Terra to Acquire Lycos for $12.7 Billion

Telefonica SA
17 May 2000


           TERRA TO ACQUIRE LYCOS FOR $12.7 BILLION IN A STOCK FOR STOCK
              TRANSACTION, CREATING AN UNPARALLELED GLOBAL INTERNET
                                   POWERHOUSE

     Unique Convergence of Internet Services, Content and Distribution; 
        Operations in 30 Countries; Leader in Fast-Growing Markets; 
         Preferred Access to More than 60 Million Customers

               Bertelsmann reaches Broad Alliance with Terra Lycos;
                    and commits to 5-Year Commerce Agreement

      Terra Lycos to Own 49% of New Wireless Joint Venture with Telefonica

Telefonica to Underwrite $2 Billion Terra Rights Offering for euros 2.2 billion

    Terra Lycos Expected to Have Over $3 Billion in Cash After Rights Offering,
    Establishing One of the World's Most Highly Capitalized Internet Companies


MADRID and WALTHAM, MA, May 16, 2000 - Terra Networks, S.A. (MC: TRR; NASDAQ:
TRRA), the leading provider of Internet access and interactive content and
services to the Spanish- and Portuguese-speaking world, and Lycos, Inc. (NASDAQ:
LCOS), the Internet's leading multi-brand network, today announced a definitive
merger agreement under which Terra will acquire Lycos in a stock-for-stock
transaction for $97.553 per Lycos share, or a total of approximately $12.5
billion in Terra stock.

The transaction will create the first truly global Internet company. The company
will be built on a unique platform that capitalizes on the convergence of
Internet services, new media, branded content, e-commerce, and next-generation
communication technologies. Terra and Lycos expect pro forma 2000 revenues of
approximately $500 million and together currently have an estimated 2 million
subscribers, more than 40 million unique users and 175 million page views per
day.  Terra Lycos will initially have operations in 30 countries, with leading
positions in multiple high-growth markets in North America, Latin America, Asia
and Europe.

Under the terms of the agreement, unanimously approved by the Boards of Terra
and Lycos, Lycos shareholders will receive $97.55 in Terra ordinary shares, or
their equivalent in Terra American Depository Receipts, in exchange for each
Lycos common share, subject to a 20% symmetrical collar the Executive Committee
of the Board of Telefonica, S.A. (MC: TEF), which currently owns approximately
67% of Terra shares, has also unanimously approved the agreement with Lycos.

As part of the agreement, Terra Lycos has entered into a broad strategic
relationship with Bertelsmann, the third-largest media company in the world with
operations in 54 countries. This alliance builds on the existing
Lycos-Bertelsmann joint venture in Europe. Bertelsmann has entered into a
five-year commerce agreement for the purchase of advertising, placement and
integration services from Terra Lycos worldwide. Additionally, Terra Lycos will
also gain  access to Bertelsmann's premier catalogue of books, music,
television, film and other media content, on preferred terms. Bertelsmann and
Terra Lycos will also  be working cooperatively to develop platforms for digital
delivery of both music and books. Terra Lycos will continue working closely with
Lycos Europe to advance the content and service of each company.

Also part of the Terra Lycos transaction is a commitment by Telefonica to 
underwrite a $2.2 billion rights offering by Terra to be commenced prior to the
closing of the stock for-stock transaction. Under the terms of the agreement,
Telefonica will subscribe for Terra's pro rata shares and purchase any shares
not purchased by the other Terra shareholders. The rights offering will be
priced at today's Madrid closing price, implying a pro forma valuation of
approximately $30 billion for Terra Lycos.

Upon completion of the rights offering, Terra Lycos is expected to have more
than $3 billion in cash, making it one of the most highly capitalized Internet
companies in the world.

Terra Lycos will also own 49% of a new wireless joint venture being established
in partnership with Telefonica and will gain access to extensive cable, fixed
line, broadband, satellite and wireless networks, which now serve more than 60
million customers globally. Telefonica is the leading telecommunications group
in Spain and Latin America, and the sixth largest wireless communications
company worldwide, with over 21 million wireless customers.

In addition to Bertelsmann's content, Terra Lycos will also have access to all
of Telefonica's media content. Telefonica is the largest broadcaster and the
second largest pay television operator in Spain and Argentina, where it also
owns leading radio stations.  Telefonica recently announced the acquisition of
Endemol Entertainment, a leading European media company.

Upon completion of the merger, Juan Villalonga, chairman and chief executive
officer of Telefonica and chairman of Terra, will serve as chairman of Terra
Lycos, and Bob Davis, president and chief executive officer of Lycos, will be
chief executive officer. Abel Linares, chief executive officer of Terra, will be
chief operating officer, and Ted Philip, chief financial officer of Lycos, will
be chief financial officer. The Terra Lycos Board of Directors will have 15
members, including Mr. Villalonga and 10 other Terra designees and Mr. Davis, 
Mr. Philip and one other Lycos designee Tomas Middelhoff, Chairman and CE'O of
Bertelsmann, is also expected to join the Board by mid - 2002. Upon closing of
the transaction, Mr. Davis will also join the Board of Telefonica Media, the
company's media subsidiary.

