Current reports

Warsaw, Poland - August 7, 2001 - Netia Holdings (NASDAQ: NTIA, WSE: NET), Poland's largest alternative provider of fixed-line telecommunications services, today announced unaudited results for the second quarter and half year ended June 30, 2001.

Financial highlights

• EBITDA for the first half 2001 improved by 137% to PLN 31.1 million (US$ 7.8 million) from PLN 13.1 million for the first half of 2000. EBITDA for the second quarter 2001 improved by 385% to PLN 16.0 million (US$ 4.0 million) from PLN 3.3 million in the second quarter 2000, and by 6% from PLN 15.1 million in the first quarter 2001.
  
  
• EBITDA margin for the first half 2001 increased to 12.1% from 6.6% for the first half 2000. EBITDA margin for the second quarter 2001 amounted to 11.9% as compared to 3.1% in the second quarter 2000 and 12.3% in the first quarter 2001.
  
  
• Revenues from telecom services for the first half 2001 increased by 36% to PLN 241.9 million (US$ 60.7 million) compared to PLN 177.4 million for the first half 2000. Revenues for the telecom services for the second quarter 2001 increased by 40% to PLN 126.6 million (US$ 31.8 million) compared to PLN 90.4 million for the second quarter 2000, and by 10% compared to PLN 115.3 million for the first quarter 2001.
  
  
• Total revenues for the first half 2001 increased by 29% to PLN 257.2 million (US$ 64.5 million) from PLN 200.0 million for the first half 2000. Total revenues for the second quarter 2001 increased by 28% to PLN 134.3 million (US$ 33.7 million) compared to PLN 104.8 million for the second quarter 2000 and by 9% compared to PLN 122.9 million for the first quarter 2001.
  
  
• Investments in gross fixed assets and computer software at June 30, 2001 increased by 33% to PLN 2,890.4 million (US$ 724.9 million) compared to PLN 2,181.0 million at June 30, 2000, and by 4% compared to PLN 2,782.1 million at March 31, 2001, reflecting the continued and increasingly targeted build-out of Netia's network.
  
  
• At June 30, 2001 Netia had PLN 664.2 million (US$ 166.6 million) in cash, excluding restricted investments of PLN 90.3 million (US$ 22.6 million) as compared to PLN 845.9 million (US$ 212.2 million) in cash and PLN 196.1 million (US$ 49.2 million) in restricted investments at March 31, 2001.
  
  
• 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. In addition, on August 1, 2001 Netia launched its long distance service with a competitive pricing plan.

Operational highlights

• Number of subscriber lines in service increased by 23% to 353,262 at June 30, 2001 from 286,259 at June 30, 2000 and by 4% from 339,228 at March 31, 2001. The number of subscriber lines is net of customer churn and disconnections by the company, which amounted to 6,589 and 4,898, respectively, for the second quarter 2001 and 11,324 and 11,316, respectively, for the first six months of 2001.
  
  
• Business lines as a percentage of total subscriber lines reached 28.6 %, up from 22.1% at June 30, 2000, and 26.9% at March 31, 2001. Business percentage of net additions for the second quarter 2001 reached 68.5%. Year-to-date revenues from business customers accounted for 52.1% of telecommunications revenues at the end of June 2001.
  
  
• Number of business customer lines in service increased by 60% to 100,982 at June 30, 2001 from 63,217 at June 30, 2000, and by 11% from 91,363 at March 31, 2001.
  
  
• Average monthly revenue per line grew by 8% to PLN 116 (US$ 29.1) in June 2001, compared to PLN 107 (US$ 26.8) in June 2000, and decreased by 1% from PLN 117 (US$ 29.3) in March 2001.
  
  
• On August 1, 2001 Netia launched its domestic long distance voice services based on indirect access in fifteen of Poland's forty nine numbering zones, following the signing on May 18, 2001 of a domestic long distance interconnection agreement with TPSA for these zones. The focus in the initial stage will be offering these services to business customers.
  
  
• In March 2001, Netia launched its local voice services in the Warsaw metropolitan area. At June 30, 2001, there were 3,679 business subscriber lines in service in Warsaw. Netia is currently constructing local access infrastructure in Warsaw. As of June 30, 2001, seven radio access base stations were installed and 40 kilometers of fiber-optic network had been constructed.
  
  
• At June 30, 2001, Internetia had 50,789 registered subscribers, compared to 12,030 at June 30, 2000 and 43,963 at March 31, 2001, making it the second largest dial-up Internet Service Provider in Poland. Average blended revenue per dial-up and call-back subscriber in June 2001 was PLN 22.
  
