Terra Reports an Increase of 7% in Revenues in the First Quarter of 2005 Net income improved by 36 million euros vs. 1Q04 MADRID, Spain, May 12 /PRNewswire-FirstCall/ -- Terra Networks, S.A., (MC: TRR; Nasdaq: TRRA), the world's leading Spanish and Portuguese internet group today released its financial results for the first quarter to 2005, and comparisons with the same period in 2004. The financial information contained in this document has been prepared according to the International Financial Reporting Standards (IFRS), which the Terra Group has adopted since the 1st of January 2005. According to this new rules, the disinvestments in Lycos Inc. and OneTravel.com, that took place in October 2004 and April 2005, must be considered as "discontinued activities". This is the reason why the figures related to Lycos Inc. and OneTravel.com in the first quarter of 2004 and 2005 have been eliminated, and they have been included in the line named "Results from the discontinued activities". Revenues The group reported net revenues of 113 million euros in the first three months of 2005, an increase of 7.2% on the same period last year. The access business accounted for 49% of revenues; communication, portal and content services for 29%; other corporate and SME services and other revenues for 12%; and advertising and e-commerce accounted for 10%. Operating expenses Operating expenses fell by 1%. The group reported total expenses of 102.4 million euros in the first quarter of 2005, compared to 103.3 million euros in the same period last year. Operating income before depreciation and amortisation (OIBDA) Terra reported OIBDA (operating income before depreciation and amortisation) of 14.3 million euros in 1Q05 vs. 1.5 million euros in the same period last year, due to higher revenues recorded in the company's main markets and to tighter cost control in the past few quarters. The OIBDA margin was 12.7% at the close of the first quarter 2005, on the back of higher revenues in Spain and Brazil (Terra's main markets) and costs savings made on virtually all operating expense items. We highlight the decline in personnel costs following the restructuring carried out last year. Net income Terra reported net income of -1.6 million euros in 1Q05, an increase of 36 million euros vs. the first three months of 2004. Cash The cash balance was 544 million euros, a fall of 1,074 million euros vs. March 2004, due mainly to the distribution of 1,136 million euros in dividends (2 euros per share) made at the end of July 2004. Operating Results: 6.8 million customers Terra had 6.8 million paid access and portal services customers in 1Q05, a rise of 28% vs. 1Q04. The Group had a total of 1.84 million paid access subscribers at March 31, 2005. We would highlight the 58% increase in broadband subscribers, mainly ADSL, compared to March 2004. The Group had 1.1 million broad band customers, of which 68% were in Brazil, 16% in Spain and 12% in Chile. We would also highlight the rise in paid communication and portal services customers (4.93 million at March 2005). This figure is 40% up on the same period last year. In 1Q05 Terra promoted its client-orientated model and launched new value- added products and services. Highlights of these include: -- The upgrade and improvement of broadband communication services, such as doubling speeds in Spain and Latin America. -- The launch of e-mail plus with 1Gb capacity, in Brazil. Terra is the first ISP to offer 1 gigabyte email services in the Brazilian internet sector, increasing capacity to allow users to save thousands of messages, receive photos, music and videos in their email accounts. -- The launch of the Fotolog service in Colombia and Argentina (the number of subscribers in the latter rose to 30,000 in one month). CONSOLIDATED STATEMENT OF OPERATIONS (in thousand of Euros - NIIF) Unaudited Three months Mar-31 2005 2004 (1) Revenues 112,971 105,412 Internal expenditures 108 182 Operating expenses Supplies -53,346 -52,127 Personnel -16,769 -19,974 Subcontracts -29,756 -29,113 Taxes -2,562 -2,087 Other net operating income (expense) 3,454 -1,676 Gain (loss) on sale of fixed asset 216 865 Impairment of goodwill and other asset 0 0 Operating income before D&A OIBDA 14,316 1,482 Depreciation and amortization -19,752 -24,422 Operating income -5,436 -22,940 Profit from associated companies -2,280 -4,850 Net financial income (expense) 2,917 7,075 Income before taxes -4,799 -20,715 Income taxes 3,185 10,541 Income from continuing operations -1,614 -10,174 Income (loss) from discontinued operations 43 -29,764 Minority interest 3 2,018 Net income -1,568 -37,920 Average shares 561,302 561,012 (1) Revenue by business line and some operating expenses show slight variations from previously reported figures due to reclassifications CONSOLIDATED BALANCE SHEET (in thousands of Euros - Spanish GAAP) Audited Mar-31 2005 2004 Assets Non-current Assets: Intangible assets 202,128 268,205 Goodwill 72,415 138,060 Property, plant and equipment and investment property 10,949 41,641 Long term financial asset and other noncurrent assets 234,653 294,152 Deferred tax asset 9,060 15,780 Total Non-current Assets: 529,205 757,838 Current assets Cash and cash equivalent 865,666 1,607,727 Other current assets 140,239 131,326 Total current Assets: 1,005,905 1,739,053 TOTAL ASSETS 1,535,110 2,496,891 Liabilities Equity attributable to equity holders of the parent 1,308,514 2,215,642 Minority interest 0 904 Non current liabilities 76,528 96,078 Current Liabilities 150,068 184,267 TOTAL LIABILITIES 1,535,110 2,496,891 OIBDA Mar-31 2005 2004 % Operating loss (5,436) (22,940) 76% Depreciation and amortization 19,752 24,422 19% OIBDA 14,316 1,482 866% OIBDA MARGIN 12.7% 1.4% 11,3 b.p. OPERATING DATA (in thousands) Mar-31 2005 2004 % Total Paid Subscribers (1) 6,767 5,273 28% Access: Narrowband 688 1,020 -33% Broadband 1,149 726 58% Total 1,837 1,746 5% VAS (CSP/Portal): 4,930 3,528 40% Broadband Access Subscribers: Spain 185 184 1% Latam 964 542 78% Total 1,149 726 58% (1) Based on number of services delivered. Some subscribers may be contracting access and Value Added Services at the same time. DATASOURCE: Terra Networks, S.A. CONTACT: Pablo Fuentes, Corporate Communications, +34-91-452-4248, , or Investors, Miguel von Bernard, +34-91-452-3922, , both of Terra Networks, S.A.

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