balance sheet.

|11. | OTHER ACCOUNTS RECEIVABLE, NET
|--- | ------------------------------
|    |                               

| | (a) | Other accounts receivable consists of the following:
| | --- | ----------------------------------------------------
| |     |                                                     

| |                                                    | 2003     |   | 2004     |  
| | -------------------------------------------------- | -------- | - | -------- | -
| |                                                    |          |   |          |  
| |                                                    | S/.000   |   | S/.000   |  
| |                                                    |          |   |          |  
| | Accounts receivable due to coercive executions (b) | 164,029  |   | 156,435  |  
| | Claims to third parties                            | 44,519   |   | 43,545   |  
| | Accounts receivable from third parties             | 9,708    |   | 21,039   |  
| | Loans to employees, Note 22(c)                     | 4,595    |   | 6,594    |  
| | Advances granted to suppliers                      | 1,229    |   | 3,490    |  
| | Others (c)                                         | 21,260   |   | 5,903    |  
| |                                                    |          |   |          |  
| |                                                    | 245,340  |   | 237,006  |  
| | Less:                                              |          |   |          |  
| | Provision for doubtful accounts (d)                | (133,609 | ) | (183,056 | )
| |                                                    |          |   |          |  
| | Total                                              | 111,731  |   | 53,950   |  
| |                                                    |          |   |          |  

| | (b) | Corresponds mainly to seizures without judicial sentences executed by various municipalities in Lima and provinces, claiming, in most of the cases, the payment of licences and fines for installation of external plant allegedly without municipal
authorization. Coercive collection processes have been initiated in most of such administrative procedures, which have resulted in liens affecting the Company funds and credit rights, prior to the existence of a definitive judicial sentence. The
internal legal advisors of the Company consider these cases have been initiated illegally, infringing the right to defense of the Company, or that they lack the necessary legal
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 25

---

| |     | grounds. In that sense, some of the coercive collections executed were declared illegal by several judicial instances. The Management of the Company continues the relevant legal actions and, in virtue of said pronouncements, estimates that the
seizures will be declared illegal; then all the necessary actions will be initiated to recover the funds that have been seized. Also, their recoverability is being assessed.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (c) | Other accounts receivable are denominated
      in local and foreign currency, and do not bear interest. The accounts receivable that are not related
    to provisioned accounts, have current maturity.                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (d) | The provision for doubtful accounts for the year 2003
            and 2004 amounted S/.104,245,000 and S/.62,504,000, respectively, and is included in Other expenses, net in
    the consolidated statements of income, see Note 29.                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                  

|12. | PREPAID EXPENSES
|--- | ----------------
|    |                 

| | (a) | Prepaid taxes and expenses consist of the following:
| | --- | ----------------------------------------------------
| |     |                                                     

| |                                          | 2003   |  | 2004  
| | ---------------------------------------- | ------ |  | ------
| |                                          |        |  |       
| |                                          | S/.000 |  | S/.000
| |                                          |        |  |       
| | Broadcasting rights for sport events (b) | 16,059 |  | 12,237
| | Prepaid advertisement                    | 8,113  |  | 4,442 
| | Others prepaid expenses                  | 47,204 |  | 24,628
| |                                          |        |  |       
| |                                          |        |  |       
| | Total                                    | 71,376 |  | 41,307
| |                                          |        |  |       

| | (b) | Correspond to rights acquired by Telefónica Multimedia S.A.C. to broadcast the soccer games played by several Peruvian professional clubs. These rights will be in force until 2005. Expenses are recorded in the consolidated statement of income
over the term of the rights on a straight-line basis and the expense of the year is included in general and administrative caption
of the consolidated statements of income.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 26

---

|13. | INVESTMENTS, NET
|--- | ----------------
|    |                 

| | (a) | Investments
        consist of the following:
| | --- | ---------------------------------------------



| |                                               | Percentage of |  |            |   |          |  
| | --------------------------------------------- | ------------- |  | ---------- | - | -------- | -
| |                                               | ownership in  |  |            |   |          |  
| |                                               | shareholders' |  | Book value |  
| |                                               | equity        |  | 12.31.03   |   | 12.31.04 |  
| |                                               |               |  |            |   |          |  
| |                                               | %             |  | S/.000     |   | S/.000   |  
| |                                               |               |  |            |   |          |  
| | Investments available
              for sale  |               |  |            |   |          |  
| | Share in Intelsat Ltd. (d)                    | 0.93          |  | 58,910     |   | 95,205   |  
| | Share in New Skies Satellites
            (d) | 0.76          |  | 25,617     |   | -        |  
| |                                               |               |  |            |   |          |  
| |                                               |               |  |            |   |          |  
| | Total                                         |               |  | 84,527     |   | 95,205   |  
| |                                               |               |  |            |   |          |  
| |                                               |               |  |            |   |          |  
| | Other investments:                            |               |  |            |   |          |  
| | Others, Note 4 (h)                            |               |  | 12,953     |   | 15,884   |  
| | Provision for impairment
            of       |               |  |            |   |          |  
| | investments (b) and
            (c)           |               |  | (6,687     | ) | (6,687   | )
| |                                               |               |  |            |   |          |  
| |                                               |               |  |            |   |          |  
| | Total                                         |               |  | 6,266      |   | 9,197    |  
| |                                               |               |  |            |   |          |  

| | (b) | Changes in the provision for impairment of investments as of December 31, 2003 and 2004 were as follows:
| | --- | --------------------------------------------------------------------------------------------------------
| |     |                                                                                                         

| |                                             | 2003    |   | 2004  
| | ------------------------------------------- | ------- | - | ------
| |                                             |         |   |       
| |                                             | S/.000  |   | S/.000
| |                                             |         |   |       
| | Balance as of January
              1,      | 51,647  |   | 6,687 
| | Add (less):                                 |         |   |       
| | Provision for the year,
            see (c) | 17,858  |   | -     
| | Write-offs                                  | (62,818 | ) | -     
| |                                             |         |   |       
| |                                             |         |   |       
| | Balance as of December
              31,    | 6,687   |   | 6,687 
| |                                             |         |   |       

| | (c) | On July, 2003, the Company sold to Telefónica, S.A. the shares of Terra Networks, S.A. through a Public Acquisition Offer. The sale value amounted to US$13,273,000 equivalent to S/.49,259,000, generating a loss amounting to S/.21,404,000
which is included in the caption Other expenses of the consolidated statement of income.
See Note 29 (a).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 27

---

| | (d) | In November, 2004, Telefónica del Perú S.A.A.
            sold to Black Stone Group, through a private agreement, all the shares it had in New Skies Satellites,
    valued in US$7,843,000 equivalent to S/.25,828,000, see Note 29 (a).                                                                                                                                                                                                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | On August 16, 2004, Intelsat Ltd. Board
    of Directors, approved the acquisition of the company on behalf of Zeus Holding Ltd. (a company domiciled
    in Bermuda). Moreover, on October 13, 2004, the Board of Directors of Telefónica del Perú S.A.A.
    approved the disposal of the entire participation maintained in Intelsat Ltd. (1,548,075 shares).                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | On January 28, 2005, IntelSat Ltd. announced
    the end of the negotiations with Zeus Holding Ltd., by means of which every shareholder, including
    the Company, will receive US$18.75 cash per share. To date, the actions to perform the sale are still
    in process. As a result, as of December 31, 2004, the Company has considered said end value as the
    fair value and recognized an income of approximately S/.36,295,000, which is included in the caption Other income (expenses) of
    the consolidated statement of income, see Note 29 (a).
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      





F - 28

---

|14. | PROPERTY, PLANT AND EQUIPMENT, NET
|--- | ----------------------------------
|    |                                   

| | (a) | The movement in property, plant and equipment is as follows:
| | --- | ------------------------------------------------------------
| |     |                                                             

| | Description                           | Cost as of December
    31, |  | Accumulated depreciation as of December 31, |  | Net book value as of December 31,
| | ------------------------------------- | --------------------------- |  | ------------------------------------------- |  | ---------------------------------
| |                                       |                             |  |                                             |  |                                  
| |                                       | 2003                        |  | 2004                                        |  | 2003                             
| |                                       | S/.000                      |  | S/.000                                      |  | S/.000                           
| |                                       |                             |  |                                             |  |                                  
| | Land                                  | 156,146                     |  | 147,007                                     |  | -                                
| | Buildings and other constructions (e) | 876,967                     |  | 886,001                                     |  | 349,806                          
| | Telephone plant                       | 12,924,878                  |  | 13,274,180                                  |  | 7,728,428                        
| | Equipment                             | 609,690                     |  | 635,822                                     |  | 472,337                          
| | Furniture and fixtures                | 67,973                      |  | 69,783                                      |  | 48,674                           
| | Vehicles (e)                          | 129,999                     |  | 129,466                                     |  | 127,049                          
| | Construction in progress and units    |                             |  |                                             |  |                                  
| | in transit                            | 255,141                     |  | 330,862                                     |  | -                                
| |                                       |                             |  |                                             |  |                                  
| |                                       |                             |  |                                             |  |                                  
| | Total                                 | 15,020,794                  |  | 15,473,121                                  |  | 8,726,294                        
| |                                       |                             |  |                                             |  |                                  

F - 29

---

| | (b) | Fully depreciated property, plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | As of December 31, 2003 and 2004, certain assets for approximately S/.3,339,976,000 and S/.3,555,338,000, respectively, are fully depreciated. Nevertheless, these assets are still in active use.                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (c) | Revalued property, plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | The net balance of property, plant and
    equipment as of December 31, 2004, includes the results of a voluntary revaluation made by ENTEL
    Perú as of December 31, 1992 based on an appraisal conducted by independent experts. The sum arising from
this revaluation was credited to shareholders equity.                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (d) | Impairment loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | During 2004, the Company recorded an impairment loss amounting to S/.13,851,000, additional over the one registered on books as of December 31, 2003, corresponding mainly to capitalized costs in the plant and computer equipment. As of December 31,
2004, the provision for impairment amounts to S/.79,192,000.                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | As of December 31, 2003 and 2004, according to the policy indicated in Note 4(p), Management has determined that the recoverable value of its property, plant and equipment is greater than its book value.                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (e) | Assets under financial lease                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | The captions buildings and other constructions, and vehicles include assets purchased under financial lease contracts which have net book values of approximately S/.27,539,000 and S/.25,502,000 as of December 31, 2003 and 2004, respectively.                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (f) | Insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | The Company and Subsidiaries maintain
    insurance contracts on their principal assets as per the policies established by Management. As of
    December 31, 2004, the Company has insurance coverage for plant and equipment for up to US$200,000,000
    (equivalent to S/.656,000,000). In Managements opinion, the insurance policies of the Company
    are consistent with the international practice in the telecommunications industry and the risk of
    contingent losses for disasters considered in the insurance policy is reasonable, taken into account
    the kind of assets owned by the Company and Subsidiaries.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F - 30

---

| | (g) | Construction in progress                                                                                                                                                                                                                                                                         
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                  
| |     | It mainly consists in constructions of telephone plants and data transmission. Also, it includes spare parts for S/.43,090,000 and S/.51,569,000 as of December 31, 2003 and 2004 respectively, see note 4 (g), for which an
impairment allowance was recorded amounting to S/.9,222,000 in 2004.
| |     |                                                                                                                                                                                                                                                                                                  

|15. | INTANGIBLES AND OTHER ASSETS, NET
|--- | ---------------------------------
|    |                                  

| | (a) | The movement in intangibles and other assets is as follows:
| | --- | -----------------------------------------------------------
| |     |                                                            

| | Description              | December 31,
| | ------------------------ | ------------
| |                          |             
| |                          | 2003        
| |                          | S/.000      
| |                          |             
| | Cost                     |             
| | Teledata                 | 13,846      
| | Issuance of bonds        | 51,993      
| | Software and SAP (b)     | 628,273     
| | Goodwill (c)             | 36,144      
| | Wireless access fee      | 54,566      
| | Others                   | 133         
| |                          |             
| |                          |             
| |                          | 784,955     
| |                          |             
| |                          |             
| | Accumulated amortization |             
| | Teledata                 | 13,846      
| | Issuance of bonds        | 51,993      
| | Software and SAP (b)     | 434,472     
| | Goodwill (c)             | 18,932      
| | Wireless access fee      | 29,271      
| | Others                   | 120         
| |                          |             
| |                          |             
| |                          | 548,634     
| |                          |             
| |                          |             
| | Net book value           |             
| | Teledata                 | -           
| | Issuance of bonds        | -           
| | Software and SAP (b)     | 193,800     
| | Goodwill (c)             | 17,213      
| | Wireless access fee      | 25,295      
| | Others                   | 13          
| |                          |             
| |                          |             
| |                          | 236,321     
| |                          |             

| | (b) | Software and SAP includes the acquisition of SAP R/3 financial and accounting software and of software licenses for platforms that support the commercial system.      The
Company recorded in 2004 a provision for impairment of S/.4,000,000 related to the software.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                        
| | (c) | Goodwill corresponds to the difference between the acquisition cost of the subsidiary Telefónica Multimedia S.A.C. and the capital share of the Company in the fair value of the acquired net assets.                                                                  
| |     |                                                                                                                                                                                                                                                                        

F - 31

---

| | (d) | As of December 31, 2003 and 2004, Management has prepared forecasts of the estimated results for the next years using a discount rate that was estimated to reflect market conditions. Based on those forecasts, Management has
estimated that the recoverable values of its property, plant and equipment, intangibles, and other assets, are greater than their book values and therefore, there is no need for a provision for impairment, as of the date of the consolidated balance
sheet.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|16. | BANK LOANS AND OVERDRAFTS
|--- | -------------------------
|    |                          

| | (a) | Bank loans and overdrafts are mainly short-term loans used for working capital; they consist of the following:
| | --- | --------------------------------------------------------------------------------------------------------------
| |     |                                                                                                               

| | Description                     | 2003    |  | 2004   
| | ------------------------------- | ------- |  | -------
| |                                 |         |  |        
| |                                 | S/.000  |  | S/.000 
| |                                 |         |  |        
| |                                 |         |  |        
| | BBVA Banco Continental          | 98,186  |  | 95,000 
| | Banco Standard Chartered - Perú | 15,735  |  | 44,500 
| | Banco de Crédito del Perú       | 34,617  |  | 62,000 
| |                                 |         |  |        
| |                                 |         |  |        
| | Total bank loans                | 148,538 |  | 201,500
| | Bank Overdrafts                 | 23,087  |  | 5,347  
| |                                 |         |  |        
| |                                 |         |  |        
| | Total                           | 171,625 |  | 206,847
| |                                 |         |  |        

| | (b) | All bank loans have current maturity and are renewed according to market conditions and have no specific guarantees or restrictions for its use.                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (c) | Loans in Nuevos Soles as of December 31, 2004, accrue a weighted average interest rate of 4.32 percent (4.15 percent annual rate as of December 31, 2003). During 2004, the weighted average interest rate accrued by loans in Nuevos
Soles was 4.07 percent (4.62 percent and 2.21 percent during 2003 year in Nuevos Soles and U.S. dollars, respectively). Interests accrued by bank loans and overdrafts for the years ended December 31, 2003 and 2004 amounted to approximately
S/.12,892,000 and S/.5,976,000,000, respectively.

