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Slide Graphics
The Creation of a Global Leader in
Internet, New Media and
Communications
Terra
Lycos
Telefonica
Bertelsmann
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2
Safe-Harbor Statement
This presentation contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. These statements are based on management's current expectations or
beliefs and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. The forward-looking statements contained in this
release address the following subjects: expected date of closing the merger;
future financial and operating results; and timing and benefits of the merger.
The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: the risk
that the Terra's and Lycos's businesses will not be integrated successfully;
costs related to the merger; failure of the Terra or Lycos stockholders to
approve the merger; inability to further identify, develop and achieve success
for new products, services and technologies; increase competition and its
effect on pricing, spending, third-party relationships and revenues; inability
to establish and maintain relationships with commerce, advertising, marketing,
technology, and content providers.
For a detailed discussion of these and other cautionary statements, please
refer to Terra's filings with the Securities and Exchange Commission,
including the Risk Factors section of Terra's F-1 filing that became effective
in November 1999, and Lycos's filings with the Securities and Exchange
Commission, including the section titled "Factors Affecting the Company's
Business, Operating Results and Financial Condition" of the Management's
Discussion and Analysis in its From 10-K for the year ended July 31, 1999 and
the Risk Factors section of Lycos's S-3 filing that became effective in March,
2000.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE BUSINESS COMBINATION TRANSACTION REFERENCED
IN THE FOREGOING INFORMATION, WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION. THE JOINT PROXY STATEMENT/PROSPECTUS WILL BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY TERRA AND LYCOS.
INVESTORS AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF THE JOINT PROXY
STATEMENT/PROSPECTUS (WHEN IT IS AVAILABLE) AND OTHER DOCUMENTS FILED BY TERRA
AND LYCOS WITH THE COMMISSION AT THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE
JOINT PROXY STATEMENT/PROSPECTUS AND THESE OTHER DOCUMENTS MAY ALSO BE
OBTAINED FOR FREE FROM TERRA.
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3
Transaction Summary
Exchange Ratio: $97.55 for every Lycos share
Collar: Symmetrical 20%
Structure: Tax free exchange of shares
Accounting: Purchase
Listing: Madrid, NASDAQ
Closing Conditions: Shareholder votes
Regulatory approval and other customary
conditions
Expected Closing Calendar 3Q '00
Telefonica Bertelsmann
Telefonica will underwrite a $2 Billion Bertelsmann commits to a broad
Terra rights offering at E62.00 world-wide alliance and enters
to be closed prior to the $1 Billion, 5-year commerce
closing agreement
Telefonica Mobile will form a joint
venture with Terra Lycos for a global
wireless unit
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4
Description of the Collar
Terra
Average Exchange Implied
Price(a) Ratio (b) Lycos Price
Upper End $68.06 1.433x $97.55
Central Reference $56.72 1.72x $97.55
Lower End $45.37 2.15x $97.55
(a) Average closing price of Terra shares for the ten days ending on the tenth
day prior to the closing date of the transaction
(b) Number of Terra shares per each Lycos share
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5
Terra Lycos Strategic Vision
Value for Consumers and Shareholders Will be Created by Leading
the Convergence of Media and Communications Globally
Fixed Telephony Web TV/Media
Mobile Communication terra LYCOS Cable Modems
Multiple-Access Portal
(MAP)
Wireless
PDAs
Web
Phone
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Terra Networks
The Leading Global
Spanish and Portuguese
Language Internet
terra Access and Content
Company
o 2 million subscribers
o 14 countries
o Multiple access offerings
o Rich/compelling content
o Network model
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Commanding Market Position
U.S.A. Spain
#1 #1 #1
Guatemala
Mexico #1 #1
#2 #1
Access Portal
Peru
#1 #1 Brazil
#2 #2
Chile
#1 #1 Argentina
#2
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8
Rapid Subscriber Growth Across
Latin America
Growth in Quarterly Subscribers
(In Thousands)
Growth = 522.5%
1,992
1,317
681
485
320
Mar-99 Jun-99 Sep-99 Dec-99 Mar-00
