Telefonica Teams With Terra Lycos

MADRID -- Terra Lycos (Nasdaq: TRLY, Madrid Exchange: TRR) and Telefonica (NYSE: TEF; Madrid Exchange:) today announced that they have signed a strategic alliance that strengthens the ties between the two companies in order to boost their internet leadership and growth.The new strategic alliance, which consolidates Terra Lycos' long-term business model, adapting it to current market conditions, exploits the fit between Telefonica's fixed line operators and Terra Lycos in all markets where they operate. The alliance builds a new relationship model based on common strategies and takes the maximum advantage of the companies' respective strengths in order to boost market growth. The agreement will help Terra Lycos to achieve profitable mid- and long-term growth and strengthens its ties with the rest of the Telefonica Group.The signing of this new Strategic Alliance Framework Agreement between Terra Lycos and Telefonica is in response to the changes that have taken place in the internet business, especially the development of broadband, and the need to adapt the products and services catalogue offered by Terra Lycos Group in the agreement signed in May 2000 to the new market reality referred to above and the specific requirements of Telefonica Group in those markets in which it operates.A steering committee has been created to promote the full development of this agreement, which will meet on a quarterly basis to ensure this broad strategic alliance achieves its full potential.As a result of this alliance, Terra Lycos is guaranteed the generation of at least 78.5 million euros per year in value, which represents the difference between the revenues for the services provided, as established in the Strategic Alliance Framework Agreement, and the costs and investment directly associated to them. This alliance is for a period of six years and is expected to be renewed on an annual basis thereafter.This strategic alliance takes full advantage of Telefonica's capacity as a broadband and narrowband connection and access provider, and Terra Lycos' position as a portal, aggregator, provider and manager of fixed telephony internet services and content for the residential, SOHO and, contingent on future agreements, SME market segments. The aim of this agreement is to take advantage of synergies and create value for both companies.Terra Lycos, with enhanced focus on commercial aspects, will continue to offer its access products (ISP) both in narrowband and broadband (ADSL) and continually adapt its products to the market and to its customers' requirements. Telefonica will become Terra Lycos' exclusive connectivity and wholesale access provider, services which will be delivered under the most favored customer treatment allowed by regulations.The alliance specifically establishes that Terra Lycos becomes Telefonica Group's exclusive provider of essential portal elements and brand and content and services aggregator of broadband and narrowband internet for the residential, SOHO and, contingent on future agreements, SME market segments. Telefonica Group access portals that offer connectivity and internet access to these market segments will be exclusively developed by Terra Lycos, which will incorporate the company's brand and will be responsible for managing and operating advertising.Terra Lycos will preferentially channel through Telefonica Group, the acquisition, roll out and commercialization of content and preferentially distribute the online content of Telefonica Group companies.At the same time, Terra Lycos will be Telefonica Group's exclusive provider of communications services (e-mail platforms, messaging, personal pages, etc.), creating value-added services on top of Telefonica's access products, especially in broadband.As regards infrastructure, Terra Lycos will outsource the management of certain services and network elements to Telefonica Group companies on a global basis, thereby increasing its operating efficiency.Terra Lycos will have preference in respect of online advertising, integrated marketing solutions as well as the auditing, consultancy, management and maintenance services of the Telefonica Group's country portals. Telefonica and Terra Lycos will channel its employees' online training services through Educaterra.In addition, Terra Lycos, Telefonica and Bertelsmann have signed agreements based on preferred relationships, which will allow the parties to continue to explore opportunities to provide mutual communication, development and content services in the online market.TelefònicaTerra Lycos