Current reports

• Revenues for 2002 were PLN 604.4m (US$157.4m), a year-on-year increase of 12%. Revenues for Q4 2002 were PLN 154.0m (US$40.1m), an increase of 6% from Q4 2001.
• Adjusted EBITDA (before the provisions for impairment of long term assets) for 2002 was PLN 155.2m (US$40.4m), representing an adjusted EBITDA margin of 26% and a year-on-year increase of 154%. Adjusted EBITDA for Q4 2002 was PLN 34.2m (US$8.9m), with an adjusted EBITDA margin of 22%.
• Non-cash exceptional item charges totaling PLN 149.4m (US$38.9m) affected financial results for 2002. These items were related to provision for impairment of long term assets of PLN 108.7m (US$28.3m) recorded in Q3 2002 and an additional charge of PLN 40.7m (US$10.6m) recorded in Q4 2002.
• Cash at December 31, 2002 was PLN 132.5m (US$34.5m), excluding restricted cash and cash equivalents of PLN 254.2m (US$66.2m).
• Successful financial restructuring led to an increase in consolidated shareholders' equity to PLN 2,802.3m (US$730.0m) at the end of Q4 2002 compared to shareholders' deficit of PLN 343.2m in Q4 2001. Netia's long-term debt was reduced by PLN 3.9bn (US$1.0bn), and the company's post-restructuring debt obligations are EUR 49.9m. Details of our debt-for-equity swap transactions are provided in "Restructuring and Other Highlights" on page 3.  

• Netia's nationwide backbone network is comprised of 3,840 km as of December 31, 2002.
• Subscriber lines decreased to 341,160 net of churn and disconnections, a year-on-year decrease of 1%.
• Business customer lines increased to 105,638, a year-on-year increase of 8%. Subscriber lines for our business segment grew to 31% of total subscriber lines while revenues from business customers accounted for 57% of telecom revenues in 2002.
• New, more competitive tariff plans for international long-distance connections were introduced on November 1, 2002 and January 2, 2003.
• Average revenue per line decreased by 6% to PLN 115 in December 2002, compared to PLN 122 in December 2001 as a result of a decrease in tariffs. On the other hand, revenues benefited from increased sales of data, carrier's carrier and other non-direct voice services.
• Headcount decreased to 1,289 at December 31, 2002 from 1,536 at December 31, 2001 as a result of management's program of cost reduction initiated in August 2001.

Wojciech Madalski, Netia's President and Chief Executive Officer commented: "Netia has emerged from 2002 as a healthy company on course for solid financial performance. On the operational side, our 2002 results confirm that our business model works - the annual revenues continue to grow at double digits, cost reduction programs show good progress, adjusted EBITDA margin has improved steadily from the negative level three years ago to a very respectable 26% and capital spending has been curtailed to focus on the most relevant projects.

"On the corporate funding side, we have completed the financial restructuring and can show a very strong balance sheet, and we are now focused on achieving profitability within a reasonable timeframe. As a result, I believe that Netia is well positioned to capitalize on business opportunities presented by the growing Polish telecoms market."

Avi Hochman, Chief Financial Officer of Netia, added: "Revenues grew 12% over 2001 and 6% in the fourth quarter as Netia benefited from the growth of its fixed line services to business customers. Adjusted EBITDA margin in the fourth quarter dipped from the levels seen in Q2 and Q3, due to investment in marketing and advertising and traditional cost increases at the end of the year. "We have also seen positive developments for Netia in the financial markets. The debt-for-equity swap has been completed and reflected in the consolidated financial statements for 2002. As a result, the consolidated balance sheet reflects shareholders equity of PLN 2.8 billion and debt of PLN 161.8 million (excluding license fee obligations), a reduction of PLN 3.9 billion. The new shares commenced trading on the Warsaw Stock Exchange on February 13, 2003. In addition, we are pleased that Nasdaq will permit us to re-apply for a quotation of our shares. "Netia intends to merge most of its operating subsidiaries into the parent company due to changes in the legal environment regarding telecommunications licenses following the introduction of a new telecommunications law in 2001 (which we expect will create a cost savings for us). Netia plans to write-off its telecommunication licenses when the Company has started to implement its plan to consolidate its operating subsidiaries."