  
• Effective May 17, 2001, Telia appointed three new members to the Netia Supervisory Board. The changes within the Netia Supervisory Board followed the organizational change within Telia effective April 1, 2001. Effective August 7, 2001 Mr. Morgan Ekberg, Executive Vice President, Business Area Networks at Telia, was appointed to become the new chairman of the Netia Supervisory Board.

Key Figures

* The US$ amounts shown in this table and in the entire document have been translated using the exchange rate of PLN 3.9871 = US$ 1.00, the average rate announced by the National Bank of Poland at June 30, 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: "Against today¿s tougher macroeconomic environment in Poland, Netia has continued to deliver solid revenue and EBITDA growth levels. While facing increased competition in some market segments and longer lead times for winning new business customers due to the slowing economy, we have continued to make important progress in the marketplace, including entry into Warsaw and the launch of domestic long distance services based on indirect access.

"Netia¿s management has taken steps to increase efficiency which should begin to have a positive impact during the fourth quarter of this year. In addition, management has undertaken measures to ensure efficient deployment of capital resources, with a view to further strengthening the focus on projects of strategic importance. We have also taken steps to ensure long-term funding of Netia¿s business plan and discussions are under way among Netia¿s shareholders, including Telia and Warburg Pincus, in preparation for the next round of funding. Lastly, we welcome Morgan Ekberg¿s appointment as the new chairman of Netia¿s supervisory board and look forward to working with him."

Financial Information

2001 Year to Date vs 2000 Year to Date

Total revenues increased by 29% to PLN 257.2 million (US$ 64.5 million) during the first half 2001, compared to PLN 200.0 million for the same period in 2000.

Revenues from telecommunications services increased by 36% to PLN 241.9 million (US$ 60.7 million) from PLN 177.4 million for the first half of 2000. The increase was primarily attributable to a 23% increase in the total number of subscribers to 353,262 at June 30, 2001 from 286,259 at June 30, 2000. Other contributing factors were the overall increase in average monthly revenue per line by 8% to the amount of PLN 116 (US$ 29) for June 2001, compared to PLN 107 for June 2000 mainly due to increases in Netia¿s monthly subscription fees in July 2000 (by 25%) and May 2001 (an increase by 36% and 40% respectively depending on a tariff plan).

Earnings before interest, tax, depreciation and amortization (EBITDA) amounted to PLN 31.1 million (US$ 7.8 million) compared with PLN 13.1 million for the first half of 2000.

Interconnection charges increased by 9% to PLN 58.1 million (US$ 14.6 million) from PLN 53.4 million for the first half of 2000. Interconnection charges as a percentage of calling charges decreased to 34% from 41%, 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 161.8 million (US$ 40.6 million) and represented 63% of total revenues at June 30, 2001, compared to 61% at June 30, 2000. This increase was driven by salary increase in April 2001, reflecting an adjustment to market levels and inflation, and temporarily higher charges for leased lines due to the backbone network¿s extension.

Headcount at June 30, 2001 was 1,639, compared to 1,350 at June 30, 2000 and 1,626 at December 31, 2000.

Productivity continued to improve, as the number of active lines in service per employee increased by 4% to an average of 216 in the first half of 2001, from 207 in the first half of 2000. Monthly average telecommunications revenue per employee increased by 10% in the period to PLN 25,352 (US$ 6,359) from PLN 23,034.

Depreciation of fixed assets increased by 63% to PLN 81.9 million (US$ 20.5 million), from PLN 50.3 million for the first half of 2000, as the construction stage of additional parts of the network drew to completion. Net financial expenses decreased by 95% to PLN 12.4 million (US$ 3.1 million) from PLN 226.6 due to an appreciation of the Polish zloty against the euro and dollar and the recognition of a PLN 191.3 million (US$ 48.0 million) foreign exchange gains.

Net loss amounted to PLN 101.8 million (US$ 25.5 million), compared to a net loss of PLN 291.9 million for the same period in 2000. The loss reduction for the first half of 2001 was mainly attributable to a decrease in net financial expenses of PLN 214.2 million due to a more favorable exchange rate, and to an improvement in EBITDA of PLN 18.0 million and was offset by increased depreciation expense.