F - 32

---

|17. | TRADE ACCOUNTS PAYABLE                          
|--- | ------------------------------------------------
|    |                                                 
|    | Trade accounts payable consist of the following:
|    |                                                 

| |                                                                                                                                                 | 2003    |  | 2004   
| | ----------------------------------------------------------------------------------------------------------------------------------------------- | ------- |  | -------
| |                                                                                                                                                 |         |  |        
| |                                                                                                                                                 | S/.000  |  | S/.000 
| |                                                                                                                                                 |         |  |        
| | Domestic suppliers                                                                                                                              | 260,479 |  | 239,380
| | Foreign suppliers                                                                                                                               | 26,261  |  | 32,992 
| | Guarantee deposits from contractors                                                                                                             | 18,839  |  | 23,716 
| | Other trade accounts payable                                                                                                                    | 171,956 |  | 182,172
| |                                                                                                                                                 |         |  |        
| |                                                                                                                                                 |         |  |        
| | Total                                                                                                                                           | 477,535 |  | 478,260
| |                                                                                                                                                 |         |  |        
| |                                                                                                                                                 |         |  |        
| | Trade accounts payable are denominated in local currency
    (nuevos soles) and U.S. dollars, have current maturities and do not bear interest.

|18. | OTHER ACCOUNTS PAYABLE
|--- | ----------------------
|    |                       

| | (a) | Other accounts payable consist of the following:
| | --- | ------------------------------------------------
| |     |                                                 

| |                             | 2003    |  | 2004     
| | --------------------------- | ------- |  | ---------
| |                             |         |  |          
| |                             | S/.000  |  | S/.000   
| |                             |         |  |          
| | Remunerations               | 62,417  |  | 79,459   
| | Taxes (b)                   | 31,865  |  | 174,821  
| | Workers' profit sharing     | 71,409  |  | 134,910  
| | Dividends                   | 15,373  |  | 13,226   
| | Interest                    | 28,587  |  | 28,228   
| | Sundry accounts payable (c) | 490,422 |  | 592,393  
| |                             |         |  |          
| |                             |         |  |          
| | Total                       | 700,073 |  | 1,023,037
| |                             |         |  |          

| | (b) | The current income tax provision deducted from the balance of prepaid income tax is shown as asset or liability, according to the net balance resulting from both concepts.    The
prepaid income tax amounts to S/.227,063,000 and S/.325,960,000 as of December 31, 2003 and 2004, respectively.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                   
| | (c) | Sundry accounts payable correspond mainly to various provisions made by the Company according to the practice indicated in note 4(m), based on their best estimations about the disbursements that would be required to settle
obligations at the date of the consolidated balance sheet.         
| |     |                                                                                                                                                                                                                                                                                                   

F - 33

---

|19. | PROMISSORY NOTES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | On March 9, 1998, the General Shareholders Meeting approved the issuance of short-term promissory notes for up to US$180,000,000, denominated in local or foreign currency, through out a program to be executed over the next
three years starting from the date the meeting was held; therefore expanding The First Promissory Notes Program of Telefónica del Perú, registered in 1996.                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Under this approval, the Second Promissory Notes Program of Telefónica del Perú was registered, with a maximum circulation amount of US$180,000,000 or its equivalent in local currency. This program was
registered at the Public Registry of Securities and Brokers and authorized by means of CONASEV Resolution N°010-2000-EF/94.1 dated January 21, 2000.                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The second program was renewed at the Public Registry of Securities and Brokers and the registration of the Second Informative Prospect was authorized by means of CONASEV Resolution No 009-2002-EF/94.11 dated February 4,
2003.                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The General Shareholders  Meeting of the Company held on March 26, 2002 approved to modify the agreement on the issuance of short-term promissory notes adopted in March 1998, (which was partially modified on March 24, 2002),
establishing the authorized amount in US$300,000,000 or its equivalent in local currency, during the next three years starting from March 26, 2002. However, it was specified that the principal of the debt obtained from the issuance of papers (bonds
and promissory notes) should not exceed, as a whole, US$900,000,000 or its equivalent in local currency.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The General Shareholders Meeting of the Company held on March 26, 2004 approved the issuance of this type of instruments until March 26, 2008, without any change in authorized amount and issuance limit.                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



F - 34

---

As ofDecember31, 2003 and 2004,Telefónicadel Perú S.A.A.maintainsthefollowingpromissorynotes incirculation:

|               |        |   |  |                  |  |                   |      | Weighted average annual interest rate |                      |     |  | Equivalent in local currency
|-------------- | ------ | - |  | ---------------- |  | ----------------- | ---- | ------------------------------------- | -------------------- | --- |  | ----------------------------
|Issuancenumber |        |   |  | Issuance date    |  | Maturity date     |      |                                       | Currency of contract |    
|               | Series |   |  |                  |  |                   | 2003 |                                       | 2004                
|               |        |   |  |                  |  |                   |      |                                       |                      |     |  |                             
|               |        |   |  |                  |  |                   |      | %                                     |                      |     |  | S/.000                      
|               |        |   |  |                  |  |                   |      |                                       |                      |     |  |                             
|               |        |   |  |                  |  |                   |      |                                       |                      |     |  |                             
|Thirtieth      |        | A |  | July 9, 2004     |  | July 4, 2005      |      | 4.68                                  |                      | S/. |  |                             
|Thirtieth      |        | C |  | October 20, 2004 |  | October 15, 2005  |      | 4.48                                  |                      | S/. |  |                             
|Twenty-fifth   |        | Q |  | January 10, 2003 |  | January 5, 2004   |      | 4.74                                  |                      | S/. |  | 15,735                      
|Twenty-sixth   |        | D |  | March 19, 2003   |  | March 3, 2004     |      | 1.39                                  |                      | US$ |  | 72,674                      
|Twenty-sixth   |        | H |  | April 22, 2003   |  | April 16, 2004    |      | 1.38                                  |                      | US$ |  | 11,355                      
|Twenty-sixth   |        | L |  | May 12, 2003     |  | April 30, 2004    |      | 1.40                                  |                      | US$ |  | 3,634                       
|Twenty-seventh |        | D |  | March 31, 2003   |  | January 2, 2004   |      | 4.47                                  |                      | S/. |  | 19,407                      
|Twenty-seventh |        | E |  | April 14, 2003   |  | January 9, 2004   |      | 4.13                                  |                      | S/. |  | 10,490                      
|Twenty-seventh |        | F |  | April 14, 2003   |  | April 8, 2004     |      | 4.54                                  |                      | S/. |  | 41,959                      
|Twenty-seventh |        | J |  | May 9, 2003      |  | April 30, 2004    |      | 4.49                                  |                      | S/. |  | 7,915                       
|Twenty-eighth  |        | B |  | July 18, 2003    |  | February 13, 2004 |      | 3.64                                  |                      | S/. |  | 9,966                       
|Twenty-eighth  |        | C |  | July 18, 2003    |  | July 12, 2004     |      | 3.83                                  |                      | S/. |  | 28,061                      
|Twenty-eighth  |        | E |  | October 28, 2003 |  | February 25, 2004 |      | 3.08                                  |                      | S/. |  | 18,892                      
|Twenty-eighth  |        | F |  | October 28, 2003 |  | July 24, 2004     |      | 3.28                                  |                      | S/. |  | 7,857                       
|Twenty-eighth  |        | G |  | October 28, 2003 |  | October 22, 2004  |      | 3.43                                  |                      | S/. |  | 17,309                      
|               |        |   |  |                  |  |                   |      |                                       |                      |     |  |                             
|               |        |   |  |                  |  |                   |      |                                       |                      |     |  |                             
|               |        |   |  |                  |  |                   |      |                                       |                      |     |  | 265,254                     
|               |        |   |  |                  |  |                   |      |                                       |                      |     |  |                             

Promissorynotes have beenacquiredby third parties and have nospecificguarantees.

F - 35

---

|20. | BONDS
|--- | -----
|    |      

| | (a) | Telefónica del Perú S.A.A. maintains the following obligations related to the issuance of bonds as of December 31, 2003 and 2004:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                  

| | Series                     |  | Issuance date     |  | Maturity date     |  | Face value |  | Authorized amount |  | Used amount |  | Effective annualinterest rate |  | Equivalent in local currency
| | -------------------------- |  | ----------------- |  | ----------------- |  | ---------- |  | ----------------- |  | ----------- |  | ----------------------------- |  | ----------------------------
| |                            |  |                   |  |                   |  | 2003       |  | 2004             
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| |                            |  |                   |  |                   |  | (000)      |  | (000)             |  | (000)       |  | (**)                          |  | S/.000                      
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 1st.Program                |  | August 16, 1999   |  | August 16, 2006   |  | S/.5,000   |  | S/.100,000        |  | S/.100,000  |  | VAC (*) + 6.9375%             |  | 113,948                     
| | 1st issuance               |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 1st.Program                |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 2nd issuance               |  | October 11, 1999  |  | October 11, 2009  |  | S/.5,000   |  | S/.70,000         |  | S/.43,710   |  | VAC (*) + 7.00%               |  | 49,578                      
| | 2nd.Program                |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 3rdIssuance                |  | December 11, 2001 |  | December 11, 2006 |  | S/.5,000   |  | S/.100,000        |  | S/.100,000  |  | VAC (*) + 6.1875%             |  | 108,070                     
| | 2nd.Program                |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 4thissuance                |  | March 14, 2002    |  | March 14, 2004    |  | S/.5,000   |  | S/.55,000         |  | S/.16,770   |  | 6.375%                        |  | 17,592                      
| | 2nd.Program                |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 5thissuance                |  | May 13, 2002      |  | May 13, 2007      |  | S/.5,000   |  | S/.30,000         |  | S/.12,140   |  | VAC (*) + 6.25%               |  | 13,137                      
| | 2nd.Program                |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 6thissuance                |  | July 9, 2002      |  | July 9, 2004      |  | S/.5,000   |  | S/.20,000         |  | S/.9,485    |  | 7.75%                         |  | 9,950                       
| | 2nd.Program - Serie A      |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 7thissuance                |  | November 25, 2002 |  | November 25, 2005 |  | US$1,000   |  | US$45,000         |  | US$35,000   |  | 4.375%                        |  | 127,181                     
| | 2nd.Program - Serie B      |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 7thissuance                |  | December 6, 2002  |  | December 6, 2005  |  | US$1,000   |  | US$45,000         |  | US$10,000   |  | 4.00%                         |  | 36,337                      
| | 2nd.Program - Series A     |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 8thissuance                |  | March 14, 2003    |  | March 14, 2005    |  | S/.5,000   |  | S/.75,000         |  | S/.75,000   |  | 6.50%                         |  | 78,675                      
| | 2nd.Program - Series B     |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 8thissuance                |  | April 22, 2003    |  | April 22, 2005    |  | S/.5,000   |  | S/.15,000         |  | S/.15,000   |  | 6.1875%                       |  | 15,735                      
| | 2nd.Program - 9th issuance |  | April 14, 2003    |  | January 14, 2005  |  | US$1,000   |  | US$26,000         |  | US$21,000   |  | 2.4375%                       |  | 76,308                      
| | 6th. Issuance of corporate |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | bonds Series A             |  | June 18, 2003     |  | June 18, 2005     |  | S/.5,000   |  | S/.70,000         |  | S/.70,000   |  | 5.1875%                       |  | 73,430                      
| | 7th. Issuance of corporate |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | bonds                      |  | August 20, 2003   |  | August 20, 2008   |  | S/.5,000   |  | S/.70,000         |  | S/.63,190   |  | 7.9375%                       |  | 66,286                      
| | 8th Issuance of corporate  |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | bonds                      |  | August 20, 2003   |  | February 20, 2009 |  | US$1,000   |  | US$30,000         |  | US$16,847   |  | 3.8125%                       |  | 61,218                      
| | 9th Issuance of corporate  |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | bonds                      |  | July 7, 2003      |  | July 7, 2007      |  | US$1,000   |  | US$20,000         |  | US$20,000   |  | 3.125%                        |  | 72,675                      
| | 3th
Program - Series A     |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 1st Issuance               |  | November 24, 2003 |  | November 24, 2010 |  | S/. 5,000  |  | S/. 70,000        |  | S/. 50,000  |  | VAC (*)+5%                    |  | 52,541                      
| | 3th
Program - Series A     |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 2nd Issuance               |  | April 20, 2004    |  | April 20, 2007    |  | S/. 5,000  |  | S/. 70,000        |  | S/. 30,000  |  | 5.3125%                       |  | -                           
| | 3th
Program - Series A     |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | 3th Issuance               |  | June 30, 2004     |  | December 30, 2007 |  | S/. 5,000  |  | S/. 70,000        |  | S/. 30,000  |  | 8.1250%                       |  | -                           
| | Financial derivates of     |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| | hedge                      |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  | 7,604                       
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  | Total                         |  | 980,265                     
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  | Less  Current portion        |  | 27,541                      
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  | Non  current portion         |  | 952,724                     
| |                            |  |                   |  |                   |  |            |  |                   |  |             |  |                               |  |                             

| |  | (*)  | Constant restating value.                                                                                                
| |  | ---- | -------------------------------------------------------------------------------------------------------------------------
| |  |      |                                                                                                                          
| |  | (**) | Interest is paid semiannually, except for bonds corresponding to the 2nd program, 9th issuance, which are paid quarterly.
| |  |      |                                                                                                                          

F - 36

---

| | (b) | According to its contractual conditions, bonds outstanding as of December 31, 2003 and 2004 mature as follows:
| | --- | --------------------------------------------------------------------------------------------------------------
| |     |                                                                                                               

| |                     | Principal amortizations
| | ------------------- | -----------------------
| |                     |                        
| | Maturity year       | 2003                   
| |                     |                        
| |                     | S/.000                 
| |                     |                        
| | 2004                | 27,541                 
| | 2005                | 415,271                
| | 2006                | 222,019                
| | 2007                | 85,811                 
| | 2008                | 66,286                 
| | 2009 and thereafter | 163,337                
| |                     |                        
| |                     |                        
| | Total               | 980,265                
| |                     |                        

| | (c) | According to Article 19 of the Income Tax Law approved by Supreme Decree 054- 99-EF and modified by Law 27804, interests are exempt from income tax until December 31, 2006. The exemption will not apply when the holder of the bonds
is a bank or a financial entity.                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (d) | Funds received from issuance of bonds in public offering were used for liability restructuring and working capital, among others. There are no specific guarantees granted for these bonds.                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (e) | The General Shareholders  Meeting of Telefónica del Perú S.A.A. held on March 26, 2002 approved to modify the agreement on the issuance of bonds, establishing the authorized amount in up to US$680,000,000 during the
next three years starting from March 26, 2002. Additionally, it was specified that the principal of the debt obtained from the issuance of papers (bonds on promissory notes) should not exceed, as a whole, US$900,000,000 or its equivalent in local
currency.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (f) | Likewise, the Third Bonds Program of Telefónica del Perú was registered for a maximum amount in circulation equivalent to US$250,000,000. This program was registered in the Public Registry of Securities
and Brokers and authorized by means of Resolution from CONASEV No 079-2004-EF/94.11 dated October 3, 2003.                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (g) | The General Shareholders Meeting of the Company held on March 26, 2004 approved the issuance of this type of instruments until March 26, 2008, without any changes in the authorized amounts and issuance limits indicated in
paragraph (e).                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F - 37

