StarMedia Secures $36 Million In Financing.

StarMedia Network, Inc. announced the completion of a $36 million equity placement. StarMedia also announced a strategic alliance with BellSouth Corporation , which will enable StarMedia to further capitalize on Latin America’s rapidly expanding wireless market through the creation of multi-access portals throughout the region, as well as provide StarMedia with a premium content distribution and advertising platform for marketers to reach their consumers.

“Our ability to create these partnerships affirms StarMedia’s long-term market opportunity,” said Fernando Espuelas, Chairman and CEO of StarMedia Network. “The addition of these partners leverages our leadership in Latin America.”

StarMedia announced that it has reached an agreement with BellSouth Corp., whereby BellSouth has purchased shares of a new series of StarMedia convertible preferred stock at a common share equivalent price of $2.55 per share for an aggregate purchase price of $25 million. On an as converted basis, these shares represent an equity interest of approximately 11% in StarMedia. BellSouth has also received warrants to purchase 4.5 million additional shares of StarMedia common stock. The warrants may be exercised after 12 months, and are comprised of three tranches of 1.5 million shares each, priced at $4.55, $6.55, and $8.55 per share, respectively.

The investment from BellSouth is being made in connection with a strategic alliance to create co-branded multi-access portals throughout Latin America, enabling Bell South’s 12 million customers throughout the region to access personalized information from anywhere via their personal computers and cellular phones. The mobile service will include WAP, SMS, text and voice access with text to speech and voice recognition technology. The fully integrated portals will also provide a premium content distribution and advertising platform for marketers to reach their consumers. The number of wireless subscribers in Latin America is expected to grow 28% per year, compared to an estimated 16% growth per year worldwide, from 65 million in 2000 to 221 million in 2005. As part of the agreement, BellSouth will become StarMedia’s preferred bandwidth, hosting and network provider.

In addition, StarMedia announced it will receive a direct investment through the purchase of the new series of convertible preferred stock of $11 million from a group of investors, including Primedia Inc., JPMorgan Partners and a number of private investors. “This investment demonstrates our ongoing commitment to StarMedia,” said Susan Segal, Partner, JPMorgan Partners, StarMedia’s first institutional investor. “We have the utmost confidence in StarMedia’s ability to grow its leading position and build a long-term profitable business in the region.”

StarMedia also announced an agreement with Primedia, owner of About.com, which is expected to result in the creation of a co-branded product initially aimed at the US Hispanic market. “StarMedia is clearly a leader among the Spanish- and Portuguese- speaking Internet communities,” stated Tom Rogers, Chairman and CEO of Primedia. “Primedia’s agreement with StarMedia will result in the distribution of our About content and the joint development of products to serve this increasingly important market.”