Current reports

Warsaw, Poland - May 6, 2002 - Netia Holdings (NASDAQ: NTIAQ; WSE: NET), Poland's largest alternative provider of fixed-line telecommunications services, today announced unaudited financial results for the first quarter of 2002.

Financial Highlights:

• Revenues for Q1 2002 amounted to PLN 146.6m (US$35.5m), a year-on-year increase of 19%.
  
  
• EBITDA for Q1 2002 amounted to PLN 30.1m (US$7.3m), a year-on-year increase of 99%. EBITDA margin for Q1 2002 reached 20.5%.
  
  
• Cash at March 31, 2002 amounted to PLN 389.2m (US$94.2m), excluding restricted investments of PLN 49.1m (US$11.9m).
  
  
• Consolidated shareholders' equity at the end of Q1 2002 was negative PLN 588.7m or US$142.5m.
  
  
• Restructuring Agreement with regard to economic terms of debt restructuring was reached and signed by Netia, Telia AB, Warburg Pincus, certain financial creditors and the Ad Hoc Committee of Noteholders on March 5, 2002. The terms of the restructuring include the exchange of Netia's existing Notes and swap claims for new notes with an aggregate principal amount of EUR 50m and ordinary shares representing 91% of our share capital immediately post-restructuring. The existing Netia shareholders would retain 9% ownership and receive warrants to acquire shares representing 15% of Netia's post-restructuring share capital (after the provision of shares representing 5% of our ordinary share capital for a key employee stock option plan).
  
  
  • All necessary share and warrant issuances with regard to Netia's reorganisation have been approved by its shareholders. On April 5, 2002, Netia filed with the Polish Securities and Exchange Commission a prospectus relating to the issuance and registration of shares in relation to the Restructuring Agreement.
    
    
  • Consents from Holders of over 90% of the Notes to the terms of the restructuring were received as of March 31, 2002.
    
    
  • Arrangement proceeding in Poland was opened with respect to Netia Telekom S.A., one of Netia's subsidiaries, on April 22, 2002. Netia is currently awaiting the opening of proceedings for Netia Holdings S.A. and another of its subsidiaries, Netia South Sp. z o.o.

Operational Highlights:

• Netia's nationwide backbone network stretched to 3,300 km as of March 31, 2002.
  
  
• Subscriber lines amounted to 342,288 net of churn and disconnections, a year-on-year increase of 4%.
  
  
• Business customer lines amounted to 100,563, a year-on-year increase of 22%. The business segment reached 29.4% of total subscriber lines while year-to-date revenues from business customers accounted for 57.1% of telecom revenues as of March 31, 2002.
  
  
• Average revenue per line increased by 8% to PLN 130 in March 2002, compared to PLN 120 in March 2001.
  
  
• An integrated customer relationship management (CRM) system "CORE" was launched on April 7, 2002 as the first integrated CRM solution of any Polish telecom operator.
  
  
• Headcount decreased to 1,362 at March 31, 2002 from 1,536 at December 31, 2001, as a result of management's program of cost reduction initiated in August 2001.

Other Highlights:

• Changes within Netia's Supervisory Board. Effective March 12, 2002 Przemyslaw Jaronski was elected to Netia's Supervisory Board, in order to represent the Ad Hoc Committee of Noteholders.

Kjell-Ove Blom, Acting CEO and Chief Operating Officer commented: "Our cost savings and increased efficiency program is producing results and has contributed to our EBITDA growth and margin year-on-year. Netia also continues its track record of innovation with new product launches such as IN services and introduction of the first integrated CRM system of any Polish operator, which will contribute to future operational efficiency and customer service improvements.

"Our efforts have been focused on Netia's debt restructuring process, completion of which would position us to continue to execute our long-term strategy as Poland's largest alternative telecommunications operator.

"In the quarter Netia experienced a slight overall decline of 0.4% in ringing lines. This is mainly the result of churn by customers impacted by the deterioration of the Polish economy and customers moving outside of Netia's coverage as well as low sales to residential customers. In addition, we refrained from launching any new sales campaigns during the quarter, given the uncertainties that prevailed prior to the consensual agreement with our bondholders on Netia's new capital structure. Nevertheless, we achieved a net increase in business customers, which now represent 29.4% of subscriber lines and 57.1% of telecom revenues, reflecting our intensified focus on corporate and SME markets."