---

|21. | LONG-TERM DEBT
|--- | --------------
|    |               

| | (a) | Long-term debt consists of the following:
| | --- | -----------------------------------------
| |     |                                          

| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  | As of December 31, 2003      |  | As of December 31, 2004
| | ------------------------------------- |  | -------- |  | -------------------- |  | ------------------- |  | ---------------- |  | ---------------------- |  | ---------------------------- |  | -----------------------
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        
| | Creditor                              |  | Currency |  | Guarantee granted by |  | Annualinterest rate |  | Terms of payment |  | Maturity date          |  | Equivalent in local currency |  | Foreign currency       
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  | S/.000                       |  | 000                    
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        
| | European Investment Bank              |  | US$      |  | -                    |  | 5.72%               |  | Semiannual       |  | September, 2013        |  | 168,969                      |  | 41,850                 
| | Telefónica del Perú Grantor Trust (b) |  | US$      |  | -                    |  | 7.48%               |  | Semiannual       |  | December, 2008         |  | 142,753                      |  | 31,428                 
| | BBVA Banco Continental                |  | S/.      |  | -                    |  | 5.95%               |  | Upon maturity    |  | April, 2006            |  | -                            |  | -                      
| | Banco Standard Chartered              |  | S/.      |  | -                    |  | 5.45%               |  | Upon maturity    |  | June, 2005             |  | 41,960                       |  | -                      
| | Banco Standard Chartered              |  | S/.      |  | -                    |  | 5.35%               |  | Upon maturity    |  | December, 2004         |  | 30,946                       |  | -                      
| | Nederlandes Investeringsbank Voor     |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        
| | Ontwikkellingslanden - Netherlands    |  | €        |  | COFIDE               |  | 2.50%               |  | Semiannual       |  | January, 2018          |  | 20,321                       |  | 4,143                  
| | Citileasing S.A.                      |  | US$      |  | Leased building      |  | 4.4436%             |  | M onthly         |  | August, 2004           |  | 4,965                        |  | -                      
| | French Public Treasury                |  | €        |  | Peruvian government  |  | 3.50%               |  | Semiannual       |  | September, 2012        |  | 2,728                        |  | 497                    
| | Others                                |  |          |  |                      |  |                     |  |                  |  |                        |  | 6,796                        |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  | Total                  |  | 419,438                      |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  | Less  Current portion |  | 89,702                       |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  | Non  current portion  |  | 329,736                      |  |                        
| |                                       |  |          |  |                      |  |                     |  |                  |  |                        |  |                              |  |                        

| | (b) | On July 14, 1998, the Board of Directors of Telefónica del Perú S.A.A. approved a financial operation denominated Securitization for a total amount of US$200,000,000; backed with the trust transfer
of accounts receivable as of such date and future, generated by the international traffic of Telefónica del Perú S.A.A. These accounts constitute the trust equity backing the issue of certificates to be carried out by the securitizing
entity in virtue of the securitization process. On December 16, 1998, Telefónica del Perú S.A.A. placed certificates for US$150,000,000 in the New York Stock Exchange at an issuance price of 99.975954 percent and at an annual interest
rate of 7.48 percent. The payment of the principal and interest is made semiannually starting December 15, 1999 until December 15, 2008. Funds provided by this operation were allocated, but not limited, to finance Telefónica del Perú
S.A.A. working capital and/or the repurchase of its own stock. On December 13, 2001, the Board of Directors approved a partial prepayment of US$50 millions, no other prepayments having been made. As of December 31, 2004 the principal of this debt
had been amortized by approximately US$118,572,000.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | According to the respective terms, Telefónica del Perú S.A.A. maintains a trust fund as a guarantee collateral, see Note 9.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | Telefónica del Perú S.A.A. is obliged to certain long-term debt covenants, which in Managements opinion are being fulfilled as of December 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F - 38

---

| | (d) | The long-term debt principal as of December 31, 2003 and 2004 matures as follows:
| | --- | ---------------------------------------------------------------------------------
| |     |                                                                                  

| |                     | 2003    |  | 2004   
| | ------------------- | ------- |  | -------
| |                     |         |  |        
| |                     | S/.000  |  | S/.000 
| | Year                |         |  |        
| |                     |         |  |        
| | 2004                | 89,702  |  | -      
| | 2005                | 89,379  |  | 90,211 
| | 2006                | 47,331  |  | 159,360
| | 2007                | 47,265  |  | 42,844 
| | 2008                | 47,262  |  | 42,834 
| | 2009 and thereafter | 98,499  |  | 90,106 
| |                     |         |  |        
| |                     |         |  |        
| | Total               | 419,438 |  | 425,355
| |                     |         |  |        

|22. | TRANSACTIONS WITH RELATED COMPANIES
|--- | -----------------------------------
|    |                                    

| | (a) | Principal transactions                                                                                                                             
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                    
| |     | During 2002, 2003 and 2004, the Company and Subsidiaries principal transactions with related parties were as follows (see also Notes 24(f) and 27):
| |     |                                                                                                                                                    

| |                                                  | 2002     |   | 2003     |   | 2004     |  
| | ------------------------------------------------ | -------- | - | -------- | - | -------- | -
| |                                                  |          |   |          |   |          |  
| |                                                  | S/.000   |   | S/.000   |   | S/.000   |  
| |                                                  |          |   |          |   |          |  
| | Income from lease of circuits                    | 40,227   |   | 40,295   |   | 83,902   |  
| | Interest on accounts receivable from             |          |   |          |   |          |  
| | Telefónica Móviles S.A.C., Note 28               | 25,326   |   | 10,140   |   | 986      |  
| | Income from sale of subsidiary, Note 29          | 118,555  |   | -        |   | -        |  
| | Interconnection expenses, net (b)                | (420,688 | ) | (395,829 | ) | (483,187 | )
| | Shared Services Centre expenses (**)             | (118,140 | ) | (112,815 | ) | (102,833 | )
| | Call-centre services and regulatory expenses     | (25,921  | ) | (29,770  | ) | (26,969  | )
| | Services received from Telefónica Móviles S.A.C. | (19,551  | ) | (18,845  | ) | (4,494   | )
| | Printing of telephone directories expenses       | (17,004  | ) | (15,050  | ) | (23,174  | )
| | Loans granted, net                               | 24,943   |   | -        |   | -        |  

F - 39

---



| | As a result of these and other minor transactions, as of December
      31, 2003 and 2004, Telefónica del Perú S.A.A. and Subsidiaries had the following
    balances with related companies:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| | Accounts receivable:                                                                                                                                                                         
| | Telefónica Móviles S.A.C. (*)                                                                                                                                                                
| | Telefónica Publicidad e Información Perú S.A.C.                                                                                                                                              
| | Telefónica Gestión de Servicios Compartidos                                                                                                                                                  
| | Perú S.A.C. (**)                                                                                                                                                                             
| | Telefónica Empresas Perú S.A.A. (***)                                                                                                                                                        
| | Telefónica International Wholesale Services Perú                                                                                                                                             
| | (formerly Emergia Perú S.A.C.)                                                                                                                                                               
| | Others                                                                                                                                                                                       
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| | Accounts payable:                                                                                                                                                                            
| | Comunicaciones Móviles del Perú S.A.                                                                                                                                                         
| | (formerly Bellsouth Perú S.A.) (b)                                                                                                                                                           
| | Telefónica del Perú S.A.C.                                                                                                                                                                   
| | Telefónica Móviles S.A.C.                                                                                                                                                                    
| | Telefónica Gestión de Servicios Compartidos                                                                                                                                                  
| | Perú S.A.C. (**)                                                                                                                                                                             
| | Others                                                                                                                                                                                       
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              
| |                                                                                                                                                                                              

| | (*)  | As of December 31, 2004, accounts receivable from Telefónica Móviles S.A.C. mainly corresponds to payments made on behalf of that company. The account receivable as of December 31, 2003 corresponds to a Mutum
Contract signed with Telefónica Móviles S.A.C. on April, 2003, whereby the balance was refinanced of the debt transferred by the Company, according to a Debt Recognition and Payment Commitment Contract dated January, 2000, as a result
of the assets and liabilities transfer related to the mobile telephone service. This debt was charged in the first quarter 2004 and at the same date, the Company and Telefónica Móviles S.A.C. signed a credit line agreement. Under said
credit line agreements, the new debt was charged in third quarter 2004, by means of a compensation between the accounts receivable it held with that company.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (**) | Telefónica Gestión de Servicios Compartidos S.A.C. offers to the Company and Subsidiaries, accounting, tax, treasury, human resources, real estate, security, logistics, information system and general
services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F - 40

---

| | (***) | As of December 31, 2004, the net balance receivable from Telefónica Empresas Perú S.A.A. includes the net balance of Telefónica de Servicios Financieros S.A.C., a company incorporated by simple merger by the
former. Said net balance includes short-term debts for S/.25,266,000.                                                                                                                                                                                                                                                                   
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (b)   | In October, 2004, the Telefónica Group (Spain) acquired all the shares of the capital share of Comunicaciones Móviles del Perú S.A. (formerly Bellsouth Perú S.A.).        Therefore,
the net balance payable as of December 31, 2004, is shown as a balance payable to related companies.
Also, though Telefónica del Perú S.A.A. still had transactions with this company during
2003 and 2004, the interconnection expenses, indicated in (a), only includes the transactions with this
related company for the months of November and December 2004.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (c)   | Loans to employees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |       | Telefónica del Perú S.A.A. and Subsidiaries grant loans to their employees and executives for periods of up to 12 months. The interest rates applied are generally below the existing market interest rates. However,
other loan conditions are substantially the same as those in the market. The balances of employee loans were approximately S/.4,595,000 and S/.6,594,000 as of December 31, 2003 and 2004, respectively, and are shown in Other accounts
receivable, net, see Note 11.                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (d)   | Directors remunerations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |       | For the years ended December 31, 2002, 2003 and 2004, the Board of Directors remuneration amounted to approximately S/.2,142,000, S/.864,000 and S/.649,000, respectively.                                                                                                                                                                                                                                                                                                                                                                              
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|23. | SHAREHOLDERS EQUITY
|--- | --------------------
|    |                     

| | (a) | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | As of December 31, 2002, 2003 and 2004, the share capital of the Company is represented by 1,721,964,417 common shares, par value of S/.1.25 each, fully subscribed and paid (par value of S/.1.00 as of December 31, 2002 and 2003).
The Company is entitled to issue approximately 162,164,383 additional shares resulting from the adjustment for inflation of the share capital as of December 31, 2004.                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | The Shareholders Meeting held on November 8, 2004, approved the capitalization of the net result from exposure to inflation accumulated as of December 31, 2002 of S/.1,173,603,880, by means of the increase of the par value to
S/.1.68 per share, without any change in the number of shares representative of the share capital and having as a result the same shareholders participation in the said share capital. Also, the reduction of the share capital in S/.743,112,776 was
approved, by means of the decrease of the par value to S/.1.25 per share, without any change in the number of shares representative of the share capital of the Company and having as a result the same shareholders participation on the said share
capital. The shareholders received a

F - 41

---



| | return of their contribution due to the capital reduction.
        The increase and decrease of share capital were effective on December 30, 2004 and the return
        of contributions on the 31stday
        of the same month. At the year ended December 31, 2004 the market value of the class B share
        was S/.1.51 having a deal frequency of 80% over the 365 days of the year (S/.1.38 and a deal
        frequency of 84% over the 365 days of the year at the year ended December 31, 2003).
    For 2003, the Company declared cash dividends amounting to S/.174,076,000
        (S/.0.1 per share). No cash dividends were declared in 2002 and 2004.
    As of December 31, 2002, 2003 and 2004, Companys share capital
    includes the following:                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Class A-1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Telefónica Perú Holding S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Class B                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Telefónica Internacional, S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Telefónica Perú Holding S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Morgan Guaranty Trust ADR Programs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Telefónica, S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Other minor shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Telefónica del Perú S.A.A. (treasury shares) (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Class C                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Companys Board of Directors is composed by a minimum of
        nine (9) members and a maximum of fourteen (14) members elected by the Special Meetings. Before
        each election, the General Shareholders Meeting must decide the number of Directors for
        the corresponding period.
    Class A-1 shares were issued as a result of the privatization process
        and grant their holders the right to elect the majority of the Board of Directors. Class B shares,
        which correspond mainly and indirectly to the shares owned by Telefónica, S.A. and acquired
        as a result of the 2000 share interchange, elect as many Directors as necessary to complete the
        total number of Directors previously defined by the General Shareholders Meeting, considering
        the number of Directors that should be elected by the A-1 shareholders and the members to be
        elected, if it were the case, by the class C Shareholders.
    Class C shares correspond to the workers of Telefónica del Perú S.A.A.,
    who will have the right to elect one member of the Board of Directors when they reach a

F - 42

---

| |     | percentage not lesser than 3% of the share capital. If this percentage is not reached at the moment of the election, Class B shareholders will elect an additional Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | On March 26, 2003, the General Shareholders Meeting determined in 9 the total number of members of the Board of Directors for a three-year period. Under the election method described above, the special Meeting of Class A-1
shareholders elected five directors; the Special Meeting of Class B shareholders elected four members, considering that the Class C shareholders did not reach the minimum percentage required to elect a member.                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | Dividends distributed to domiciled individuals and non-domiciled shareholders, whether legal entities or individuals, are subject to a 4.1% income tax withholding rate. There is no restriction on the remittance of dividends abroad
or on the repatriation of capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (b) | Treasury shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | On March 1, 2004, the Company discontinued the listing of its American Depositary Shares (ADSs) related to the class C shares, from the New York Stock Exchange (NYSE). Likewise, the related deposit program was cancelled the same
date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | In order to take off the record of the Class B shares from the Securities and Exchange Commission (SEC), on April 29, 2004, the Company registered a form so as to acquire the underlying ADSs shares that JP Morgan Chase Bank
(depositary bank of those shares) would offer for sale at the Lima Stock Exchange, as a result of the deposit program cancellation. Furthermore, on July 8, 2004, the possibility for the Company to acquire own-issuance Class B shares was announced to
the market, according to the agreement at the General Shareholders and Board of Directors Meeting held on March 26 and 11, 2004, respectively. As a consequence Telefónica del Perú S.A.A. acquired 17,455,816 shares of Class
B, for a total amount of S/.21,896,000.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | As of December 31, 2004, the share capital is shown in the consolidated balance sheet net of the amount paid for the acquisition of own-issuance shares (Class B).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | Legal reserve                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | In accordance with the General Law of Corporations in Peru, the Company is required to appropriate annually at least 10 percent of its net income, after deducting the income tax, to a legal reserve until it reaches 20 percent of
its share capital. The legal reserve may be used to offset future losses or may be capitalized, existing in both cases the obligation to restore it.                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|24. | TAXATION
|--- | --------
|    |         

| | (a) | On December 31, 2003 expired the Legal Stability Agreements signed with the Peruvian Government (represented by the Comisión Nacional de Inversiones y Tecnologías Extranjeras CONITE) in May 1994 by the Empresa
Nacional de
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                              

