RealTime IT News

Terra Networks IPO Shouldn't Stay Earthbound

For a brief time earlier this year, StarMedia Networks (STRM) owned the spotlight as the leading Web portal player targeting the Latin American Internet market, which is expected to more than double (from 15 million to 34 million users) in the next year.

But StarMedia's stock has faded since its spring ticker debut, as heavyweights such as America Online Inc. (AOL) and Yahoo Inc. (YHOO) have zeroed in on the Spanish- and Portuguese-language markets in Latin America, Europe and the United States.

Now another company trying to capture these markets is about to ratchet up the pressure on StarMedia. Terra Networks, a subsidiary of Spanish telecommunications giant Telefonica, is slated to go public this week in a $257 million stock offering led by Goldman Sachs. The proposed Nasdaq ticker symbol is TRRA, and the 22.3 million shares are expected to be priced between 10 21/32 and 12 7/16.

(The company will make a concurrent offering of shares in Spain designed to raise $185 million.)

Terra Networks currently provides Internet access to 860,000 customers in Latin America and Spain. But the key number here is 54 million - that's the amount of customers served by Telefonica in Spain, Brazil, Chile, Guatemala and Peru. Terra is counting on leveraging Telefonica's relationship with these customers and its knowledge of those national markets.

In the U.S., the company, which was formed last year and is based in Madrid, recently launched Internet access service through a partnership with IDT (ITDC).

Besides offering Internet access, Terra Networks runs Web portals in the above markets and also offers online advertising and marketing, site design and Web hosting services. Site traffic has grown from 13 million monthly visitors in March to 22 million in September, while the number of paid subscribers jumped from 352,000 through June to 604,000 through September, a 70% rise.

Revenues last year were $14.2 million, while net loss was $4.4 million. Through the first half of 1999, sales were $9.8 million, against a net loss of $25 million.

In addition to its current services, Terra Networks plans to introduce mobile phone 'Net access, cable modems, ADSL, satellite and wireless local loops, as well as video streaming and IP-based voice and fax messaging. It's an ambitious agenda, but with net proceeds from the dual offerings expected to top $364 million, Terra will have a substantial checkbook to draw from.

While its growing debt may worry some, I expect Terra Networks relationship with Telefonica, its rapid growth and the desire among investors to back a winner in the Latin American market will provide enough fuel to launch an IPO rocket.

ALL NEW! internet.com's HotWatch a monthly e-mail subscription for $99, featuring Internet Stock Report's top 10 noteworthy Internet stocks for the month. Each month you will receive in-depth analysis on the top 10 Internet stocks to watch with the information you need to assess the fast-paced nature of Internet stocks. Staying on top of market changes in the Internet Stock market is what counts. For $99 per year, you receive 12 timely issues sent to you by e-mail. Don't wait, our next issue will be out before you know it with a whole new perspective on the market. Sign up today at: e-newsletters