Spanish telecoms giant Telefónica [NYSE:TEF] is poised to launch an audacious cash bid to acquire the outstanding shares of its internet arm Terra Lycos, in a move which could cost EUR1.7 billion if acceptances are received from target shareholders. Telefónica’s offer of EUR5.25 a share values the company at EUR3.26 billion, well below the EUR13 billion high of its initial public offering in November 1999. The Spanish telco, which already owns 36.5% of the internet venture, has been the subject of some criticism for not having made the move earlier. Analysts have long questioned the logic of Telefónica competing for business against its own internet arm. The parent company says that after absorbing Terra Lycos it expects EBITDA to improve by EUR269 million in the period to 2006. Terra Lycos has yet to make a profit. Its business model has been jeopardised by problems in the online advertising market and competition from Telefónica in the high speed internet access market. German media group Bertelsmann backed out of a EUR1 billion online advertising deal reached during the internet boom of 2000.