F - 43

---

| |     | Telecomunicaciones del Perú - ENTEL PERU and the Compañía Peruana de Teléfonos - CPT, valid subsequently to Telefónica del Perú S.A.A., according to the Addendum of June 6, 1995, which
were valid for 10 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (b) | In accordance with the preceding paragraph, Telefónica del Perú S.A.A. income tax for the years 2002 and 2003 was calculated based on a 30% rate and considering financial statements adjusted to reflect the changes in
the Wholesale Price Index, following the methodology established by Legislative Decree No627. The annual income tax should not be less than 2 percent of Telefónica del Perú S.A.A. total net assets, excluding the investments in
shares in companies domiciled in Peru and the value of new plant and equipment in the year of their acquisition and in the subsequent year. Since 2004, the Company is subject to the tax system in force. In that sense, the Company has determined its
income tax based on the Income Tax Law approved by Supreme Decree No 054-99-EF, and its amendments and regulatory norms; according to which, the income tax is calculated based on a 30% rate and considering consolidated financial statements
adjusted to reflect the changes in the wholesale Price Index.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | Likewise, the total or partial distribution of earnings, is subject to a withholding rate of 4.1 percent of the amount distributed to foreign shareholders and domiciled individuals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | As of December 31, 2002, 2003 and 2004, the Subsidiaries approximate tax loss carry forwards are the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                                       | 2002   |  | 2003   |  | 2004  
| | ------------------------------------- | ------ |  | ------ |  | ------
| |                                       |        |  |        |  |       
| |                                       | S/.000 |  | S/.000 |  | S/.000
| | Entity                                |        |  |        |  |       
| |                                       |        |  |        |  |       
| | Telefónica Multimedia S.A.C.          | 68,775 |  | 97,579 |  | 27,422
| | Telefónica Servicios Digitales S.A.C. | 2,589  |  | 6,681  |  | 6,984 
| | Servicios Editoriales del Perú S.A.C. | 6,317  |  | 14,862 |  | 14,621

| |  | The fiscal treatment for the tax loss carry
        forwards has been changed by means of Legislative Decree No 945, which became in force on
    January 1, 2004.    In that sense:
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                     
| |  | 1.                                                                                                                                                                                  
| |  |                                                                                                                                                                                     
| |  | 2.                                                                                                                                                                                  
| |  |                                                                                                                                                                                     
| |  | 3.                                                                                                                                                                                  

F - 44

---

> The tax loss carryforward amounts of each subsidiary depend on the results of the reviews indicated in paragraph (d) below.

| | (d) | Telefónica del Perú S.A.A. income tax and
        returns from 2000 to 2004 and value added tax returns from December 2000 to December 2004 are
        subject to review by the tax authority. Telefónica del Perú S.A.A. 1997, 1998 and
        1999 income tax returns and value added tax returns from January to December, 1997, 1998 and
        1999 have been reviewed by the tax authority, see note 34(a). Currently, the tax authority is
        reviewing the 2000 and 2001 returns.
    Additionally, the income tax and value added tax returns are subject
    to fiscal review by the tax administration, for the periods indicated below:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Entity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Telefónica Multimedia S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Telefónica Servicios Integrados S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Transporte Urgente de Mensajería S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Telefónica Servicios Comerciales S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Telefónica Servicios Digitales S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Servicios Editoriales del Perú S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Telefónica Soluciones Globales Holding S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | Telefónica Servicios Técnicos S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Servicios Globales de Telecomunicaciones S.A.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Antena 3 Producciones S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |     | The tax authority is legally entitled to review and, if necessary, adjust the income tax calculated by Telefónica del Perú S.A.A. and Subsidiaries during the four years following the year of filing of the related tax
returns. Due to possible interpretations of current legislation by the tax administration, it is not possible to determine whether or not such reviews will result in tax liabilities for Telefónica del Perú S.A.A. and Subsidiaries.
However, in Management and their legal advisors opinion, any additional tax assessment would not be significant for the consolidated financial statements as of December 31, 2002, 2003 and 2004.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (e) | In accordance with the Telecommunications Law, Supreme Decree 013-93-TCC, and its regulations approved by the Supreme Decree No 027-2004-MTC, telecommunications service concessionaires should pay the fees and rates set forth
below, computed on all the different telecommunication services annual revenues invoiced and collected in the case of (e.2), on all the different telecommunication services under concession and/or authorization in the case of (e.3) below and only on
the final and carrier telephone services in the case of (e.1):                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F - 45

---

| | Concept:                                             | Beneficiary |  | %  
| | ---------------------------------------------------- | ----------- |  | ---
| |                                                      |             |  |    
| | (e.1) Special fee assigned to the Telecommunications | OSIPTEL     |  | 1.0
| | Investment Fund (FITEL)                              |             |  |    
| | (e.2) Contributions for supervision services         | OSIPTEL     |  | 0.5
| | (e.3) Commercial service usage rate                  | MTC         |  | 0.5

| |     | Likewise, under the aforementioned provisions, an annual royalty has been established for the use of the radio-waves spectrum. This royalty is determined by applying different percentages to the Taxable Unit (UIT) in force at the
beginning of the year and according to the type of service provided by the concessionaire.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | As of December 31, 2002, 2003, and 2004 the expense recognized for these concepts amounted to S/.63,497,000, S/.61,895,000 and S/.59,004,000, respectively, and is included in the caption General and administrative
expenses of the consolidated statements of income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (f) | Starting from fiscal year 2001, for the purposes of income tax and value added tax (VAT), the determination of transfer pricing (market value) of transactions with related companies and with or through companies resident in
territories with low or nil taxation, must be made using the arms length principle and be supported with documentation and information (a study) on the valuation methods used for determining transfer pricing, indicating the criteria and
objective elements used. For fiscal year 2003 and previous, due to the Legal Stability Agreement signed with the Peruvian Government, the Companys Management and its legal advisors are of the opinion that the transfer pricing regulations
affect the Company only in respect to the VAT, and; estimate that at the date of the balance sheet, there are no significant liabilities in connection to this matter. For fiscal year 2004, due to the expiry of the Legal Stability Agreement signed
with the Peruvian Government, these rules, with regards to income tax, will be applicable to Telefónica del Perú S.A.A. as well; the management of Telefónica del Perú S.A.A. and Subsidiaries consider that the respective
adaptation actions have been taken.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

F - 46

---

|25. | GENERAL AND ADMINISTRATIVE EXPENSES
|--- | -----------------------------------
|    |                                    

| | (a) | General and administrative expenses consist of the following:
| | --- | -------------------------------------------------------------
| |     |                                                              

| |                                              | 2002    |  | 2003      |  | 2004   
| | -------------------------------------------- | ------- |  | --------- |  | -------
| |                                              |         |  |           |  |        
| |                                              | S/.000  |  | S/.000    |  | S/.000 
| |                                              |         |  |           |  |        
| | Services provided by third parties (b)       | 727,427 |  | 784,646   |  | 774,419
| | Provision for doubtful accounts, note 10 (b) | 125,983 |  | 131,632   |  | 49,624 
| | Taxes                                        | 91,270  |  | 90,886    |  | 82,060 
| | Others                                       | 20,655  |  | 19,219    |  | 17,037 
| |                                              |         |  |           |  |        
| |                                              |         |  |           |  |        
| | Total                                        | 965,335 |  | 1,026,383 |  | 923,140
| |                                              |         |  |           |  |        

| | (b) | Consist of the following:
| | --- | -------------------------
| |     |                          

| |                               | 2002    |  | 2003    |  | 2004   
| | ----------------------------- | ------- |  | ------- |  | -------
| |                               |         |  |         |  |        
| |                               | S/.000  |  | S/.000  |  | S/.000 
| |                               |         |  |         |  |        
| | Leases                        | 149,550 |  | 141,021 |  | 137,793
| | Fees                          | 144,686 |  | 199,860 |  | 196,948
| | Cable TV signals rental fees | 117,094 |  | 123,105 |  | 96,042 
| | Maintenance and repairs       | 96,729  |  | 123,083 |  | 107,002
| | Printings and services        | 53,194  |  | 52,321  |  | 48,787 
| | Advertising                   | 62,610  |  | 51,762  |  | 50,383 
| | Mail and telecommunications   | 28,485  |  | 40,563  |  | 65,399 
| | Transport and storage         | 15,269  |  | 15,160  |  | 14,312 
| | Others                        | 59,810  |  | 37,771  |  | 57,753 
| |                               |         |  |         |  |        
| |                               |         |  |         |  |        
| | Total                         | 727,427 |  | 784,646 |  | 774,419
| |                               |         |  |         |  |        

|26. | PERSONNEL EXPENSES                          
|--- | --------------------------------------------
|    |                                             
|    | Personnel expenses consist of the following:
|    |                                             

| |                                                                                                                                                       | 2002    |  | 2003    |  | 2004   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ------- |  | ------- |  | -------
| |                                                                                                                                                       |         |  |         |  |        
| |                                                                                                                                                       | S/.000  |  | S/.000  |  | S/.000 
| |                                                                                                                                                       |         |  |         |  |        
| | Salaries                                                                                                                                              | 354,130 |  | 336,779 |  | 320,344
| | Social security and insurance                                                                                                                         | 28,835  |  | 30,262  |  | 25,629 
| | Severance indemnities                                                                                                                                 | 25,227  |  | 28,123  |  | 23,971 
| | Other personnel expenses                                                                                                                              | 35,459  |  | 28,747  |  | 13,795 
| |                                                                                                                                                       |         |  |         |  |        
| |                                                                                                                                                       |         |  |         |  |        
| | Total                                                                                                                                                 | 443,651 |  | 423,911 |  | 383,739
| |                                                                                                                                                       |         |  |         |  |        
| |                                                                                                                                                       |         |  |         |  |        
| | The average number of Telefónica del Perú S.A.A.
    and Subsidiaries employees during 2002, 2003 and 2004 was 4,873, 5,052, and 5,175, respectively.



F - 47

---

|27. | TRANSACTIONS WITH TELEFONICA INTERNACIONAL DE ESPAÑA, S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | On May 16, 1994, CPT and ENTEL Perú separately signed a Technology Transfer and Management Fees Agreement with Telefónica Internacional, S.A. (TISA), for a term of five years to be automatically renewed for
subsequent five-year periods up to a maximum of 20 years, coinciding with the initial term of the Concession Contract. In return, TISA receives a quarterly fee.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The technology transfer fee is equal to 1 percent of total revenues for services invoiced by Telefónica del Perú S.A.A. Up to the second quarter 2004 the management and administration fee was equal to 9 percent of
the operating revenue, excluding depreciation, amortization, technology transfer and management fee payments, as well as taxes, duties, contributions and royalties established under the Concession agreements. As from the third quarter 2004,
according to an addendum of said contract, dated September 30, 2004, the management and administration fee is determined based on advising and consultancies of professionals and specialized technicians designated by TISA, who provides their services
subject to a fee rate table. Said addendum superseded the nine percent fee initially agreed.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Clause 5.5 of the Contract establishes that in order to maintain adequate solvency levels, TISA will only receive the quarterly fee when the quarters net income before workers profit sharing, deductions and taxes plus
the quarters financial expenses, divided by the quarters financial expenses, is greater than 2. In fulfillment of said clause, no technology transfer and Management fee was generated for the fourth quarter 2004.                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | During 2004, under this agreement the accumulated technology transfer fee was approximately S/.30,443,000 (approximately S/.36,900,000 and S/.47,176,000 in 2002 and 2003, respectively). Likewise, during 2004 under this agreement
the accumulated management and administration fee was approximately S/.127,400,000 (approximately S/.209,521,000 and S/.262,729,000 in 2002 and 2003, respectively).                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | According to the agreement, the amount paid during the year is subject to an audit to be performed during the first quarter of next year. In Managements opinion, the amounts recorded for 2004 will not be significantly
modified as a result of such audit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F - 48

---

|28. | INTEREST INCOME AND EXPENSE                          
|--- | -----------------------------------------------------
|    |                                                      
|    | Interest income and expense consist of the following:
|    |                                                      

| |                                        | 2002     |   | 2003     |   | 2004     |  
| | -------------------------------------- | -------- | - | -------- | - | -------- | -
| |                                        |          |   |          |   |          |  
| |                                        | S/.000   |   | S/.000   |   | S/.000   |  
| |                                        |          |   |          |   |          |  
| | Interest income:                       |          |   |          |   |          |  
| | Interest on accounts receivable from   |          |   |          |   |          |  
| | Telefónica Móviles S.A.C., see note 22 | 25,326   |   | 10,140   |   | 986      |  
| | Interest on trade accounts receivable  | 24,700   |   | 19,478   |   | 12,458   |  
| | Interest on time deposits              | 1,981    |   | 601      |   | 5,965    |  
| | Others                                 | 4,080    |   | 2,065    |   | 5,063    |  
| |                                        |          |   |          |   |          |  
| |                                        |          |   |          |   |          |  
| | Total                                  | 56,087   |   | 32,284   |   | 24,472   |  
| |                                        |          |   |          |   |          |  
| |                                        |          |   |          |   |          |  
| | Interest expense:                      |          |   |          |   |          |  
| | Interest on bank loans                 | (130,787 | ) | (45,657  | ) | (28,480  | )
| | Interest on bonds                      | (71,100  | ) | (61,791  | ) | (68,418  | )
| | Interest on promissory notes           | (24,462  | ) | (11,898  | ) | (3,304   | )
| | Financial commissions                  | (9,241   | ) | (4,959   | ) | (3,231   | )
| | Others                                 | (8,034   | ) | (21,265  | ) | (19,625  | )
| |                                        |          |   |          |   |          |  
| |                                        |          |   |          |   |          |  
| | Total                                  | (243,624 | ) | (145,570 | ) | (123,058 | )
| |                                        |          |   |          |   |          |  