Avi Hochman, Chief Financial Officer of Netia, added: "Netia has achieved substantial 99% year-on-year growth in EBITDA and an EBITDA margin of 20.5% as our cost reduction and increased efficiency program makes headway. Both revenues and EBITDA saw modest increases compared to the fourth quarter. Between Q1 2002 and Q4 2001 our cash position decreased by PLN 97.7m due to the settlement of a swap transaction with JPMorgan Chase Bank, the purchase of fixed assets and the restructuring costs.

"More importantly, Netia's debt restructuring proposal has now been accepted by over 90% of the bondholders. We are moving to implement the swap of debt for equity. This will establish a solid capital structure and foundation to enable Netia's future healthy development."

Financial Information

2002 Q1 vs. 2001 Q1

Revenues increased by 19% to PLN 146.6m (US$35.5m) for Q1 2002 compared to PLN 122.9m for Q1 2001.

Revenues from telecommunications services increased by 22% to PLN 140.8m (US$34.1m) in Q1 2002 from PLN 115.3m in Q1 2001. The increase was primarily attributable to an increase in total number of subscriber lines coupled with an increase in average revenue per line associated with the increase in business mix of lines as well as introduction of new products. The total number of subscriber lines increased by 4% to 342,288 at March 31, 2002 from 328,728 at March 31, 2001 while the overall increase in average monthly revenue per line was 8% to PLN 130 (US$31) for March 2002, compared to PLN 120 for March 2001.

EBITDA increased by 99% to PLN 30.1m (US$7.3m) in Q1 2002 compared with PLN 15.2m for Q1 2001. EBITDA margin for Q1 2002 increased to 20.5% from 12.3% for Q1 2001.

"Other operating expenses" amounted to PLN 85.0m (US$20.6m) and represented 58% of total revenues in Q1 2002, compared to 61% in Q1 2001, with salaries and benefits being the main item. The level of salaries and benefits increased in Q1 2002 in comparison to Q1 2001 mainly as a result of severance payments of PLN 0.9m and bonus provisions of PLN 2.5m created in accordance with the Key Employee Retention Plan bonus scheme based on the Restructuring Agreement and agreed upon by the Supervisory Board and Ad Hoc Committee of Noteholders.

Interconnection charges increased by 4% to PLN 29.4m (US$7.1m) in Q1 2002 from PLN 28.4m in Q1 2001. Interconnection charges as a percentage of calling charges decreased to 29% from 33%, reflecting the increased proportion of traffic carried through Netia's own backbone network.

Amortization of goodwill and other intangible assets increased to PLN 18.3m (US$4.4m) in Q1 2002 from PLN 15.1m in Q1 2001, mainly as a result of increased amortization of computer software as well as amortization of the Warsaw metropolitan license, which became operational in March 2001.

Depreciation of fixed assets increased by 26% to PLN 48.8m (US$11.8m) in Q1 2002, from PLN 38.8m in Q1 2001, as the construction stage of additional parts of the network was completed.

Net financial expenses increased to PLN 207.7m (US$50.3m) in Q1 2002 from PLN 20.3m in Q1 2001 due to foreign exchange losses resulting from the depreciation of the Polish zloty against the euro and dollar in Q1 2002 compared to the zloty's appreciation in Q1 2001 as well as higher interest costs connected with senior notes issued by Netia.

Net loss amounted to PLN 245.4m (US$59.4m) in Q1 2002, compared to a net loss of PLN 56.8m in Q1 2001. The higher loss was mainly attributable to an increase in net financial expenses and unrealized foreign exchange losses.

Cash used in investing activities decreased by 69% to PLN 92.1m (US$22.3m) in Q1 2002, from PLN 294.1m in Q1 2001, in accordance with the revised business plan approved in late 2001.

Cash and cash equivalents at March 31, 2002 amounting to PLN 389.2m (US$94.2m) were available to fund Netia's operations. The Company also had deposits in escrow amounting to PLN 49.1m (US$11.9m) at March 31, 2002 designed to service the interest payments on its 2000 Senior Notes in June 2002. In accordance with the Restructuring Agreement, these deposits will be transferred to the Company at the completion of restructuring.

Operational Review

Connected lines at March 31, 2002 increased by 0.2% to 527,562 lines, up from 526,402 lines at December 31, 2001. The number of connected lines decreased in comparison with the number reported for Q1 2001 due to the write-off of 70,200 lines recorded in the third quarter of 2001.