The cash outflow from investing activities decreased by 38% to PLN 444.2 million (US$ 111.4 million) for the first half of 2001, from PLN 714.2 million for the same period of 2000 with net cash used for the purchase of fixed assets and computer software in the amount of PLN 388.1 million (US$ 97.3 million) for the first half of 2001.

Net fixed assets and computer software increased by 27% to PLN 2,533.4 million (US$ 635.4 million) as of June 30, 2001, compared to PLN 1,987.3 million at June 30, 2000, mainly further reflecting the expansion of the network.

At June 30, 2001, Netia had cash and cash equivalents of PLN 664.2 million (US$ 166.6 million) available to fund its operating losses, capital expenditures and network expansion as well as license and debt service obligations. The Company had in addition deposits in escrow amounting to PLN 90.3 million (US$ 22.6 million) to service interest payments on its 2000 Senior Notes until June 2002.

2001 First Quarter vs 2000 Fourth Quarter

Revenues for the second quarter 2001 increased by 9% to PLN 134.3 million (US$ 33.7 million) compared to PLN 122.9 million for the first quarter of 2001. This increase was attributable to a 10% increase in telecommunications revenues to PLN 126.6 million (US$ 31.8 million) compared to PLN 115.3 million for the first quarter 2001 and a 1% increase in other revenues, representing the operations of Uni-Net, a joint venture with Motorola offering radio trunking services, to PLN 7.7 million (US$ 1.9 million) compared to PLN 7.6 million for the first quarter 2001.

Average monthly revenue per line decreased by 1% to PLN 116 (USD 29.1) in June 2001 from PLN 117 in March 2001. Average monthly revenue per business line decreased by 10% to PLN 209 (USD 52.4) from PLN 231 in March 2001 as a result of lower usage and higher pricing discounts, reflecting in part a more challenging macroeconomic environment. Average monthly revenue per residential line increased by 5% to PLN 79 (USD 19.8) from PLN 75 in March 2001.

EBITDA for the quarter was PLN 16.0 million (US$ 4.0 million), compared to PLN 15.1 million for the first quarter 2001, representing an EBITDA margin of 11.9% as compared to 12.3% in the previous quarter. The decrease in EBITDA margin for the quarter was caused by salary increases made in April 2001, aimed at adjusting salaries to the local market¿s levels and inflation, as well as temporarily higher expenses for leased lines rental charges due to the backbone network¿s extension.

Operational Review

The Company increased the number of connected lines by 23% to 576,012 lines at the end of the second quarter 2001, up from 470,006 lines at June 30, 2000, and by 4% in the quarter, up from 553,798 lines at March 31, 2001.

Business lines as a percentage of total subscriber lines reached 28.6%, up from 26.9% at March 31, 2001, reflecting the intensified focus on the high value corporate and SME market segments.

On August 1, 2001 Netia launched its domestic long distance voice services. The services, addressed primarily to the business customer base, will be initially provided in 15 numbering zones, including, among others, Poland¿s top ten cities. Netia has already applied to Telekomunikacja Polska S.A. to provide its interconnection so that Netia can offer domestic long distance indirect services country-wide. In addition, Netia filed with the Court of Warsaw a claim against the State Treasury of the Republic of Poland and the Ministry of Communications for compensation in the amount of PLN 183 million (approximately EUR 54 million or $46 million) for delays that prevented the timely launch of its domestic long distance (DLD) services.

In March 2001, Netia successfully launched its local voice services in the Warsaw metropolitan area. At June 30, 2001 there were 3,679 subscriber lines in service in Warsaw. Netia is constructing currently a local access infrastructure in Warsaw. As of June 30, 2001, seven radio access base stations were installed and 40 kilometers of fiber-optic network constructed.

Netia is continuously developing its Internet offer and is now Poland¿s second largest dial-up Internet Service Provider with 50,789 registered subscribers at June 30, 2001, generating in June 2001 a blended average revenue per user of PLN 22. According to OBOP's survey for May 2001, Internetia.pl was ranked No. 4 in the category "most frequently visited portal".

In the second quarter 2001, Netia increased its nationwide backbone network to connect Poland¿s twelve largest urban areas. This backbone network now stretches to 3,100 kilometers and consists of 1,850 kilometers of fiber and 1,250 kilometers of leased lines. Netia is constructing additional infrastructure, planned for completion in 2001, of approximately 850 kilometers to replace most of the presently leased lines.

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. In August 2001, Netia launched its domestic long distance services based on indirect access. Netia has also secured the benefit of a nationwide data and IP license to provide data transmission and Internet-based services.