StarMedia Network Trembles: A New Boss, Potential Accounting Problems & Management Departures.

The Board of Directors of StarMedia Network announced that Susan Segal has been appointed to serve as acting Chairman of the Board. She succeeds Fernando Espuelas, co-founder and former Chief Executive Officer of the Company, who, pursuant to his August 2001 agreement with the Company, resigned on November 15 as Chairman of the Board of Directors. Mr. Espuelas will continue to serve as a Director on the Company’s Board.

StarMedia Network (Nasdaq: STRM) announced that it plans to restate its unaudited financial statements for the quarters ended March 31 and June 30, 2001, and its audited financial statements for the fiscal year ended December 31, 2000. A Special Committee of the Company’s Board of Directors is conducting an investigation of accounting issues with respect to revenue recognition by two of the company’s Mexican subsidiaries, AdNet S.A. de C.V. and StarMedia Mexico, S.A. de C.V. The Special Committee has retained outside counsel to assist in the investigation, which has led the Company to a preliminary conclusion that revenues aggregating approximately $10 million were improperly recognized by those subsidiaries during the period from October 1, 2000 through June 30, 2001. At the present time, the financial statements for those periods should not be relied on.

The Company is working to conclude its investigation expeditiously, and will file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, as well as the restated reports, promptly after its investigation is completed. StarMedia does not intend to provide further information with respect to these matters prior to the completion of its investigation.

Separately, the Company also announced as follows:

* Steven J. Heller has resigned as Chief Financial Officer of StarMedia Network, effective November 15, 2001, on terms and conditions previously agreed with StarMedia Network.

* The company terminated the employment of Justin Macedonia as General Counsel of the company earlier this month. In September 2001, Mr. Macedonia had filed a notice of intention to arbitrate against the company asserting that the company was obligated to makes tax indemnity payments to him in the amount of $1,740,588. The company denies any obligation to make such payments, intends to vigorously defend against such claims and has pursued counterclaims against Mr. Macedonia.