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Terra Lycos has managed to offset in part falls in advertising revenue with an increase in Net access revenues.

Publishing its Q1 results today the global Internet network, which includes operations such as the Lycos portal, RagingBull.com, Tripod.com and Wired.com, said that it had continued to cut operating costs in a bid to drive the business into the black.

During the first quarter of 2002, Terra Lycos earned revenue of E161 million, in line with the company's previously announced forecast.

However, this was down 10 per cent on the same period last year when the group notched up revenues of E178 million.

Advertising and ecommerce revenues fell 26 per cent from E123 million in Q1 2001 to E90 million in Q1 2002, although this was partly compensated by a 28 per cent jump in Internet access revenues from E55 million to E71 million during the same period.

EBITDA (earnings before interest, taxes etc) losses improved by 46 per cent from E76 million in Q1 2001 to E41 million in this quarter - the company's best EBITDA performance to date.

In a statement Joaquim Agut, Terra Lycos executive chairman, said: "These results demonstrate that Terra Lycos is confronting adverse market conditions with a clear business vision, offering customer-oriented services and content and adding new sources of revenue.

"This clear market orientation, along with efficient cost management and a strong financial position, gives Terra Lycos a uniquely solid position in the Internet sector and strengthens its positive trend toward profitability," he said.

However, the Web portal and ISP business could have it plans to reach profit scuppered if Bertelsmann AG succeeds in renegotiating its $1 billion online advertising contract with Terra Lycos.

The massive ad contract was originally signed in May 2000 and stated that Bertelsmann would spend $325 million on advertising with Terra Lycos by October 2002.

Bertelsmann also agreed to spend a further $675 million with Terra Lycos by the end of 2005 although it retained an option that it could renegotiate this deal if necessary.

According to reports, it now wants to exercise this option and see a sharp drop in the amount it spends. ®

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