F - 49

---

|29. | OTHER INCOME (EXPENSES), NET
|--- | ----------------------------
|    |                             

| | (a) | Other income (expenses), net consist of the following:
| | --- | ------------------------------------------------------
| |     |                                                       

| |                                                                | 2002     |   | 2003     |   | 2004     |  
| | -------------------------------------------------------------- | -------- | - | -------- | - | -------- | -
| |                                                                |          |   |          |   |          |  
| |                                                                | S/.000   |   | S/.000   |   | S/.000   |  
| |                                                                |          |   |          |   |          |  
| | Other income:                                                  |          |   |          |   |          |  
| | Sale of investment in Telefónica Publicidad e Información      |          |   |          |   |          |  
| | Perú S.A.C. (b)                                                | 118,555  |   | -        |   | -        |  
| | Valuation of investment available for sale, note 13 (d)        | -        |   | -        |   | 36,295   |  
| | Sale of investment in New Skies Satellites, note 13 (d)        | -        |   | -        |   | 25,828   |  
| | Sale of property, plant and equipment                          | 37,429   |   | 18,532   |   | 15,819   |  
| | Sale of investment in Terra Networks S.A., note 13 (c)         | -        |   | 49,259   |   | -        |  
| | Others                                                         | 68,353   |   | 37,868   |   | 39,479   |  
| |                                                                |          |   |          |   |          |  
| |                                                                |          |   |          |   |          |  
| | Total                                                          | 224,337  |   | 105,659  |   | 117,421  |  
| |                                                                |          |   |          |   |          |  
| | Other expenses:                                                |          |   |          |   |          |  
| | Cost of investment in Telefónica Publicidad e                  |          |   |          |   |          |  
| | Información Perú S.A.C., (b)                                   | (83,366  | ) | -        |   | -        |  
| | Provisions and prior years' expenses (d)                       | (95,567  | ) | (76,360  | ) | (112,463 | )
| | Cost of property, plant and equipment and intangibles sold,    |          |   |          |   |          |  
| | notes 14 and 15                                                | (39,972  | ) | (12,587  | ) | (6,270   | )
| | Incentivated retirement program (c)                            | (70,072  | ) | (28,867  | ) | (99,466  | )
| | Provision for obsolescence of inventories                      | (21,400  | ) | -        |   | -        |  
| | Provision for doubtful accounts, note 11 (d)                   | (44,632  | ) | (104,245 | ) | (62,504  | )
| | Provision for impairment of investment in Terra Networks S.A., |          |   |          |   |          |  
| | notes 13 (c)                                                   | (44,960  | ) | (17,858  | ) | -        |  
| | Cost of sale of investment in Terra Networks S.A., note 13 (c) | -        |   | (52,805  | ) | -        |  
| | Cost of sale of investment in New Skies Satellites             | -        |   | -        |   | (25,617  | )
| | Others                                                         | (187,754 | ) | (108,029 | ) | (109,949 | )
| |                                                                |          |   |          |   |          |  
| |                                                                |          |   |          |   |          |  
| | Total                                                          | (587,723 | ) | (400,751 | ) | (416,269 | )
| |                                                                |          |   |          |   |          |  
| |                                                                |          |   |          |   |          |  
| | Other expenses, net                                            | (363,386 | ) | (295,092 | ) | (298,848 | )
| |                                                                |          |   |          |   |          |  

| | (b) | On February 8, 2002, Telefónica del Perú S.A.A. and Telefónica
Publicidad e Información, S.A., an entity established in Spain and holder of the telephone directories
service line, signed a sale and  purchase agreement whereby Telefónica Publicidad e Información,
S.A. acquired Telefónica Publicidad e Información Perú      S.A.C.,
a Companys subsidiary. The price for such transfer was approximately US$31.2 million, (approximately
S/.118,555,000), resulting in an approximately capital gain of US$9.4 million (approximately S/.35,189,000).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | As a result of the transfer described above, Telefónica Publicidad e Información Perú     S.A.C.
is no longer a Companys subsidiary and depends directly from its respective holding
entity in Spain, of which Telefónica, S.A. is the major shareholder.                                                                                                                                                                                                                                                                                                   

F - 50

---

| | (c) | On October 4, 2004, Telefónica del Perú S.A.A. announced a Voluntary Retirement Programme with exceptional benefits for the employees. This Programme would have specific characteristics and be in force until March
31, 2005. The expenses for this concept correspond to the employees that have accepted this Programme until December 31, 2004, as well as to other workers in different programmes executed during 2004.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (d) | Expenses arising from prior years provisions and expenses, including expenses related to depreciation of fixed assets and intangible assets and deferred expenses.                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                               

|30. | INCOME TAX AND WORKERS PROFIT SHARING
|--- | --------------------------------------
|    |                                       

| | (a) | The income tax and workers profit sharing shown in the accompanying consolidated statements of income are made up as follows:
| | --- | ------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                               

| |                          | 2002    |   | 2003    |   | 2004    |  
| | ------------------------ | ------- | - | ------- | - | ------- | -
| |                          |         |   |         |   |         |  
| |                          | S/.000  |   | S/.000  |   | S/.000  |  
| |                          |         |   |         |   |         |  
| | Workers' profit sharing: |         |   |         |   |         |  
| | Current                  | 77,985  |   | 77,945  |   | 148,218 |  
| | Deferred                 | (4,153  | ) | (8,077  | ) | (19,909 | )
| |                          |         |   |         |   |         |  
| |                          |         |   |         |   |         |  
| | Total                    | 73,832  |   | 69,868  |   | 128,309 |  
| |                          |         |   |         |   |         |  
| |                          |         |   |         |   |         |  
| | Income tax:              |         |   |         |   |         |  
| | Current                  | 211,005 |   | 215,035 |   | 403,835 |  
| | Deferred                 | (12,171 | ) | (24,228 | ) | (52,913 | )
| |                          |         |   |         |   |         |  
| |                          |         |   |         |   |         |  
| | Total                    | 198,834 |   | 190,807 |   | 350,922 |  
| |                          |         |   |         |   |         |  

F - 51

---

| | (b) | The reconciliation of the effective tax rate to the statutory tax rate is as follows:
| | --- | -------------------------------------------------------------------------------------
| |     |                                                                                      

| |                                                 | 2002    |   | 2003  |  | 2004   
| | ----------------------------------------------- | ------- | - | ----- |  | -------
| |                                                 |         |   |       |  |        
| |                                                 | S/.000  |   | %     |  | S/.000 
| |                                                 |         |   |       |  |        
| |                                                 |         |   |       |  |        
| | Company's income before tax                     | 221,338 |   | 100.0 |  | 196,768
| | Income tax rate                                 | 30      | % |       |  | 30     
| |                                                 |         |   |       |  |        
| |                                                 |         |   |       |  |        
| | Income tax at the statutory tax rate            | 66,401  |   | 30.0  |  | 59,030 
| |                                                 |         |   |       |  |        
| | Tax effect of non deductible expenses:          |         |   |       |  |        
| | Generic provisions                              | 45,946  |   | 20.8  |  | 48,603 
| | Rent of locations for public telephone services | 32,171  |   | 14.5  |  | 33,813 
| | Non deductible financial expenses               | 4,243   |   | 1.9   |  | 3,594  
| | Others                                          | 38,740  |   | 17.5  |  | 27,638 
| |                                                 |         |   |       |  |        
| |                                                 |         |   |       |  |        
| | Income tax expense as per Telefónica            |         |   |       |  |        
| | del Perú S.A.A.'s books                         | 187,501 |   | 84.7  |  | 172,678
| |                                                 |         |   |       |  |        
| |                                                 |         |   |       |  |        
| | Income tax (benefit) expense as per             |         |   |       |  |        
| | the Subsidiaries' books                         | 11,333  |   |       |  | 18,129 
| |                                                 |         |   |       |  |        
| |                                                 |         |   |       |  |        
| |                                                 | 198,834 |   |       |  | 190,807
| |                                                 |         |   |       |  |        

F - 52

---

| | (c) | Components of the net deferred liability are as follows:
| | --- | --------------------------------------------------------

| |                               | As of January 1, 2003 |   | (Debited)/ credited to income statement |   | (Debited)/ credited to equity |   | Others |   | Result from exposure to inflation |   | As of December 31, 2003 |   | (Debited)/ credited to income statement |   | (Debited)/ credited to equity |   | Result from exposure to inflation |   | As of December 31, 2004 |  
| | ----------------------------- | --------------------- | - | --------------------------------------- | - | ----------------------------- | - | ------ | - | --------------------------------- | - | ----------------------- | - | --------------------------------------- | - | ----------------------------- | - | --------------------------------- | - | ----------------------- | -
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| |                               | S/.000                |   | S/.000                                  |   | S/.000                        |   | S/.000 |   | S/.000                            |   | S/.000                  |   | S/.000                                  |   | S/.000                        |   | S/.000                            |   | S/.000                  |  
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | Deferred assets:              |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | Provision for doubtful        |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | accounts                      | 20,375                |   | (15,363                                 | ) | -                             |   | -      |   | (400                              | ) | 4,612                   |   | 14,748                                  |   | -                             |   | (215                              | ) | 19,145                  |  
| | Financial leasing             | 5,723                 |   | (1,933                                  | ) | -                             |   | -      |   | (111                              | ) | 3,679                   |   | (3,363                                  | ) | -                             |   | (172                              | ) | 144                     |  
| | Provision for impairment of   |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | investments                   | 59,704                |   | 4,618                                   |   | -                             |   | -      |   | (1,171                            | ) | 63,151                  |   | (18,290                                 | ) | -                             |   | (2,950                            | ) | 41,911                  |  
| | Provision for legal           |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | contingencies                 | 27,757                |   | 10,802                                  |   | -                             |   | -      |   | (544                              | ) | 38,015                  |   | 5,171                                   |   | -                             |   | (1,777                            | ) | 41,409                  |  
| | Inventories, investments and  |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | property inflation adjustment | 9,534                 |   | 735                                     |   | -                             |   | -      |   | (187                              | ) | 10,082                  |   | -                                       |   | -                             |   | (470                              | ) | 9,612                   |  
| | Tax loss carryforward of      |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | Telefónica Multimedia S.A.C.  | 17,673                |   | (15,687                                 | ) | -                             |   | -      |   | (345                              | ) | 1,641                   |   | 8,581                                   |   | -                             |   | (76                               | ) | 10,146                  |  
| | Others                        | 54,551                |   | (6,448                                  | ) | (5,347                        | ) | (216   | ) | (886                              | ) | 41,654                  |   | 19,480                                  |   | (4,558                        | ) | (1,468                            | ) | 55,108                  |  
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | Total                         | 195,317               |   | (23,276                                 | ) | (5,347                        | ) | (216   | ) | (3,644                            | ) | 162,834                 |   | 26,327                                  |   | (4,558                        | ) | (7,128                            | ) | 177,475                 |  
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | Deferred liabilities:         |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | Depreciation                  | (1,100,935            | ) | 30,839                                  |   | (18,952                       | ) | -      |   | 41,876                            |   | (1,047,172              | ) | 21,765                                  |   | (16,157                       | ) | 244                               |   | (1,041,320              | )
| | Software license              | (61,072               | ) | 22,307                                  |   | (1,325                        | ) | -      |   | 1,197                             |   | (38,893                 | ) | 6,718                                   |   | (1,130                        | ) | 1,817                             |   | (31,488                 | )
| | Financial leasing             | (10,491               | ) | (776                                    | ) | -                             |   | -      |   | 206                               |   | (11,061                 | ) | 157                                     |   | -                             |   | 516                               |   | (10,388                 | )
| | Telephone plant               | (76,967               | ) | (771                                    | ) | -                             |   | -      |   | 1,508                             |   | (76,230                 | ) | 13,426                                  |   | -                             |   | 3,561                             |   | (59,243                 | )
| | Revaluation of assets         | (53,389               | ) | 3,984                                   |   | -                             |   | -      |   | 612                               |   | (48,793                 | ) | 4,431                                   |   | -                             |   | 2,279                             |   | (42,083                 | )
| | Others                        | (18,074               | ) | (2                                      | ) | -                             |   | 14,691 |   | 1,295                             |   | (2,090                  | ) | (2                                      | ) | -                             |   | 97                                |   | (1,995                  | )
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | Total                         | (1,320,928            | ) | 55,581                                  |   | (20,277                       | ) | 14,691 |   | 46,694                            |   | (1,224,239              | ) | 46,495                                  |   | (17,287                       | ) | 8,514                             |   | (1,186,517              | )
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  
| | Net deferred liability        | (1,125,611            | ) | 32,305                                  |   | (25,624                       | ) | 14,475 |   | 43,050                            |   | (1,061,405              | ) | 72,822                                  |   | (21,845                       | ) | 1,386                             |   | (1,009,042              | )
| |                               |                       |   |                                         |   |                               |   |        |   |                                   |   |                         |   |                                         |   |                               |   |                                   |   |                         |  

F - 53

---

|31. | EARNINGSPERSHARE                                                                                                                                                                                                                            
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                             
|    | Basic and dilutedearningsper
        share iscalculatedbydividingtheconsolidatednet
        incomeattributabletoordinaryshareholdersby
    theweightedaveragenumberofordinarysharesoutstandingas of the date of theconsolidatedbalancesheet.

| |                                                                                                                                             |               |  | Days        |  | Weighted     
| | ------------------------------------------------------------------------------------------------------------------------------------------- | ------------- |  | ----------- |  | -------------
| |                                                                                                                                             |               |  | outstanding |  | average      
| |                                                                                                                                             | Shares        |  | until       |  | number of    
| |                                                                                                                                             | outstanding   |  | year-end    |  | shares       
| |                                                                                                                                             |               |  |             |  |              
| |                                                                                                                                             |               |  |             |  |              
| | Balance as of December 31, 2002                                                                                                             | 1,721,964,417 |  | 365         |  | 1,721,964,417
| |                                                                                                                                             |               |  |             |  |              
| |                                                                                                                                             |               |  |             |  |              
| | Balance as of December 31, 2003                                                                                                             | 1,721,964,417 |  | 365         |  | 1,721,964,417
| |                                                                                                                                             |               |  |             |  |              
| |                                                                                                                                             |               |  |             |  |              
| | Balance as of December 31, 2004                                                                                                             | 1,721,964,417 |  | 365         |  | 1,721,964,417
| |                                                                                                                                             |               |  |             |  |              
| |                                                                                                                                             |               |  |             |  |              
| | Thecomputationof
        theconsolidatedbasic and
        dilutedearningsper share as ofDecember31,
    2002, 2003 and 2004 is shown below:

| | As of December 31, 2002 |  | As of December 31, 2003 |  | As of December 31, 2004
| | ----------------------- |  | ----------------------- |  | -----------------------
| |                         |  |                         |  |                        
| | Consolidated            |  | Number                  |  |                        
| | net income              |  | of shares               |  | Earnings               
| | (numerator)             |  | (denominator)           |  | per share              
| |                         |  |                         |  |                        
| | S/.                     |  |                         |  | S/.                    
| |                         |  |                         |  |                        
| | 32,784,000              |  | 1,721,964,417           |  | 0.019039               
| |                         |  |                         |  |                        