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9
Rapid Subscriber Growth Across
Latin America
Paid Subscribers Free Subscribers
(In Thousands Per Month) (In Thousands Per Month)
Growth = 189.1% Growth = 6,447.1%
879 1,113
758 559
564 297
364 122
304 17
Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00
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10
Rapid Page View and Revenue Growth
Page Views Quarterly Revenues
(In Millions Per Month) ($ in Millions)
Growth = 181.3% Growth = 164.8%
706 $41.3
464 $34.2
290 $20.0
251 $15.6
Jun-99 Sep-99 Dec-99 Mar-00 Jun-99 Sep-99 Dec-99 Mar-00
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The Internet's Leading Network
LYCOS
o 44% U.S. reach
o 148 Million page views per day worldwide
o Four of the world's top 20 internet sites
o $78MM in Q3 revenues with $25MM of cash flow
o An acquisition integration success story
o Earnings positive for 4 consecutive quarters
o Met or exceeded consensus for 16 straight quarters
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Lycos: Leadership in North
America, Europe and Asia
Lycos
Canada
Lycos Lycos
Europe Lycos Korea
Lycos Greater Asia
Lycos
Japan
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Strong Revenue Growth
Quarterly Revenue Growth (Dollars in Millions)
$68.5
$56.0
$45.1
$35.1
$30.6
$24.8
$19.0
$15.1
$12.6
$9.3
$7.8
$5.9
$5.0
$3.7
---- ---- ---- ---- ---- ----- ----- ---- ---- ---- ---- ---- ---- ----
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
---------------------- --------------------- ------------------- ---------
1977 1998 1999 2000
Source: Company 10-K and 10-Q SEC filings.
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14
Monetizing the Traffic
Quarterly Revenues Per Unique User
------------------------------------------------------------------------------
==
== E-Commerce
==
[]
[] Advertising
[]
106% Growth
$2.20
======
======
====== $0.78
$1.07 ======
====== [][][]
====== $0.34 [][][]
====== [][][] $1.42
[][][] [][][]
[][][] [][][]
[][][] $0.73 [][][]
[][][] [][][]
Q2 '99 Q2 '00
Note: Quarters ended January 31, 2000
Source: Media Metrix
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The Leading Telecom Group in
Spain and Latin America
Telefonica
o #1 Telco in Spain and Latin America
o #6 Wireless service provider worldwide
o #1 TV broadcaster in Spain and Argentina (#2 Pay TV)
o More than 62 million customers
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Bertelsmann
Bertelsmann delivers leading content worldwide
as the premier content provider on Terra Lycos
Representative Brands
o Random House (#1 publishing house worldwide)
o Bertelsmann is the
o CLT-UFA/Pearson TV (#1 TV producer worldwide, # most global media
1 TV distributor in Europe) company in the world
and the leading media
o Gruner + Jahr (#1 magazine publisher in Europe) company on the
Internet
o BMG Entertainment (#4 music company in the world)
o Bertelsmann Direct (#1 in clubs worldwide,
#2 in media e-commerce worldwide) o Bertelsmann occupies
leading market
o Bertelsmann Arvato (#1 Printing house in Europe, positions worldwide
#1 in distribution/services) with over 600
companies in 54
countries
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terra LYCOS
The Creation of a Global Leader in Internet,
New Media and Communications
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Terra Lycos: Global Internet Leadership
o Internet's Largest Footprint with Operations in 37 Countries
o 175 Million page views per day
o Projected 2001 Revenues of as much as $900m
o Industry Leading Revenue Growth
o Over $3bn in cash
o Target Operating Margins of 30%
o Mobile Leadership
o Deep Alliances with Market Leaders:
Telefonica and Bertelsmann
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Terra Lycos: A Global Leader in
Key Internet Regions
Canada #1 Western Europe #3
Japan #2
U.S. Hispanic #1
Total U.S. #4 Korea #1
Latin America #1 Asia Pacific # 2
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Terra Lycos Management
Senior Management
o Chairman: Juan Villalonga
o CEO: Bob Davis
o COO: Abel Linares (present CEO Terra)
o CFO: Ted Philp (present CFO Lycos)
Board of Directors
o 14 Total, 7 Independents, 4 from Telefonica and 3 from Lycos
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The Terra Lycos Value Proposition
Providing Aggregating Offering Rich Monetizing
Access Audience Content Traffic
Terra Libre
Lycos Free
Commundo
Terra Line
Terra Premium
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The Terra Lycos Value Proposition