Mr. Villalonga said, 'The combination of Terra and Lycos, supported by 
strategic relationships with Telefonica and Bertelsmann, creates a global
Internet and new media powerhouse with a scale and global footprint unmatched 
by any other Internet or media company in the world. Our combination brings
together many complementary strengths that we believe will enable Terra Lycos 
to generate consistently higher and sounder growth in revenues, cash flow and 
users than neither company could expect to achieve independently. The result 
will be a company uniquely positioned to provide compelling content and
functionality for its users, targeted access to large and attractive
demographics for its advertisers, attractive opportunities for its employees, 
and strong growth for its shareholders.'

Mr. Davis said, 'We are creating a global Internet powerhouse. This merger 
leads the way in the convergence between the Internet, next-generation forms of
connectivity, and both traditional and new media content. As a result, Terra 
Lycos will offer users new levels of Internet experience, which will further 
enhance our ability to attract, connect, retain  and  monetize user traffic. 
Lycos and Terra are two aggressive and forward-thinking companies that fit
together perfectly. Terra provides Lycos with immediate access to 550 million
new potential customers and broad reach in the Spanish- and Portuguese-speaking
world. Lycos provides Terra with rich content offerings, blue-chip advertisers
and e-commerce capabilities, which will be further enhanced by both companies'
relationships with Bertelsmann.'

Thomas Middelhoff, said, 'Based on our successful three-year partnership with 
Lycos, we are pleased to enter into a broad strategic relationship with Terra 
Lycos and Telefonica that will be an important element in our multifaceted  
global distribution strategy.  We believe our extensive multimedia content will
be a valuable enhancement to Terra Lycos's global offering.'

Mr. Linares said, 'Lycos is a top-tier Internet portal that is remarkably
complementary to Terra on a global basis. This combination will accelerate
Terra's vision of becoming the leading global Internet player, providing
services that will go way beyond the possibilities by the Spanish and Portuguese
languages, which are currently Terra's core business.' 

The transaction is expected to be completed in the third quarter of calendar
year 2000, subject to shareholder and regulatory approval.

Lazard Freres & Co. LLC served as financial advisor to Terra. Credit Suisse 
First Boston served as financial advisor to Lycos.


About Terra Networks
Terra Networks is one of the leading providers of Internet access (ISP) and
local-language interactive content and services to residential and small
office/home office users in the Spanish- and Portuguese-speaking world. Its ISP
business has more than 2 million customers. Its portals serve more than 700
million page-views and at the close of the most recent quarter had 63  million
visits per month. Terra currently is the leader in Internet activities in
Spanish- and Portuguese-speaking countries, including Spain, Argentina, Brazil,
Mexico, Chile, Peru, Venezuela, Guatemala and the United States. Terra plans to
launch new portals and Internet access services in its target markets.

About Lycos, Inc.
Founded in 1995, Lycos, Inc, is a leading Web media company and owner of the
Lycos Network, one of the most visited hubs on the Internet, reaching nearly
half of all U.S. web users. The Lycos Network is a unified set of websites,
attracting a diverse audience by offering a variety of services, including
leading web search and navigation resources; web community and communications
services, including free homepage building, free web-based e-mail, clubs, chat,
and instant messaging; a personalized My Lycos start page; a comprehensive
shopping center featuring over 2,400 merchants; and an assortment of compelling
content such as games, music, news, fun and educational information and
activities for kids as well as information about investing, technology,
entertainment, sports, small business, travel and more.  The Lycos Network
includes  Lycos.com,  Tripod, WhoWhere, Angelfire, MailCity,  HotBot,  HotWired,
Wired News, Webmonkey, Suck.com, Sonique, Quote, Gamesville and  Lycos  Zone. 
Lycos, Inc. is a global Internet leader with a major presence throughout the
U.S., Europe, Asia and Latin America.

About Telefonica
Telefonica, S.A. is the largest supplier of telecommunications services in the
Spanish- and Portuguese- speaking world.  Through affiliate companies in Latin
America, Europe, North Africa and the United States, the Telefonica Group
services a potential market of more than 550 million customers in 17 countries.
With 23 billion euros in 1999 revenues, Telefonica is also Spain's largest
company in terms of profits, assets, market capitalization and employment.
Telefonica controls Terra, a leading Internet company worldwide with more than
630 million visits to its websites per month and a Stock Market capitalization
of more than euros 18 billion. The Telefonica Group's revenues for 1999 totalled
euros 23 billion.

About Bertelsmann
Bertelsmann is the third-largest media company in the world, with consolidated
revenues of approximately $16.4 billion. The company has significant interests
in all areas of media, including books (Random House); magazine and newspaper
publishing (Gruner + Jahr); music (BMG Entertainment); television (in Europe,
CLT-UFA); multimedia (Lycos Europe and barnesandnoble.com, a joint venture with
Barnes & Noble, Inc.); film; and radio. With more than 600 individual companies,
Bertelsmann currently employs nearly 72,000 people in 54 countries.