F - 54

---

|32 | BUSINESS SEGMENT INFORMATION
|-- | ----------------------------

| | (a) | Following,thebusinesssegmentinformationdisclosuresby
        servicecategory,as ofDecember31, 2002,
        2003 and 2004:
| | --- | --------------------------------------------------------------------------------------------------------------------------

|                              | Fixed local telephone services |   | Long distance telephone services |   | Cable television |   | Equipment supplies |   | Other services |   | Total      |  
|----------------------------- | ------------------------------ | - | -------------------------------- | - | ---------------- | - | ------------------ | - | -------------- | - | ---------- | -
|                              |                                |   |                                  |   |                  |   |                    |   |                |   |            |  
|                              | 2002                           |   | 2003                             |   | 2004             |   | 2002               |   | 2003           |   | 2004       |  
|                              |                                |   |                                  |   |                  |   |                    |   |                |   |            |  
|                              | S/.000                         |   | S/.000                           |   | S/.000           |   | S/.000             |   | S/.000         |   | S/.000     |  
|                              |                                |   |                                  |   |                  |   |                    |   |                |   |            |  
|Property, plant and equipment | 9,562,261                      |   | 9,630,210                        |   | 9,568,115        |   | 2,834,989          |   | 2,810,423      |   | 2,825,742  |  
|Accumulated depreciation      | (5,065,276                     | ) | (5,775,775                       | ) | (6,232,868       | ) | (1,522,286         | ) | (1,501,865     | ) | (1,655,894 | )
|Intangibles and
other assets  | 320,749                        |   | 389,914                          |   | 426,612          |   | 62,837             |   | 59,892         |   | 65,528     |  
|Accumulated amortization      | (181,491                       | ) | (273,276                         | ) | (316,332         | ) | (36,521            | ) | (41,975        | ) | (48,589    | )
|Total assets                  | 5,336,669                      |   | 4,277,404                        |   | 3,627,339        |   | 1,502,827          |   | 1,691,865      |   | 1,370,797  |  
|Total liabilities             | 2,766,706                      |   | 2,351,173                        |   | 2,296,682        |   | 487,277            |   | 473,756        |   | 413,186    |  
|Operating revenues            | 1,872,793                      |   | 1,847,416                        |   | 1,700,956        |   | 499,172            |   | 393,201        |   | 331,350    |  
|Operating expenses            | (1,449,740                     | ) | (1,493,462                       | ) | (1,303,007       | ) | (392,707           | ) | (366,364       | ) | (329,793   | )
|Operating income
(losses)     | 423,053                        |   | 353,954                          |   | 397,949          |   | 56,466             |   | 26,837         |   | 1,557      |  

| | (b) | Following,thesegmentinformationdisclosuresfor
        Lima andProvincessegmentsas ofDecember31, 2002,
        2003 and 2004 ispresented:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------

|                                     | Lima       |   | Provinces  |   | Total      |  
|------------------------------------ | ---------- | - | ---------- | - | ---------- | -
|                                     |            |   |            |   |            |  
|                                     | 2002       |   | 2003       |   | 2004       |  
|                                     |            |   |            |   |            |  
|                                     | S/.000     |   | S/.000     |   | S/.000     |  
|                                     |            |   |            |   |            |  
|Property, plant and equipment        | 9,792,292  |   | 10,029,722 |   | 10,451,161 |  
|Accumulated depreciation             | (5,451,293 | ) | (5,967,984 | ) | (6,645,943 | )
|Intangibles and other
        assets | 728,966    |   | 779,844    |   | 857,693    |  
|Accumulated amortization             | (417,742   | ) | (544,547   | ) | (633,200   | )
|Operating revenues                   | 2,576,575  |   | 2,609,003  |   | 2,653,180  |  
|Operating expenses                   | (2,011,726 | ) | (2,065,010 | ) | (1,833,456 | )
|Operating income                     | 564,849    |   | 543,993    |   | 819,724    |  

F - 55

---

|33. | FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company and Subsidiaries are exposed to market risks in the normal course of their operations; nevertheless, Management establishes control policies for credit, liquidity, market, interest rates and foreign currency risks,
based on their technical knowledge and experience.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Credit risk is controlled through the evaluation and analysis of individual transactions. To carry out such analysis, the Company and Subsidiaries evaluate the accounts receivable aging report, which is used to estimate the
necessary provision for doubtful accounts, see notes 4(f) and 10 (b). In addition, the Company suspends the services, totally and partially, to clients who have overdue accounts receivable over 120 days.                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Liquidity risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Liquidity is controlled through the matching of the maturities of assets and liabilities, by obtaining credit lines and/or by issuing marketable securities that allow the Company and Subsidiaries to develop their activities
normally.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Foreign currency risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Regarding foreign currency transactions, the most significant risk relates to the fact that a part of the loans have been obtained in U.S. dollars; therefore, a significant devaluation of the local currency would have an adverse
effect in the fulfilment of such obligations, because most of the revenues are generated in Nuevos Soles. Management monitors this risk through an analysis of Peruvian macro-economic indicators and, in their opinion, as of the date of this report,
there are no factors that indicate that a significant devaluation of the Peruvian currency is likely to occur. Likewise, in order to mitigate this risk, the Company uses exchange rate forward and currency swap contracts, see note 7.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Interest rate risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | This risk has been reduced due to the credit rating of the Company and Subsidiaries and the Telefónica Group, which allows the procurement of competitive interest rates in local and international markets, reducing this
risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Fair value of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Accounting standards define a financial instrument as cash, evidence of property in an entity, or a contract whereby its is agreed to or imposed on an entity the right or the contractual obligation of delivering or receiving money
or any other financial instrument. Fair value is the amount at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms length transaction. The best evidence of a fair value is its quoted
market price, if available.                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F - 56

---

> In the event that quotations not be available, the fair value is estimated based on the quoted market price of a financial instrument with similar characteristics, on the present value of the forecasted cash flows, or on other
> appraisal techniques, all of which are significantly affected by the various assumptions used. In spite of the fact that Management uses its best judgment to estimate the fair value of its financial instruments, inherent weaknesses exist in any
> appraisal technique.  Consequently, fair value could not be an approximation of net realizable value or of the value of liquidation.
> A significant part of the assets and liabilities of the financial statements are short-term financial instruments, with less than a one-year maturity. The fair value of these financial instruments, with the exception of those for
> which an active market exists, is considered to be equivalent to the recorded value as of the date of the consolidated balance sheet.
> The methodologies and assumptions used depend on the terms and characteristic risks of the different financial instruments and include the following:
> Cash and banks do not represent a significant credit or interest rate risk. Therefore, it has been assumed that their book values are representative of their fair values.
> Marketable securities corresponding to the Trust Fund (U.S. Treasury Papers) are stated at the lower of cost or market value. Accordingly, the estimated fair value considers the
> potential earnings not recorded but that have been estimated based on the exchange prices of these investments.
> Due to the fact that accounts receivable are presented net from their provision for doubtful accounts and have a maturity of less than one-year, Management considers that their
> fair value does not differ significantly from their book value.
> Investment available for sale are stated at fair value Investments in associates which are not consolidated are not marketable securities, therefore Management has considered
> that their book value is similar to their fair value.
> In the case of liabilities that bear interests with a maturity of more than one year, the fair value was calculated using discounted cash flows at outstanding rates applicable to
> liabilities with similar characteristics. As of December 31, 2004, the fair value and
> book value of these liabilities amounted to S/.957,000,000 and S/.917,000,000, respectively
> (S/.1,355,000,000 and S/.1,282,000,000 as of December 31, 2003, respectively).
> For financial liabilities that bear interests at variable and preferential rates, it has been assumed that their book value is the same as their market value.
> The fair value of derivatives is based on market valuations.Based on the criteria described above, the Companys Management considers that there are no significant differences between the book value and the fair value of the financial instruments of the Company and Subsidiaries.

F - 57

---

|34. | CONTINGENCIES                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                 
|    | In the normal course of its operations, the Company and Subsidiaries are subject to several tax, labour, civil and judicial claims, which are recorded according to accounting principles generally accepted in Peru, see note 4. The
most significant contingencies as of December 31, 2002, 2003 and 2004 are described below:
|    |                                                                                                                                                                                                                                                                                                                                 

| | (a) | To date, the assessments received from the tax authority are the following:
| | --- | ---------------------------------------------------------------------------
| |     |                                                                            

| |  | (i)   | As a result of the fiscal review of the year 1998, on February 11, 2002 the Company was notified by Tax Authority (SUNAT) through several resolutions for the payment of income tax and value added tax including penalties and
interests, for approximately S/.223,051,978 (at February 2002 values).                                                                                    
| |  | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                           
| |  |       | Telefónica del Perú S.A.A. Management and its legal advisors filed a partial claim against those resolutions on the basis that they are not in accordance with legal rulings in force in Peru. To date, SUNAT is
evaluating the information presented by Telefónica del Perú S.A.A. in the claiming file.                                                                                 
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                           
| |  |       | Telefónica del Perú S.A.A. Management and its legal advisors estimate that the results of the process will not have a significant impact on the consolidated financial statements.                                                                                                                                                                                                        
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                           
| |  | (ii)  | On December 24, 2003, SUNAT notified the Company through various resolutions for the additional payment to cover pre-payments of income tax, income tax withholdings applicable to non-domiciled taxpayers, and value added tax,
corresponding to 1999. Said assessments amount to approximately S/.213,751,359 (at December 2003 values), and include the respective fines and interests.
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                           
| |  |       | The Company has appealed all said resolutions since, in its opinion, they do not agree with legal norms currently in force in Peru.                                                                                                                                                                                                                                                       
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                           
| |  |       | Management and legal advisors estimate the results of the process will not have a significant impact on the consolidated financial statements.                                                                                                                                                                                                                                            
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                           
| |  | (iii) | As a result of the fiscal review of the year 1999, on December 23, 2004, the Company was notified for the non-payment of the income tax for that year.                                                                                                                                                                                                                                    
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                           
| |  |       | On January 20, 2005, the Company appealed those resolutions since, in its opinion, although there are high amounts, they do not agree with legal norms currently in force in Peru.                                                                                                                                                                                                        
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                           
| |  |       | Management and legal advisors estimate the results of the process will not have a significant impact on the consolidated financial statement.                                                                                                                                                                                                                                             

F - 58

---

| |  | (iv) | Likewise, on December 23, 2004, the Company has been notified through several Determining Resolutions for income tax pre-payments, non-domiciled income tax withholding and value added tax related to year 2000.
| |  | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |      |                                                                                                                                                                                                                  
| |  |      | Even though the amount of the assessments is high, the Company does not consider the assessment as grounded and filed an appeal against said resolutions on January 20,2005.                                     
| |  |      |                                                                                                                                                                                                                  
| |  |      | Management and legal advisors estimate the results of the process will not have a significant impact on the consolidated financial statement.                                                                    
| |  |      |                                                                                                                                                                                                                  

| | (b) | As of December 31, 2004 and 2003, the Company and its Subsidiaries have several labour and civil lawsuits and administrative processes. Both, internal and independent legal advisors are conducting such lawsuits. As of December 31,
2004 and 2003, the Companys Management and its legal advisors have deemed necessary, based on the available evidence as of such dates, to record provisions to cover the risks of said contingencies, as set forth in note 4(m), against the
results of years 2004 and 2003, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|    | In this sense, Management and its legal advisors, both internal and external, have been monitoring the different risks that affect the Company and its Subsidiaries and consider that the provisions for contingencies recorded to
date are sufficient to cover the identified business risks as of December 31, 2004.                                                                                                           
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|35. | SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN PERU (PERUVIAN GAAP) AND ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES (U.S. GAAP)                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The consolidated financial statements of Telefónica del Perú S.A.A. and Subsidiaries were prepared in accordance with generally accepted accounting principles in Peru (Peruvian GAAP), which differ in some
respects from generally accepted accounting principles in the United States (U.S. GAAP). A reconciliation of consolidated shareholders equity and net income from Peruvian GAAP to U.S. GAAP is provided below.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | RECONCILIATION BETWEEN CONSOLIDATED SHAREHOLDERS EQUITY AND NET INCOME TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The following table ("Reconciliation Table") sets forth the most significant adjustments to consolidated shareholders equity and net income that would have been required had U.S. GAAP been applied instead of Peruvian
GAAP:                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  

F - 59

---

| | Shareholders equity                                          |                        |  
| | ------------------------------------------------------------- | ---------------------- | -
| |                                                               |                        |  
| |                                                               | Year Ended December 31 |  
| |                                                               |                        |  
| |                                                               | 2003                   |  
| |                                                               |                        |  
| |                                                               | S/.000                 |  
| |                                                               |                        |  
| | Shareholders' equity according to the                         |                        |  
| | consolidated financial statements                             |                        |  
| | prepared under Peruvian GAAP                                  | 3,463,336              |  
| |                                                               |                        |  
| |                                                               |                        |  
| | Adjustments increasing (decreasing)                           |                        |  
| | reported shareholders' equity                                 |                        |  
| | Revenue recognition - installation fee, note 35 (b)           | (102,907               | )
| | Revaluation of property, plant and equipment (i), note 35 (c) | (184,574               | )
| | Capitalized interest (ii), note 35 (d)                        | 587,105                |  
| | Debt assumed by the State, note 35 (h)                        | (234,748               | )
| | Reversal of goodwill amortization, note 35 (k)                | 7,007                  |  
| | Gain on investment available for sale, note 35 (n)            | -                      |  
| | Deferred workers' profit sharing from                         |                        |  
| | U.S. GAAP adjustments, note 35 (f)                            | (19,344                | )
| | Deferred income taxes from U.S. GAAP, note 35 (e)             |                        |  
| | adjustments                                                   | (80,250                | )
| | Undiscounting of contingent liabilities, note 35 (m)          | -                      |  
| |                                                               |                        |  
| |                                                               |                        |  
| | Net adjustments                                               | (27,711                | )
| |                                                               |                        |  
| |                                                               |                        |  
| | Shareholders' equity in accordance with                       |                        |  
| | U.S. GAAP                                                     | 3,435,625              |  
| |                                                               |                        |  

| | (i)  | Revaluation adjustment is presented net of accumulated depreciation of S/.264,714,000 and S/.276,223,000 as of December 31, 2003 and 2004, respectively.         
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                  
| | (ii) | Capitalized interest adjustment is presented net of accumulated depreciation of S/.634,204,000 and S/.703,275,000 as of December 31, 2003 and 2004, respectively.
| |      |                                                                                                                                                                  