Subscriber lines in service increased by 4% to 342,288 at March 31, 2002 from 328,728 at March 31, 2001 and decreased by 0.4% from 343,802 at December 31, 2001. The number of subscriber lines is net of customer churn and disconnections of defaulting payers by the Company, which amounted to 7,145 and 7,299, respectively. The recorded churn was mostly a result of customers affected by the deterioration of Polish economic conditions, the uncertainties surrounding Netia's financial situation and customers moving outside the coverage of Netia's network.

Business lines as a percentage of total subscriber lines reached 29.4%, up from 25.0% at March 31, 2001 and 28.5% at December 31, 2001, reflecting the intensified focus on the corporate and SME market segments. Business customers accounted for all net additions in the quarter while the residential segment saw net disconnections. Revenues from business customers accounted for 57.1% of telecommunications revenues in Q1 2002.

Business customer lines in service increased by 22% to 100,563 at March 31, 2002 from 82,145 at March 31, 2001 and by 3% from 97,994 at December 31, 2001.

Average monthly revenue per line grew by 8% to PLN 130 (US$31) in March 2002, compared to PLN 120 in March 2001 and by 7% from PLN 122 in December 2001.

Average monthly revenue per business line amounted to PLN 251 (US$61) in March 2002, representing a 12% increase from PLN 225 in December 2001 and a 1% decrease from PLN 254 in March 2001.

Average monthly revenue per residential line increased by 5% to PLN 79 (US$19) in March 2002 from PLN 75 in March 2001 and decreased by 2% from PLN 81 in December 2001.

An integrated customer relationship management (CRM) system was launched in April 2002, the first integrated CRM system of any Polish telecom operator. This new initiative is designed to increase Netia customers' satisfaction while further reducing operating costs.

Intelligent Network (IN) services, including new free-phone and split-charge service offerings, were launched in February 2002. Netia is the first domestic long distance operator among the three competitors to the incumbent TP S.A. to launch IN services.

Netia's nationwide backbone network connecting Poland's twelve largest urban areas now stretches to 3,300 kilometers and consists of 2,250 kilometers of fiber and 1,050 kilometers of leased lines. Netia is constructing additional infrastructure, planned for completion in 2002, of approximately 960 kilometers to replace most of the present leased lines.

Headcount at March 31, 2002 was 1,362, compared to 1,635 at March 31, 2001 and 1,536 at December 31, 2001. During 2001 Netia made announcements on headcount reductions of approximately 20%, and finalization of this program is being carried out.

The number of active lines in service per employee increased by 21% to an average of 249 in Q1 2002, from 206 in Q1 2001. Monthly average telecommunications revenue per employee increased by 41% to PLN 34,357 in Q1 2002 from PLN 24,376 in Q1 2001.

License payments. The Polish Minister of Infrastructure decided on January 19, 2002 to postpone the payment of license fee installments of certain Netia operating subsidiaries, originally due in November and December 2001, until June 30, 2002. The total amount of the deferred installments is approximately EUR 33 million. The Minister of Infrastructure also established deferral fees, in the total amount of approximately PLN 9 million, for the re-scheduled license fee payments, payable on June 30, 2002. In May 2001, certain of our subsidiaries applied to the Ministry of Communications and the President of the Office for Regulation of Telecommunication ("URT") for confirmation that remaining license fee installments are not due and requesting the return of EUR 92 million in license fees paid by such subsidiaries. In parallel, Netia applied for a return of EUR 24 million in license fees paid for its domestic long distance license in April 2001.

Key Figures

* The US$ amounts shown in this table and in the entire document have been translated using the exchange rate of PLN 4.1321 = US$1.00, the average rate announced by the National Bank of Poland at March 31, 2002. These figures are included for convenience only.

** Net debt is defined as long term debt, including its current portion, less cash, restricted cash and both long and short term portion of escrow accounts.

Key operational indicators

* Following the general outline of the ten-year business plan and strategy to focus on providing services to business customers approved in late 2001, the number of connected lines reported for the third quarter 2001 has been recalculated in order to reflect the write-off of 70,200 connected lines due to the future limited utilization of certain existing parts of Netia's local access network.

Some of the information contained in this news release contains forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors. For a more detailed description of these risks and factors, please see the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 20-F filed with the Commission on March 28, 2002 and it Current Report on Form 6-K filed with the Commission on April 3, 2002. The Company undertakes no obligation to publicly update or revise any forward-looking statements.