Terra Networks Agrees To The Sale Of Lycos. Inc. To Daum Communications

The total transaction is valued at $540 million

MADRID, - August 2, 2004 - Terra Networks S.A. and Daum Communications Corp., Korea’s leading Internet portal, have reached an agreement by which the former sells to the latter the entire stock of Lycos Inc., a Terra subsidiary, in execution of the resolutions approving the operation adopted by the Boards of Directors of those companies. The agreement follows the conclusion of a competitive sale process undertaken at the instance of Terra and headed by the investment bank Lehman Brothers who acted as financial advisor to Terra.

The operation does not include Terra Networs USA or Terra’s stake in Lycos Europe. Terra will retain these and other finacial aseets that Lycos will be transferring prior to the sale.

The transaction is valued at $540 million. The book value of the assets to be received by Terra prior to the sale is initially estimated at around 435 million USD. The initial price of the sale of Lycos, following execution of the transfer, comes to 105 million USD.

The operation is set within the strategy of Terra of strengthening its presence in geographical areas in which the Telefónica Group has significant operations and in the Spanish and Portuguese speaking market.

The sale of Lycos, whose income represented around 16% of the total for the TERRA Group in 2003, is going to imply a fall in the expected earnings for the current accounting year. Nevertheless, the operation is not going to alter the Group’s forecasts of generating a positive EBITDA in the accounting year 2004.

The execution of the sale and, as a consequence, the effective transfer of the stock, are, in accordance with the signed agreement, subject to the obtaining of any administrative authorisations that might be necessary, and in particular, to its express approval by the US authorities for the Defence of Competition or tacit approval once a period of 30 days has passed without any opposition.