F - 60

---

Statements of Income

| |                                                                                       |     | 2002          |   |     | 2003          |   |     | 2004          |  
| | ------------------------------------------------------------------------------------- | --- | ------------- | - | --- | ------------- | - | --- | ------------- | -
| |                                                                                       |     |               |   |     |               |   |     |               |  
| |                                                                                       |     | S/.000        |   |     | S/.000        |   |     | S/.000        |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| | Net income according to the consolidated                                              |     |               |   |     |               |   |     |               |  
| | financial statements prepared under                                                   |     |               |   |     |               |   |     |               |  
| | Peruvian GAAP                                                                         |     | 32,784        |   |     | 23,021        |   |     | 50,904        |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| | Adjustments increasing (decreasing)                                                   |     |               |   |     |               |   |     |               |  
| | reported net income:                                                                  |     |               |   |     |               |   |     |               |  
| | Expiration of debt assumed by the State, note 35 (h)                                  |     | -             |   |     | -             |   |     | 234,748       |  
| | Revenue recognition - installation fee, note 35 (b)                                   |     | 27,281        |   |     | 27,932        |   |     | 8,000         |  
| | Depreciation on revaluation of property, plant                                        |     |               |   |     |               |   |     |               |  
| | and equipment, note 35 (c)                                                            |     | 8,689         |   |     | 8,689         |   |     | 11,909        |  
| | Capitalized interest:                                                                 |     |               |   |     |               |   |     |               |  
| | Capitalized interest, note 35 (d)                                                     |     | 27,314        |   |     | 16,240        |   |     | 18,159        |  
| | Depreciation on capitalized interest, note 35 (d)                                     |     | (75,999       | ) |     | (72,354       | ) |     | (69,071       | )
| | Interest from debt assumed by the State, note 35 (h)                                  |     | (11,695       | ) |     | (3,512        | ) |     | -             |  
| | Reversal of goodwill amortization, note 35 (k)                                        |     | 3,531         |   |     | 3,476         |   |     | 4,265         |  
| | Deferred workers' profit sharing from                                                 |     |               |   |     |               |   |     |               |  
| | U.S. GAAP adjustments, note 35 (f)                                                    |     | 11,580        |   |     | 1,625         |   |     | 9,026         |  
| | Deferred income taxes from U.S. GAAP                                                  |     |               |   |     |               |   |     |               |  
| | adjustments, note 35 (e)                                                              |     | 43,510        |   |     | 4,388         |   |     | 24,366        |  
| | Gain from transactions with companies                                                 |     |               |   |     |               |   |     |               |  
| | under common control, note 35 (i)                                                     |     | (35,189       | ) |     | -             |   |     | -             |  
| | Gain on investment available for sale, note 35 (n)                                    |     | -             |   |     | -             |   |     | (36,295       | )
| | Undiscounting of contingent liabilities, note 35 (m)                                  |     | -             |   |     | -             |   |     | (34,613       | )
| |                                                                                       |     |               |   |     |               |   |     |               |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| | Net adjustments                                                                       |     | (978          | ) |     | (13,516       | ) |     | 170,494       |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| | Net income in accordance with U.S. GAAP                                               |     | 31,806        |   |     | 9,505         |   |     | 221,398       |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| | Basic and diluted earnings per share                                                  | S/. | 0.018         |   | S/. | 0.006         |   | S/. | 0.129         |  
| | Basic and diluted earnings per ADS                                                    |     |               |   |     |               |   |     |               |  
| | (based on the shares per ADS) (*)                                                     | S/. | 0.185         |   | S/. | 0.055         |   | S/. | 1.286         |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| | Weighted average number of shares                                                     |     |               |   |     |               |   |     |               |  
| | outstanding basic and diluted                                                         |     | 1,721,964,417 |   |     | 1,721,964,417 |   |     | 1,721,964,417 |  
| |                                                                                       |     |               |   |     |               |   |     |               |  
| | (*)  Each ADS represents 10 ordinary class B shares of Telefónica
    del Perú S.A.A.

F - 61

---

| | The following are the changes in the consolidated shareholders equity
    under U.S. GAAP, as restated:
| | --------------------------------------------------------------------------------------------------------
| |                                                                                                         
| |                                                                                                         
| |                                                                                                         
| | Shareholders' equity in accordance with U.S. GAAP, as
of                                                
| | January 1, 2003                                                                                         
| |                                                                                                         
| | Net income in accordance with U.S. GAAP, 2003                                                           
| | Declared dividends                                                                                      
| | Unrealized gain on marketable securities                                                                
| |                                                                                                         
| |                                                                                                         
| | Shareholders' equity in accordance with U.S. GAAP, as
of                                                
| | December 31,2003                                                                                        
| |                                                                                                         
| | Net income in accordance with U.S. GAAP, 2004                                                           
| | Treasury shares                                                                                         
| | Share capital reduction                                                                                 
| | Others                                                                                                  
| |                                                                                                         
| |                                                                                                         
| | Shareholders' equity in accordance with U.S. GAAP, as of                                                
| | December 31, 2004                                                                                       
| |                                                                                                         

| | With regard to the balance sheets and statements of income,
    the following significant captions determined under U.S. GAAP would have been, as restated:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                            
| |                                                                                                                                                            
| |                                                                                                                                                            
| |                                                                                                                                                            
| | Balance sheets                                                                                                                                             
| | Trade accounts receivable                                                                                                                                  
| | Total current assets                                                                                                                                       
| | Investments, net                                                                                                                                           
| | Property, plant and equipment, net                                                                                                                         
| | Goodwill, net                                                                                                                                              
| | Intangible assets                                                                                                                                          
| | Total non-current assets                                                                                                                                   
| | Total liabilities                                                                                                                                          
| |                                                                                                                                                            
| |                                                                                                                                                            
| |                                                                                                                                                            
| |                                                                                                                                                            
| |                                                                                                                                                            
| | Statements of income                                                                                                                                       
| | Operating income, notes 35 (f) and (g)                                                                                                                     

F - 62

---

| | ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY
        U.S. GAAP
    The following information is presented on a U.S. GAAP basis.
    Statement of Comprehensive Income:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                 
| |                                                                                                                                                                                 
| |                                                                                                                                                                                 
| |                                                                                                                                                                                 
| |                                                                                                                                                                                 
| | Net income per U.S.GAAP                                                                                                                                                         
| | Other Comprehensive Income (loss):                                                                                                                                              
| | Unrealized gain (loss) on marketable securities,                                                                                                                                
| | net of income tax and workers' profit sharing,                                                                                                                                  
| | note 35 (l) and (n)                                                                                                                                                             
| | Sale of marketable securities                                                                                                                                                   
| |                                                                                                                                                                                 
| |                                                                                                                                                                                 
| | Comprehensive income                                                                                                                                                            
| |                                                                                                                                                                                 

| | Changes in Accumulated Other Comprehensive Income (*):                                                                                                                                                        |         |   |         |   |       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | - | ------- | - | ------
| |                                                                                                                                                                                                               |         |   |         |   |       
| |                                                                                                                                                                                                               | 2002    |   | 2003    |   | 2004  
| |                                                                                                                                                                                                               |         |   |         |   |       
| |                                                                                                                                                                                                               | S/.000  |   | S/.000  |   | S/.000
| |                                                                                                                                                                                                               |         |   |         |   |       
| | Beginning balance, January 1                                                                                                                                                                                  | -       |   | (19,863 | ) | -     
| | Other Comprehensive Income (loss):                                                                                                                                                                            |         |   |         |   |       
| | Unrealized gain (loss) on marketable securities,                                                                                                                                                              |         |   |         |   |       
| | net of tax                                                                                                                                                                                                    | (19,863 | ) | 6,379   |   | -     
| | Sale of marketable securities                                                                                                                                                                                 | -       |   | 13,484  |   | -     
| |                                                                                                                                                                                                               |         |   |         |   |       
| |                                                                                                                                                                                                               |         |   |         |   |       
| | Ending balance, December 31                                                                                                                                                                                   | (19,863 | ) | -       |   | -     
| |                                                                                                                                                                                                               |         |   |         |   |       
| |                                                                                                                                                                                                               |         |   |         |   |       
| | (*) Net of the respective tax effects.
    Income taxes -
    All the operations of Telefónica del Perú S.A.A. and
    Subsidiaries are located in Peru, and they are subject to income taxes solely in Peru.

F - 63

---

| | (i) | The additional deferred tax effects of significant temporary differences according to U.S. GAAP, are as follows:
| | --- | ----------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                 

| |                                         | December 31, |  
| | --------------------------------------- | ------------ | -
| |                                         |              |  
| |                                         | 2003         |  
| |                                         |              |  
| |                                         | S/.000       |  
| |                                         |              |  
| | Deferred tax assets                     |              |  
| | Revenue recognition                     | 27,786       |  
| | Revaluation of property, plant and      |              |  
| | equipment, net                          | 49,835       |  
| | Undiscounting of contingent liabilities | -            |  
| | Gain of investment available for sale   | -            |  
| |                                         |              |  
| |                                         |              |  
| |                                         | 77,621       |  
| |                                         |              |  
| | Deferred tax liabilities                |              |  
| | Capitalized interest                    | (141,930     | )
| | Deferred income tax liability not       |              |  
| | recorded, note 4(o)                     | (15,941      | )
| | Others                                  | -            |  
| |                                         |              |  
| |                                         |              |  
| |                                         | (157,871     | )
| |                                         |              |  
| | Additional net deferred tax liabilities |              |  
| | according to U.S. GAAP                  | (80,250      | )
| |                                         |              |  

F - 64

---

| | (iii) | The reconciliation of the income tax expenses computed at the statutory Peruvian income tax rate to the provision for income taxes recorded on a U.S. GAAP basis in the statements of income is as follows:
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                            

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          | 2002    |   | 2003  |  | 2004    |  
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | ------- | - | ----- |  | ------- | -
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          | S/.000  |   | %     |  | S/.000  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Aproximate income before income taxes    |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | in accordance with U.S. GAAP             | 187,131 |   | 100.0 |  | 195,924 |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Statutory tax rate                       | 30      | % |       |  | 30      | %
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Expected income tax provision in accor-  |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | dance with U.S. GAAP at statutory        |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | tax rate                                 | 56,140  |   | 30.0  |  | 58,778  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Effects of items increasing/(decreasing) |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | the effective tax rate                   |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Non taxable income                       | -       |   | -     |  | -       |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Non deductible financial expenses        | 4,242   |   | 2.3   |  | 3,594   |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Generic provisions                       | 45,946  |   | 24.6  |  | 48,603  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Rent of locations for public telephone   |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | services                                 | 32,171  |   | 17.2  |  | 33,813  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Gain from transactions with companies    |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | under common control                     | 10,556  |   | 5.6   |  | -       |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Others (individually non significant)    | 6,267   |   | 3.4   |  | 41,631  |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Actual provision for income taxes        |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | in accordance with U.S. GAAP             | 155,322 |   | 83.1  |  | 186,419 |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          |         |   |       |  |         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                          |         |   |       |  |         |  
| | Reclassification noted -    Under Peruvian GAAP the trust fund is presented as a current asset,
        according to U.S. GAAP the trust fund is presented as a non-current asset, because it is an asset
        restricted to long-term obligations. As of December 2004, this investment amounts to S/.37,325,000.    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY
        ACCEPTED IN PERU (PERUVIAN GAAP) AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES
        (U.S. GAAP)    The accompanying consolidated financial statements have been prepared
        in accordance with Peruvian GAAP, which differs in certain aspects from U. S. GAAP. The effects
        of these significant differences are reflected in the Reconciliation Tables above and primarily
    relate to the items discussed in the following paragraphs:

F - 65

---

| | (a) | Restatement of Financial Statements for General Price Level Changes -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The accompanying consolidated financial statements were prepared based on the accounting records of Telefónica del Perú S.A.A. and its Subsidiaries accounting records, which are carried at the nominal values of
the transactions date and include the adjustment to reflect the effect of the changes in the Nation-wide Wholesale Price Index (WPI). The methodology used for the adjustment is that approved by the Peruvian Accounting Body (CNC) by the
Resolutions No002-90-EF/93.01 and No003- 93-EF/93.01. In accordance with such methodology: (a) non monetary items in the consolidated financial statements have been adjusted, (b) monetary assets and liabilities in foreign currency are not
adjustable because they are stated in Peruvian nuevos soles of purchasing power at the consolidated balance sheet date, and (c) the inflation exposure result is taken to the consolidated statement of income. The inflation/deflation net gain or loss
resulting from said adjustment is included in the consolidated statements of income. According to the above-mentioned index, inflation was 4.9 percent in 2004 (1.7 percent and 2.0 percent in 2002 and 2003, respectively).
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The figures corresponding to the previous years consolidated financial statements, shown for comparative purposes, are expressed at the level of wholesale prices as of December 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Under U.S. GAAP, account balances and transactions are stated in the units of currency of the period in which they arose. This accounting model is commonly known as the historical cost basis of accounting. U.S. Securities Exchange
Commission (SEC) rules establish that foreign private issuers that prepare their financial statements in a reporting currency that comprehensively includes the effects of price level changes are not required to eliminate such effects in
the reconciliation to U.S. GAAP. Therefore, the U.S. GAAP reconciliation of net income and shareholders equity does not reflect as a difference the effect of the general price level restatement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (b) | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | In December 1999, the SEC staff released Staff Accounting Bulletin (SAB) No101, Revenue Recognition updated by SAB No 104 in December 2003, to provide guidance on recognition and disclosure of revenues in
financial statements. Under Peruvian GAAP, Telefónica del Perú S.A.A. recognizes installation fees and the related costs when the installation is made. Under U.S. GAAP the treatment was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

> Revenues and expenses under U.S. GAAP until December 31, 2003
>       Under U.S. GAAP, the Company has deferred revenues from obtaining new customers (installation fees) over the expected period that the customer will use the services.

