Current reports

Warsaw, Poland - May 15, 2001 - Netia Holdings (NASDAQ: NTIA, WSE: NET), Poland's largest alternative provider of fixed-line telecommunications services, today announced unaudited results for the first quarter of 2001.

Financial highlights

• EBITDA for the first quarter 2001 improved by 55% to PLN 15.2 million (US$ 3.7 million) from PLN 9.8 million in the first quarter of 2000, and by 83% from PLN 8.3 million in the fourth quarter 2000. EBITDA margins for the first quarter 2001 improved to 12.3% as compared to 6.4% in the fourth quarter 2000.
  
  
• Total revenues for the first quarter 2001 increased by 29% to PLN 122.9 million (US$ 30.0 million) compared to PLN 95.2 million for the first quarter 2000 and decreased by 4.6% compared to PLN 128.8 million for the fourth quarter 2000.
  
  
• Revenues from telecom services for the first quarter 2001 increased by 33% to PLN 115.3 million (US$ 28.1 million) compared to PLN 87.0 million for the first quarter 2000, and decreased by 1.3% compared to PLN 116.8 million over the fourth quarter 2000. Core telecom revenues, which include revenues from calling charges as well as installation and monthly fees, increased by 31% compared to the first quarter 2000 and by 3% over the fourth quarter 2001.
  
  
• Investments in gross fixed assets and computer software at March 31, 2001 increased by 37% to PLN 2,782.1 million (US$ 678.6 million) compared to PLN 2,035.7 million at March 31, 2000, and by 3.9% compared to PLN 2,677.4 million at December 31, 2000, reflecting the continued build-out of Netia's network.
  
  
• At March 31, 2001, Netia had PLN 845.9 million (US$ 206.3 million) in cash (excluding restricted investments of PLN 196.1 million or US$ 47.8 million) as compared to PLN 1,142.9 million in cash and PLN 205.5 million in restricted investments at December 31, 2000.
  
  
• On January 18, 2001 and March 30, 2001, Netia entered into its second and third currency hedge transactions. To date, the coupon payments on debt of nearly US$ 700 million, representing approx. 80% of Netia's long-term debt denominated in foreign currencies, have been swapped into Polish zloty.
  
  
• Effective December 2000, several Netia subsidiaries were granted a deferral of license fee payments until the end of 2010. The amount deferred was EUR 44 million (approx. US$ 39 million at the March 31, 2001 exchange rate) in outstanding license fees.
  
  
• In April 2001, Netia filed for the return of EUR 24 million (approx. US$ 21 million) of fees paid to date in respect to its domestic long distance license.
  
  
• Effective May 1, 2001 Netia introduced changes to its telecommunications tariff, with an increase in monthly fees coupled with reductions in installation fees and domestic long distance rates.

Operational highlights

• Number of subscriber lines in service increased by 26% to 339,228 at March 31, 2001 from 268,912 at March 31, 2000, and 5.7% from 321,073 at December 31, 2000. The number of subscriber lines is net of customer churn and disconnections, which amounted to 4,728 and 10,856, respectively, for the first quarter 2001 compared to 2,358 and 10,385, respectively, for fourth quarter 2000.
  
  
• Business lines as a percentage of total subscriber lines reached 26.9%, up from 21.0% at March 31, 2000, and 25.3% at December 31, 2000. Business percentage of net additions for the first quarter 2001 reached 56%. Revenues from business customers accounted for 53.2% of telecommunications revenues in March 2001 as compared to 49.6% in December 2000.
  
  
• Number of business customer lines in service increased by 62% to 91,363 at March 31, 2001 from 56,530 at March 31, 2000, and by 12.6% from 81,137 at December 31, 2000.
  
  
• Average monthly revenue per line grew by 7.3% to PLN 117 (US$ 28.5) in the first quarter 2001, compared to PLN 109 in the first quarter 2000, and by 2.6% from PLN 114 in the fourth quarter 2000.
  
  
• In March 2001, Netia launched its services in the Warsaw metropolitan area. At March 31, 2001 Netia had in Warsaw 2,447 subscriber lines in service.
  
  
• At March 31, 2001, Internetia had 43,963 registered subscribers, in comparison with 36,500 at December 31, 2000, positioning it as the second largest dial-up Internet Service Provider in Poland. Average blended revenue per dial-up and call-back subscriber in March 2001 was PLN 29 (US$ 7.10).
  
  
• As a result of the difficulties encountered in finalizing the domestic long distance interconnection agreement with Telekomunikacja Polska S.A. (TP S.A.), Netia requested that the Telecommunications Regulatory Office ("URT") establish a deadline for completion. Simultaneously, Netia requested the refund of domestic long distance license fees of EUR 24 million paid to date.

Key Figures

* The US$ amounts shown in this table and in the entire document have been translated using the exchange rate of PLN 4.100 = US$ 1.00, the average rate announced by the National Bank of Poland at March 31, 2001. These figures are included for convenience only.

