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Tuesday, 16 May, 2000, 20:56 GMT 21:56 UK
Terra and Lycos tie knot
Terra's web site
Terra is a Latin leader online
Spanish internet provider Terra Networks is to merge with US web portal Lycos in a $12.5bn deal.

The merger, announced after US stock markets closed on Tuesday, creates one of the world's biggest internet groups.

Terra, whose parent company is Spanish telecoms company Telefonica, boasts a big presence in Brazil and Mexico as well as Spain.

It is also trying to capture a stake in the 35 million strong Spanish speaking market in the US.

Lycos has been looking for a partner for some time after a US merger fell through in 1999.

Bertelsmann involved

The combined company, which will be called Terra Lycos, will have an estimated 50 million users and 175 million page views per day.

As part of the agreement Germany's Bertelsmann, the third-largest media company in the world, agreed to purchase $1bn of advertising, placement and integration services from Terra Lycos worldwide over five years.

In return, the merged firm will gain access to Bertelsmann's books, music, television, film and other media content, on preferred terms.

This alliance builds on the existing Lycos-Bertelsmann joint venture in Europe, Lycos Europe, of which Bertelsmann will remain a significant shareholder.

Lycos has recently announced an alliance with Lloyds TSB in the UK to provide a free internet service to its bank customers.

Strong results

It had also been rumoured to have been in talks with AltaVista after its $20bn merger deal with the Home Shopping Network collapsed.

Terra is one of the biggest internet companies in Europe, with a market capitalisation of more than $15bn.

It is a fully owned subsidiary of the Spanish telephone company Telefonica, which withdrew its bid for Dutch company KPN last week.

Terra is growing fast, with a 50% increase in its subscriber base to 1.67m people during the first three months of this year.

Although it still made a loss of $63m in the first quarter of its financial year, its income is also growing quickly.

Advertising revenues rose nearly 860% year-on-year to $6m, while group page views by the end of March rose to 705m, up 62% from December 1999.

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See also:

30 Mar 00 | Business
European internet fever cools
22 Mar 00 | Business
Lycos Europe catches web fever
18 Nov 99 | Business
Europe's top net stock
12 May 99 | The Company File
Lycos takeover collapses
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