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> Under U.S. GAAP the Company also deferred and amortized, until December 31, 2003, the related cost of obtaining new customers over the same period as the related revenues were being recognized.
>       Revenues and expenses under U.S. GAAP after December 31, 2003
>       As from January 1, 2004, the Company has decided to change its accounting treatment for those costs related to the activation, which in U.S. GAAP were eligible for deferral, by adopting an accounting policy whereby these costs are
>         expensed when incurred. Such change has not had a material impact on the consolidated financial position or results of operations under U.S. GAAP.

| | (c) | Revaluation of Fixed Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | In 1992 Telefónica del Perú S.A.A. made a voluntary revaluation of certain of ENTELs (one of the two companies that became Telefónica del Perú S.A.A.) property, plant and equipment. This
revaluation does not relate to the Companys normal inflation adjustments for non-monetary assets, and is not permitted under U. S. GAAP. The adjustments provided in the Reconciliation between consolidated shareholders equity and net
income under Peruvian GAAP and U.S. GAAP, mentioned above, include the effect of the elimination of this voluntary revaluation, as well as the elimination of the additional depreciation arising from such revaluation.                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (d) | Capitalized Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Under Peruvian GAAP Benchmark Treatment, Telefónica del Perú S.A.A. and Subsidiaries do not capitalize interest cost incurred in connection with the construction of major capital projects. Under U.S. GAAP, the amount
of interest incurred in connection with the construction of these projects is calculated by applying the average interest rates corresponding to the Companys outstanding borrowings during each period, and is included in property, plant and
equipment and depreciated over the lives of the related assets. The adjustments provided in the Reconciliation between consolidated shareholders equity and net income under Peruvian GAAP and U.S. GAAP, include this matter net of the respective
depreciation arising from such capitalization in prior periods.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (e) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Since January, 1998, Peruvian GAAP recognizes the temporary differences between the tax basis of assets and liabilities and their amounts for financial purposes. As explained in note 4(o), under Peruvian GAAP, Telefónica
del Perú S.A.A. began recording on December 31, 1999 the accumulated effect of the deferred tax liability as of December 31, 1997, recognizing annually one sixth of such effect as a charge to retained earnings.                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Since the revaluation of fixed assets is not permitted under U.S. GAAP (see (c) above), the related deferred income tax recorded under Peruvian GAAP has been reversed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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| |     | The adjustments included in the Reconciliation between consolidated shareholders equity and net income under Peruvian GAAP and U.S. GAAP, mentioned above, represent the items that would be computed for the differences
between U.S. GAAP and Peruvian GAAP, plus the deferred tax liability not yet recorded for local purposes and the reversal of the deferred taxes related to the revaluation.                                                                                                             
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (f) | Workers profit sharing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Workers share the Companys profit by receiving 10% of the Companys taxable income (before workers profit sharing). Since January 1998, under Peruvian GAAP, temporary differences are considered in the computation
of workers profit sharing expense for the period, following the same methodology used for deferred income taxes.                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Because workers profit sharing is calculated on taxable income in accordance with Peruvian GAAP, it recognizes the effects of temporary differences between the accounting principles followed by the Company under U.S.GAAP
plus the deferred workers profit sharing liability not yet recorded for local purposes and the reversal of the deferred workers profit sharing related to the revaluation.                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Under U.S. GAAP, workers profit sharing expenses would be included in the determination of operating income.                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (g) | Classification of Expenses included in Others expenses, net                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Under Peruvian GAAP, the Company classified certain expenses, such as expenses related to the segregation process, provision for contingencies, allowance for doubtful other accounts receivable, expenses related to impairment loss,
within the caption others expenses, net (see note 29). Under U.S. GAAP, these expenses would be included in the determination of operating income.                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (h) | Foreign Debt Assumed by the State                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | In February 1994 before the privatization process of CPT S.A. and ENTEL PERU S.A., the State assumed certain of ENTELs foreign debt; which was to be negotiated directly by the State with the various foreign creditors most of
them organized or members of the Paris Club for final payment of such debt. Under U.S. GAAP, such debt originally entered into by ENTEL had been classified as a liability until December 31, 2004, when the Company finally obtained supportable
evidence of its extinguishment.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | The Company has reviewed the statute of limitations under Peruvian law, under those legislations of member countries of the Paris Club, as well as under other legislations which could be commonly used as the governing laws in loan
agreements with respect to commercial debts (the Debts). In light of the information currently available, pursuant to the applicable provisions under the reviewed jurisdictions, the Company deduced that the statute of limitations for
such debts is under ten years.  

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| |     | Furthermore, even considering the case in which such debts were governed by Peruvian law, the statute of limitations thereunder is ten years as set forth under article 2001 of the Peruvian Civil Code. Therefore, considering all
analyzed circumstances, from a conservative point of view, the statute of limitations of such debts could not, under any circumstance, exceed a maximum of 10 years. Moreover, until the issuance of this financial statements, no claim in any form has
been made against the Company with respect to such debt.                                               
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | In addition, consistent with the ten years after State assumed such debt, the Company requested the opinion of a third party consultant (a Peruvian economics consultant), regarding the possibility of any former Entel Perus
creditors made a successful claim against the Company, which concluded on its report dated May 11th2005, that the possibility of successful recourse for the Debts against the Company
was remote.                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Considering all available information indicated above the Company has concluded that it has been legally released from such liability and therefore it has considered that under US GAAP this debt have been extinguished on December
31, 2004.                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (i) | Gains from transactions with companies under common control                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | As stated in Note 29, the Company entered, in 2003, into a sale and purchase agreement whereby Telefónica Publicidad e Información S.A. acquired Telefónica Publicidad e Información Perú S.A.C., a
Companys subsidiary. The Company recorded, under Peruvian GAAP, a gain of S/.35,189,000. Under U.S. GAAP, because this transaction is between entities under common control, the gain would be treated as a capital contribution.                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (j) | Derivatives and Hedge Accounting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Under Peruvian GAAP some derivatives used as foreign exchange risk management purposes are not recorded at their fair value. Under U.S. GAAP according to SFAS No. 133 all derivatives, whether designated in hedging relationships or
not, should be recorded on the balance sheet at fair value. The accounting for changes in fair value of a derivative instrument and, if applicable, in related hedge item depends on its intended use and the resulting designation. The adoption of SFAS
No. 133 had no material impact on the consolidated financial statements.                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (k) | Goodwill amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142). Under SFAS 142, goodwill is no longer amortized over its estimated useful life, but is instead tested for impairment on
an annual basis and whenever indicators of impairment arise. The goodwill impairment test, which is based on fair value, is performed on a reporting unit level. Under SFAS 142, intangible assets with indefinite lives will not be amortized. Instead
they will be carried at the lower of cost or market value and tested for impairment at least annually.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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| |     | The Company has performed the transitional goodwill impairment test required by
SFAS No. 142 as of January 1, 2002 and the annual goodwill impairment test as of
December 31, 2002, 2003 and 2004. As a result of these analyses, Management has
determined that no impairment is required for the adoption of SFAS No. 142 or for the
year ended December 31, 2002, 2003 and 2004. Goodwill has been assigned to the
cable television operating segment, since it relates to the purchase of Telefonica
Multimedia S.A.C. The fair value of the reporting unit for which goodwill has been
assigned was determined using a discounted cash flow approach. Goodwill in the
cable TV segment will be tested for impairment as of December 31 of every year.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (l) | Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Under Peruvian GAAP the investment in Terra Networks, S.A. (see Note 13) is
recorded at cost, adjusted for an impairment for a permanent decline in value. Under
U.S. GAAP the investment is considered to be a marketable security that is recorded at
its fair market value. In addition to the permanent decline recorded under Peruvian
GAAP the decline in value that is considered temporary is recorded as a component of
other comprehensive income under U.S. GAAP. During the year ended December 31,
2003, the Company has sold this investment (see note 13(c)) and has reclassified all
accumulated other comprehensive income to earnings.                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (m) | Undiscounting of contingent liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Under Peruvian GAAP, according to IAS 37, the contingent liabilities and their related
accrued interest are calculated and recorded at the present value of the disbursements
that the Company expects to incur to settle the obligation. Under U.S. GAAP, the
contingent liabilities should not be discounted. The adjustment provided in the
Reconciliation between consolidated shareholders equity and consolidated net income
under Peruvian GAAP and U.S. GAAP, represent the difference between its net
present value and nominal value.                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (n) | Gain on investment available for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Under Peruvian GAAP, increases of the fair value of an investment available for sale,
must be recognized as earnings. Under U.S. GAAP, the investment in a Company that
does not have a readily determinable fair value should be recorded at cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (ñ) | Recently Issued Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Statements of Financial Accounting Standards N° 123 (Revised 2004):
Shared Based Payment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | In December 2004, the FASB issued SFAS No. 123 (revised 2004), Shared Based
Payments (SFAS 123R). This statement eliminates the option to apply the intrinsic
value measurement provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees" to stock compensation awards issued
to employees. Rather, SFAS 123R requires companies to measure the cost of
employee services received in exchange for an award of equity instruments based on                                                                                                                                                                                                                                                             

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> the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award the requisite service period (usually the vesting period).
>         SFAS 123R applies to all awards granted after the required effective date, December 15, 2005, and to awards modified, repurchased, or cancelled after that date. SFAS 123R will be effective for our fiscal year ending December 31, 2005. The Company
>       does not anticipate that adoption of this Standard will have a material effect on its consolidated financial position, consolidated results of operations, or consolidated cash flows.
>     Statements of Financial Accounting Standards No. 151: Inventory Costs  An Amendment of ARB No. 43, Chapter 4
>     On November 24, 2004, the FASB issued SFAS No. 151, "Inventory Cost, a revision of ARB No. 43, Chapter 4". The amendments to SFAS No. 151 aim to improve financial information, stating that the expenses of inactive facilities,
>         transportation costs, manipulation costs and scrap material costs should be recorded in the statement of operation as expenses of the period. The application of fixed cost to inventories should be based on the normal capacity of the production
>       facilities.
>     SFAS No. 151 will be applicable to valuation of Inventories by the end of the first reporting period ending after June 15, 2005. The Company does not anticipate that the adoption of SFAS No. 151 will have a material impact on its
>       consolidated financial position, consolidated cash flows or consolidated results of operations.
>     Statements of Financial Accounting Standards No. 153: Exchanges of Non-monetary Assets - An Amendment of APB Opinion No. 29
>     On December 16, 2004, the FASB issued SFAS N0.153, "Exchanges of Non-monetary Assets - an amendment of APB Opinion No. 29", which amends Accounting Principles Board Opinion No. 29 "Accounting for Nonmonetary Transactions". This
>         amendment is based on the idea that exchange transactions should be valued in accordance with the value of the exchanged assets. The exception made for similar non-monetary productive assets is eliminated and substituted by a more extensive
>       exception related to non-monetary assets with a non-commercial consideration. APB No. 29 stated that the exchange transaction of a productive asset for a similar one should be recorded at the book value of the exchanged asset.
>     SAS No. 153 will be applicable for non-monetary asset exchange transactions occurring in fiscal periods beginning after June 15, 2005. The Company does not anticipate that the adoption of SFAS No. 153 will have a material impact
>       on its consolidated financial position, consolidated cash flows or consolidated results of operations.

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> SAB No. 107: Shared Based Payment
>     On March 29, 2005, the SEC released a Staff Accounting Bulletin (SAB) relating to the FASB accounting standard for stock options and other share-based payments. The interpretations in SAB No. 107, "Share-Based Payment," (SAB 107)
>         express views of the SEC Staff regarding the application of SFAS No. 123 (revised 2004), "Share-Based Payment "(Statement 123R). Among other things, SAB 107 provides interpretive guidance related to the interaction between Statement 123R and certain
>         SEC rules and regulations, as well as provides the Staff's views regarding the valuation of share-based payment arrangements for public companies. The Company does not anticipate that adoption of SAB 107 will have any effect on its consolidated
>       financial position, consolidated results of operations or consolidated cash flows.
>     FIN No. 46 - Consolidation of Variable Interest Entities  an interpretation of ARB No. 51
>     In January 2003, the Financial Accounting Standards Board ("FASB") released Interpretation No. 46 Consolidation of Variable Interest Entities ("FIN 46") which requires that all primary beneficiaries of Variable Interest Entities
>         (VIE) consolidate that entity. FIN 46 is effective immediately for VIEs created after January 31, 2003 and to VIEs in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June
>         15, 2003 to VIEs in which an enterprise holds a variable interest it acquired before February 1, 2003. In December 2003, the FASB published a revision to FIN 46 ("FIN 46R") to clarify some of the provisions of the interpretation and to defer the
>         effective date of implementation for certain entities. Under the guidance of FIN 46R, entities that do not have interests in structures that are commonly referred to as special purpose entities are required to apply the provisions of the
>       interpretation in financials statements for periods ending after March 14, 2004. The adoption of this statement had no impact on the consolidated financial position on consolidated results of operations.
>     SAB No. 104 - Revenue Recognition and EITF 00-21
>     In December 2003, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition. SAB 104 updates portions of the interpretive guidance included in Topic 13 of the codification of
>         Staff Accounting Bulletins in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The adoption of this statement had no impact on the consolidated financial
>       position on consolidated results of operations.
>     EITF 04-1: Accounting for Preexisting Relationships between the Parties to a Business Combination
>     This Issue addresses the accounting for preexisting relationships between the parties to a business combination. The consensuses in this Issue should be applied to business combinations consummated and goodwill impairment tests
>       performed in reporting periods beginning after October 13, 2004. The application of this new accounting

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| |  | literature by Telefonica had
          no impact on its consolidated financial position, consolidated cash flows or consolidated results
          of operations.
      EITF Issue No. 01-08 - Determining Whether an Arrangement Contains
          a Lease
      In May 2003, the EITF reached consensus in EITF Issue No. 01-08 to
          clarify the requirements of identifying whether an arrangement should be accounted for as a
          lease at its inception. The guidance in the consensus is designed to mandate reporting revenue
          as rental or leasing income that otherwise would be reported as part of product sales or service
          revenue. EITF Issue No. 01-08 requires both parties to an arrangement to determine whether
          a service contract or similar arrangement is, or includes, a lease within the scope of SFAS
          No. 13, "Accounting for Leases." The adoption of this EITF had not impact on the consolidated
          financial position on consolidated results of operations.
      EITF Issue No. 03-11 - Reporting Realized Gains and Losses on Derivative
          Instruments That Are Subject to FASB Statement No. 133, Accounting for Derivative Instruments
          and Hedging Activities, and Not Held for Trading Purposes
      In July 2003, the EITF reached consensus in EITF Issue No. 03-11
          that determined whether realized gains and losses on derivative contracts not held for trading
          purposes should be reported on a net or gross basis is a matter of judgment that depends on
          the relevant facts and circumstances and the economic substance of the transaction. In analyzing
          the facts and circumstances, EITF Issue No. 99-19, and Opinion No. 29, "Accounting for Nonmonetary
          Transactions," should be considered. EITF Issue No. 03-11 is effective for transactions or
          arrangements entered into after September 30, 2003. The adoption of this EITF had not impact
    on the consolidated financial position on consolidated results of operations.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|36. | SUBSEQUENT ACCOUNTING EVENT                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                           
|    | By Resolution No. 034-2005-EF/93.01 of the CNC dated February 17, 2005, published on march 2, 2005, the CNC approved and rendered official the International Accounting Standards (IASs) which had been amended in December 2003 and
in March 2004, and International Financial Reporting Standards (IFRS) 1 to 5; and cancelled IAS 15 as from January 1, 2005 and IAS 22 and 35 as from January 1, 2006.
|    |                                                                                                                                                                                                                                                                                                                                                                                                           
|    | As per said Resolution, the IFRS and the new versions of the above-mentioned IAS, will apply in the preparation an presentation of financial statements corresponding to periods beginning on January 1, 2006, and optionally, for
those beginning on January 1, 2005.                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                           
|    | These changes would affect the financial statements under Peruvian GAAP without effect in current or future financial statements under U.S. GAAP.                                                                                                                                                                                                                                                         

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