** Net debt is defined as long term debt less cash and both long and short term portion of escrow accounts.

^ Certain prior period amounts have been restated to reflect the impact of an adjustment to the nominal cost of licenses to reflect their net present values in accordance with IAS 38 "Intangible Assets".

Mattias Gadd, Netia's President and CEO, commented: "We are pleased with the first quarter's improvement in EBITDA, and with the successful launch of local voice services in Warsaw, Poland's largest telecoms market. Netia now operates in six of Poland's largest urban areas, and our backbone, which became operational at the end of last year, connects the top ten cities, supporting Netia's further development of competitive services, including wholesale capacity and carrier's carrier services. Revenue fell slightly due to continued promotional activities in the market, especially for the business segment, together with significant forced churn (disconnections) levels. However, the growth in core telecom revenues, which include revenues from calling charges as well as monthly and subscription fees was 3% when compared over the previous quarter.

"Netia's strategic review this quarter has resulted in our decision to further concentrate our resources in the short- and medium term on building leadership in the most profitable segments of the Polish telecoms market, particularly the corporate and SME segments, including selective data services as well as Internet services. Our main immediate priority is execution, with a particular focus on efficiency and operational performance improvements. With the recent tariff increases as well as the growing number of business customers coming on stream particularly in Warsaw, we expect further improvements in revenues and EBITDA for the rest of the year."

Commenting on the results, Avi Hochman, Chief Financial Officer of Netia, said: "Netia is consistently delivering growth in EBITDA, with a near doubling of both the EBITDA level and margin in the first quarter 2001 over the previous quarter. We are pleased with the increase in Average Revenue per Line, reflecting the growth of revenues from telephony services and our success in winning business customers. Total revenues were affected by the gradual phasing down of the Uni-Net radio trunking services. In addition, the revenues declined slightly due to one time revenue from disposal of assets in amount of PLN 2.6 million, which occurred in the previous quarter.

Revenues will be positively impacted, starting from the next quarter, as a result of the successful launch of local voice telecommunications services in Warsaw in March 2001, along with the new tariff introduced from May 1, 2001."

Financial Information

2001 First Quarter vs 2000 First Quarter
Total revenues increased by 29% to PLN 122.9 million (US$ 30.0 million) during the first quarter 2001, compared to PLN 95.2 million for the same period in 2000.

Revenues from telecommunications services increased by 33% to PLN 115.3 million (US$ 28.1 million) from PLN 87.0 million in the first quarter of 2000. The increase was primarily attributable to a 26.1% increase in the total number of subscribers to 339,228 at March 31, 2001 from 268,912 at March 31, 2000. Other contributing factors were the overall increase in average monthly revenue per line in the amount of PLN 117 (US$ 28.5) for the first quarter 2001, compared to PLN 109 for the first quarter 2000 due to increases in Netia's local tariff and monthly subscription fees in January 2000 (by 13% and 33%, respectively) and July 2000 (by 7% and 25%, respectively) as well as higher usage.

Earnings before interest, tax, depreciation and amortization (EBITDA) amounted to PLN 15.2 million or US$ 3.7 million compared with PLN 9.8 million in the first quarter of 2000.

Interconnection charges increased by 9% to PLN 28.4 million (US$ 6.9 million) from PLN 26.0 million. Interconnection charges as a percentage of calling charges decreased to 33.5% from 41.3%, reflecting the effect of direct interconnection to the mobile operators and increased proportion of traffic carried through Netia's own backbone network.

"Other operating expenses" amounted to PLN 75.0 million (US$ 18.3 million), with salaries and benefits as the main item; headcount at March 31, 2001 was 1,635, compared to 1,276 at March 31, 2000. Such "other operating expenses" represented 61.0% of total revenues at March 31, 2001, compared to 58.6% at March 31, 2000. Productivity continued to improve, as the number of active lines in service per employee increased by 4% to an average of 211 in the first quarter of 2001, from 202 in the first quarter of 2000. Monthly average telecommunications revenue per employee increased by 5% in the period to PLN 24,376 (US$ 5,945) from PLN 23,295.

Depreciation of fixed assets and amortization of licenses increased by 35% to PLN 47.6 million (US$ 11.6 million), from PLN 35.2 million, as the construction stage of additional parts of the network drew to completion. Net financial expenses decreased by 58% to PLN 20.3 million (US$ 5.0 million) due to an appreciation of the Polish zloty against the euro and dollar.

Net loss amounted to PLN 56.8 million (US$ 13.8 million), compared to a net loss of PLN 85.1 million at March 31, 2000. The loss reduction was mainly attributable to a decrease in financial expenses by PLN 28.6 million due to a more favorable exchange rate, and improved EBITDA by PLN 5.4 million.

The cash outflow from investing activities increased by 66% to PLN 294.1 million (US$ 71.7 million), from PLN 176.8 million for the same period of 2000.

