TERRA NETWORKS, LYCOS IN BIG WEB PLAY

Spanish Internet service provider Terra Networks Friday said it was in talks with U.S. Internet media network provider Lycos Inc. in a move that could create a new global Internet giant behind America Online Inc. and Yahoo! Inc.

In a statement issued in Madrid, Terra Networks declined to specify whether the talks involved an alliance or possible merger, Reuters reported. "Talks are currently going on with Lycos with no definitive agreement worth announcing so far and no guarantee for the time being that one can be reached," Terra said in a filing to Spain's National Securities Market Commission.

Terra Networks' $16.41 billion market capitalization makes it the second-largest in the European Internet field. Lycos has a market value of about $6 billion.

The discussions were first reported by Spanish daily Expansion and led Terra to file the confirmation with Spanish market regulators.

Expansion said the two companies had been negotiating for several weeks in New York about a "global alliance" that could lead to a merger. A spokeswoman for Waltham, MA-based Lycos declined to comment on the filing and said it would have no comment on "rumors and speculation."

Speaking of rumors and speculation, the Wall Street Journal reported that if the Terra sought to acquire Lycos in a stock-swap deal, Lycos would most likely be seeking at least $90 a share. Germany's Bertelsmann AG, which has a joint venture with Lycos, might also play a role in the combined entity.

In response to word of the talks, Terra's shares closed up 2.2 percent at 64.9 euros on the Madrid stock exchange as the market warmed to the idea of Terra expanding in the prized U.S. market.