Agreement for Lycos sale

Telefonica SA
03 August 2004

TERRA NETWORKS, S.A., a Telefonica subsidiary, pursuant to the provisions of
article 82 of the Spanish Stock Market Act, hereby communicates the following


                                 RELEVANT FACT

In the early morning of July 31st (Madrid time), TERRA NETWORKS, S.A.
(hereinafter, TERRA) and the Korean company DAUM COMMUNICATIONS Corp. have
signed an agreement by which the former sells to the latter the entire stock of
LYCOS, Inc. (hereinafter, LYCOS), a TERRA subsidiary, in execution of the
resolutions approving the operation adopted by the Boards of Directors of those
companies and following the conclusion of a competitive sale process undertaken
at the instance of TERRA and headed by the investment bank Lehman Brothers who
acted as financial advisor to TERRA.

The operation is set within the strategy of TERRA of strengthening its presence
in geographical areas in which the Telefonica Group has significant operations
and in the Spanish and Portuguese speaking market, both of which are regarded as
a target market for the Telefonica Group, all this being in accordance with
TERRA's communique made by virtue of the appropriate Relevant Fact of April 29,
2004 and in the latest Shareholders General Meeting.

Prior to the sale, LYCOS will be transferring to TERRA, among other assets, the
shares it holds in Terra Networks USA, LLP (subsidiary concerned with operating
the portal for Spanish speaking people in the United States), its stake in Lycos
Europe, N.V., and other investments.

The book value of the assets to be received by TERRA prior to the sale is
initially estimated at around 435 million USD. The initial price of the sale of
LYCOS, following execution of the transfer, comes to 105 million USD. On the
basis of the book values of the aforementioned assets at July 2004 and the
current exchange rate, it is initially estimated that the sale that is described
could represent a book profit before tax of around 20 million euros, though the
final figures will be those resulting from the balance sheet closed on the date
of the sale.

The sale of LYCOS, whose revenue represented around 16% of the total for the
TERRA Group in 2003, is going to imply a fall in the expected earnings for the
current accounting year. Nevertheless, the operation is not going to alter the
Group's forecasts of generating a positive EBITDA in the accounting year 2004.

The execution of the sale and, as a consequence, the effective transfer of the
stock, are, in accordance with the signed agreement, subject to the obtaining of
any administrative authorisations that might be necessary, and in particular, to
its express approval by the US authorities for the Defence of Competition or
tacit approval once a period of 30 days has passed without any opposition.



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