Net cash used in the purchase of fixed assets and computer software amounted to PLN 239.4 million (US$ 58.4 million). Net fixed assets and computer software increased by 32% to PLN 2,470.1 million (US$ 602.4 million) as of March 31, 2001, compared to PLN 1,866.1 million at March 31, 2000, further reflecting the expansion of the network.

At March 31, 2001, Netia had cash and cash equivalents of PLN 845.9 million (US$ 206.3 million) available to be invested to support commercial activities and in building its telecommunications network. The Company had in addition deposits in escrow amounting to PLN 196.1 million (US$ 47.8 million) to service interest payments on its 1999 Senior Notes until June 2001, and 2000 Senior Notes until June 2002.

2001 First Quarter vs 2000 Fourth Quarter

Revenues for the quarter decreased by 4.6% to PLN 122.9 million (US$ 30.0 million) compared to PLN 128.8 million for the fourth quarter of 2000. This decrease was attributable to a 1.3% decrease in telecommunications revenues to PLN 115.3 million (US$ 28.1 million) compared to PLN 116.8 million for the fourth quarter 2000 due to in part the impact of promotional campaigns in the first quarter of 2001. Revenues for the quarter were also affected by a 36.7% decrease in other revenues, representing the operations of Uni-Net, a joint venture with Motorola offering radio trunking services, to PLN 7.6 million (US$ 1.9 million ) compared to PLN 12.1 million for the fourth quarter 2000.

Average monthly revenue per line increased by 2.6% to PLN 117 (USD 28.5) from PLN 114 in the fourth quarter of 2000. Average monthly revenue per business line increased by 3.1% to PLN 231 (USD 56.3) from PLN 224 in the previous quarter. Average monthly revenue per residential line decreased by 2.6% to PLN 75 (USD 18.3) from PLN 77 in the fourth quarter.

EBITDA for the quarter was PLN 15.2 million (US$ 3.7 million), compared to PLN 8.3 million for the fourth quarter 2000, representing an EBITDA margin of 12.3% as compared to 6.4% in the previous quarter.

Operational Review

The Company increased the number of connected lines by 25% to 553,798 lines at the end of first quarter 2001, up from 441,421 lines at March 31, 2000, and by 1.4% in the quarter, up from 546,309 lines at December 31, 2000.

Business lines as a percentage of total subscriber lines reached 26.9%, up from 21.0% at March 31, 2000, reflecting the intensified focus on the high value corporate and SME market segments.

In March 2001, Netia successfully launched its local voice services in the Warsaw metropolitan area. At March 31, 2001 there were 2,447 subscriber lines in service in Warsaw.

Netia is continuously developing its Internet offer and is now Poland's second largest dial-up Internet Service Provider with 43,963 registered subscribers at March 31, 2001, generating in March 2001 a blended average revenue per user of PLN 29 (US$ 7.1). Internetia.pl is one of the most often visited Polish portals. According to OBOP's survey for March 2001, Internetia.pl was ranked No. 4 among Polish portals (category: visit during last month).

In the fourth quarter 2000, Netia successfully put into operation its nationwide backbone network, which connects Poland's ten largest urban areas. This backbone network now stretches to 2,550 km and consists of 1,650 km own fiber lines and 900 km leased lines. Netia is constructing additional infrastructure, planned for completion in 2001, of approximately 850 km to replace most of the presently leased lines.

In January 2001, Netia received a favorable arbitration decision from the Polish Minister of Communications, which sets the interconnection rates for domestic long distance services. Netia has been ready for launch of domestic long distance services since the second half of 2000 and has finalized negotiations on the interconnection agreement with TP S.A. Although both TP S.A. and Netia approved and initialed the negotiated agreement in February 2001, TP S.A has not signed it to date. Netia has therefore requested that the Telecommunications Regulatory Office ("URT") establish a deadline for TP S.A. to sign the agreement. In addition, due to the inability to use the license and the opening of the market in 2002, Netia requested the URT to refund EUR 24 million of domestic long distance fees paid to date.

This press release contains certain statements of a forward-looking nature with respect to plans and projections of future performance of Netia, the occurrence of which involves certain risks and uncertainties including but not limited to product and market acceptance risks, the impact of comparative pricing, product development, commercialization and technology. Investors are directed to Netia's reports and documents filed from time to time with the US Securities and Exchange Commission, including Netia's Annual Report on Form 20-F for the year ended December 31, 2000, for additional factors that should be considered before investing in Netia's securities.

NETIA HOLDINGS is the largest alternative fixed-line telecommunications operator in Poland. Netia has 24 licenses for local telecommunications services in territories, covering some 15 million people or approximately 40% of the Polish population, which include the most economically advanced parts of the country. The Company's existing local telephone license territories cover six of the country's ten largest urban areas including Warsaw, Krakow, Poznan, Gdansk, Lublin and Katowice. Netia has also secured the benefit of a nationwide data and IP license to provide data transmission and Internet-based services. In May 2000, Netia 1 was issued a nationwide domestic long distance voice license.