Current reports

Netia SA (“Netia” or the “Company”), announced in the current report No. 2/2008 dated 8 January 2008 that it had received an indicative expression of interest to purchase its indirect shareholding in affiliate P4 Sp. z o.o. (“P4”) and that it considered a sale of its equity interest in P4 as an alternative to issuing new equity as a means to fund Netia’s expansion plans in the Polish broadband market. The Company hereby informs that the indicative expression of interest was from Tollerton Investments Limited (“Tollerton”) and Novator Telecom Poland S.a.r.l (“Novator”).

Following preliminary negotiations, the Company, Tollerton and Novator today signed a non-binding letter of intent which they agreed the preliminary terms of the potential transaction, i.e. in particular:
(i) the price of EUR 130 million, payable in cash on closing;
(ii) the additional price payable to the Company in case of future change of control of P4 during 12 months after closing of the transaction;
(iii) the shares in P4 would be acquired indirectly, through the buyers’ acquisition from Netia of 100% of Netia Mobile Sp. z o.o., a fully owned holding company whose sole asset is a 23.4% stake in P4; and
(iv) assumptions of amendments to the trade contracts between the Company and P4, including the terms of the service provider agreement, the execution of which was notified by the Company in the current reports No. 81/2007 dated 8 December 2007 and 3/2008 dated 17 January 2008, to reflect the fact that following the transaction Netia will no longer be a shareholder of P4.

Having considered the findings of two valuations of Netia’s shareholding in P4, prepared by two independent expert advisors, the Management Board of the Company resolved to authorize the potential buyers to commence their due diligence on Netia Mobile Sp. z o.o., and to commence negotiations on the sale of the Company’s shareholding in P4. The price of Euro 130 million represents a 63% premium over the Euro 79.7 million of equity contributed by Netia to P4.

In Management’s opinion, the price offered by Tollerton and Novator is very attractive for a minority stake and, if the sale closes as anticipated, would provide the funding necessary for Netia to implement its broadband-driven growth strategy. Moreover, in line with its strategy, Netia expects to continue to leverage the results of its founding investment in P4 through the continuation of the existing UMTS Transmission and Mobile Service Provider contracts.

Netia’s Management received consent from the Supervisory Board to sign the above mentioned Letter of Intent. Supervisory Board members affiliated with P4’s majority shareholder, Constantine Gonticas and Bruce McInroy, neither participated in the Supervisory Board’s discussions nor voted on the resolution on this matter. Prior to the signing of the agreements, Management intend to obtain a fairness opinion and a further consent of the Supervisory Board is required prior to any binding agreements being executed.

Netia’s Management expects that P4 may make further equity calls during the course of 2008 of up to Euro 150 million as it continues to build its subscriber base and roll-out its network. As Netia anticipates disposal of its stake in P4 during the first quarter of 2008, Netia will not be making further equity contributions to P4 in the immediate future but the resulting potential dilution will have no impact on the anticipated sale transaction.

In accordance with the Letter of Intent it is the intention of the parties that binding contracts be exchanged and the transaction be closed by 31 March 2008.

Completion of the transaction will depend on satisfactory completion the due diligence on Netia Mobile Sp. z o.o. conducted by the potential buyers, and on all the detailed terms and conditions of the transaction being agreed in the form of a binding contract.