Providing Aggregating Offering Rich Monetizing
Access Audience Content Traffic
Terra Libre terra
Lycos Free LYCOS
Commundo HotBot
Terra Line Angelfire
Terra Premium tripod
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The Terra Lycos Value Proposition
Providing Aggregating Offering Rich Monetizing
Access Audience Content Traffic
Terra Libre terra Quote.com
Lycos Free LYCOS Gamesville
Commundo HotBot terra
Terra Line Angelfire SONIQUE
Terra Premium tripod invertia.com
WIRED NEWS
BigBrother
LYCOS ZONE
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The Terra Lycos Value Proposition
Providing Aggregating Offering Rich Monetizing
Access Audience Content Traffic
Terra Libre terra Quote.com LYCOShop
Lycos Free LYCOS Gamesville WINGSPANbank.com
Commundo HotBot terra BARNES & NOBLE
Terra Line Angelfire SONIQUE BBVA
Terra Premium tripod invertia.com DeRemate.com
WIRED NEWS Amadeus
BigBrother
LYCOS ZONE
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<TABLE>
<CAPTION>
Terra Lycos Operational Synergies
Providing Aggregating Offering Monetizing
Access Audience Rich Content Traffic
<S> <C> <C> <C>
o Lycos content and o Community is one of o Bertelsmann o LycosSHOP is one of
services accelerate the hottest areas of publishing and the most powerful
Terra's ability to growth in Latin music become the platforms for
mine Telefonica's America - Lycos basis for further e-commerce - over
40MM fixed line has the #1 community 2,800 merchants
suscribers community in Tripod development
and Angelfire o FairMarket auction
o Lycos Digital media o Exchange and relationship married
offerings (Sonique, o Lycos and Terra translation of with DeRemate.com,
MP3 Search) have both pioneered content and services the largest auction
become a draw for the "network" of between Lycos and house in Latin
Telefonica's 2.3MM brands" model - the Terra America
cable subscribers network becomes
stronger as a new o 200 person Lycos
o Quote.com, MailCity brands are needed sales organization
and instant
messaging become
killer applications
for Telefonica Mobile
20MM subscribers
</TABLE>
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Revenue Synergies
o Lycos Sale of Latin American Inventory
o Bertelsmann $1bn Revenue Commitment
o New Content Page Views
o Mobile Portal Revenues
o Worldwide Placements
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Expense Synergies
o Lycos Avoids Latin American Market Development
o Terra Avoids US and Europe Market Development
o Sales and G&A Leverage
o Substantial Bandwidth Economies
o Content Costs Greatly Reduced
o Terra R&D eliminates search and community
o Lycos R&D eliminates mobile products
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Wireless Portal Joint Venture
o Access through
wireless platform
o Content distribution to
20 million customers
o Realtime E-commerce
Telefonica Servicios Moviles, S.A. LYCOS
o Anytime Anyplace
o Killer applications
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Wireless Internet is the Next Wave
Mass Market Internet Opportunities
o 1 Billion Users (2003)
o 13% CAGR (1998-2003)
o 330MM Subscribers (2003)
o 5% CAGR (1998-2003)
o 1 Billion Subscribers (2003)
o 28% CAGR (1998-2003)
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Telefonica Mobile Market Leadership
Spain
El Salvador
59%
33% 79.5%
316.1%
Peru
Brazil
69%
41.3% 70%
99.9%
Chile
Argentina
52%
76.9% 25%
113.4% Key
Market Share
March 1999-March 2000
Annual Growth
Only included subsidiaries managed by Telefonica
Data as of March 31, 2000
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terra LYCOS A Growth Engine Worldwide
Revenue Comparative Valuation Analysis
CAGR 2000-2001
Aggr. Aggr.
Market 2001E Value
Value Revenue Multiple
80.0%
Yahoo $73,344 $1,377.0 53.3x
36.6%
AOL 126,352.4 10,797.9 11.4
15.1%
Terra-
Lycos 1 22,020.5 900.0 24.5
Terra- Yahoo AOL
Lycos
1 Based on the value of Terra shares under the terms of the definitive merger
agreement
Note: Revenue estimates are based on industry reports and are not intended to
be the basis of detailed finanical guidance.
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Terra Lycos: Creation of
Shareholder Value
o Global Leadership
o Large Scale and Diversified Revenues
o Unparalleled Depth and Breadth of Access Platforms
o Deep Telefonica and Bertelsmann Alliance
o The Most Complete Investment Vehicle for Convergence
o More than a $3bn cash position
o Revenue Growth of as much as 80%
o EBITDA Positive in Q4 2001
o Opportunity to fully exploit premium assigned to first mover
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terra Lycos
