Telefonica, the Spanish phones group that has turned itself into a media conglomerate, is now reaping the rewards of reinventing itself as a dotcom player.

Shares in Terra networks, its Internet division reached Euros116 this morning roughly ten times its price at flotation exactly two months ago. At this price Terra is valued at Euros 30bn - more than Amazon and about a third of Yahoo - and is poised to enter the Ibex stock index as Spain's third largest company.

Telefonica, which retains over 70% of Terra shares, listed the subsidiary at a price of Euros 13 for institutional investors and Euros 11.81 for Spanish private investors.

Terra's soaring share price lifted Telefonica's stock valuation 2% today to Euros27.09. Telefonica itself is beefing up its cable, TV and telecoms interests through a series of deals and seeking to extend its influence beyond its domestic market into Latin America:

  • Last week it bought into Argentinian film production outfit Patagonik taking a 30% stake alongside Buena Vista International, Disney and Artear.
  • Earlier this month it swapped cable and TV assets worth $4bn with US investment firm Hicks Muse Tate & Furst
  • In December it upped its stake in leading Spanish producer Lolafilms from 51% to 70%
  • it has bought outright control of phone networks in Brazil, Argentina and Peru.

    • With both shares so highly valued more deals are expected to follow. Market gossip last week suggested that Telefonica and France's Vivendi could merge. That would allow the merger of Vivendi's pay-TV unit Canal Plus and Telefonica's satellite TV operator Via Digital.