• The Restructuring Agreement relating to Netia's debt restructuring, entered into by Netia, Telia AB, certain companies controlled by Warburg Pincus & Co., certain financial creditors and the ad hoc committee of noteholders on March 5, 2002 (the "Restructuring Agreement"), continues to be implemented. Pursuant to the Restructuring Agreement, the following milestones have been achieved:
  
  - All necessary share, warrant and notes issuances in Netia's restructuring have been approved by its shareholders. On December 2, 2002, Netia published its Polish prospectus relating to the issuance and registration of new shares (series H, J and K shares) and notes pursuant to the Restructuring Agreement.
  - 312,626,040 series H shares at the price of PLN 1.0826241 per share were allocated to those creditors who opted to subscribe for them in accordance with the agreed terms of Netia's restructuring on December 23, 2002. The series H shares represent approximately 91% of Netia's share capital. Following the registration of the capital increase on January 30, 2003, Netia has share capital of PLN 344,045,212 (344,045,212 shares issued and outstanding at PLN 1 par value per share). Series H shares commenced trading on the Warsaw Stock Exchange (separately from Netia's other series of shares and under the ticker "NET2") on February 13, 2003.
  - EUR 49.9m in aggregate principal amount of 10% Senior Secured Notes due 2008 were issued in exchange for the outstanding notes of Netia Holdings B.V. and Netia Holdings II B.V. and obligations from swap transactions entered into by Netia Holdings III B.V. on December 23, 2002, in accordance with the agreed terms of the restructuring and the composition plans for each of Netia's Dutch subsidiaries.
  Warrants to acquire shares representing 15% of Netia's post-restructuring share capital (series J shares) will be issued to the holders of record of Netia's shares on the day preceding the subscription for series H shares. Additionally, up to 5% of the post-restructuring share capital, excluding shares to be issued upon exercise of the warrants related with series J shares, will be issued under a key employee stock option plan (series K shares). The issuance of warrants for series J and issuance of series K shares will complete the restructuring process.
• Changes within Netia's Supervisory Board. Effective January 15, 2003, Netia's Supervisory Board consists of the following 10 members: Nicholas N. Cournoyer (Chairman of the Supervisory Board), Jaroslaw Bauc, Morgan Ekberg, Richard James Moon, Andrzej Radziminski, Ewa Maria Robertson Andrzej Michal Wiercinski, Jan Henrik Ahrnell, Przemyslaw Jaronski and Hans Tuvehjelm. As of the date of the registration by the Polish court of the changes to Netia's Statute adopted by the Extraordinary General Meeting of Shareholders on January 15, 2003, Jan Henrik Ahrnell, Przemyslaw Jaronski and Hans Tuvehjelm will cease to be members of Netia's Supervisory Board.
• Changes within Netia's Management Board. Effective February 7, 2003, Dariusz Wojcieszek resigned from his position as member of Netia's Management Board.
• The Extraordinary Shareholders' Meeting of Netia Holdings S.A. held on January 15, 2003 adopted resolutions on (i) changes of Netia's Statute, (ii) changes of the composition of Netia's Supervisory Board, (iii) rules regulating compensation of members of Netia's Supervisory Board, and (iv) establishing security interests over Netia's assets in connection with EUR 49.9m Senior Secured Notes due 2008 issued by Netia Holdings B.V. These resolutions were adopted in connection with the restructuring of the Netia group companies.
• Netia's American Depositary Shares may be re-quoted on The Nasdaq SmallCap Market upon completion of a review of Netia's application by the Nasdaq Listing Qualifications Department. Netia's Management Board has decided to file such an application.
• License fee payments totaling approximately PLN 195.4m (US$50.9m) due on December 31, 2002 were not made. Following the changes introduced into the Polish telecommunications law in December 2002, Netia has filed for canceling all outstanding license fees totaling PLN 323.5m (US$84.3m) based on capital expenditures it has already incurred.
• The internal consolidation of operating subsidiaries was approved by Netia's Supervisory Board in December 2002. This process is expected to result in most operating companies being merged into the parent company, thus reducing management costs and simplifying both operational and financing arrangements.
• Redemption of the outstanding Senior Secured Notes due 2008 (the "Notes") with an aggregate principal amount of EUR 49.9m was approved by Netia's Supervisory Board on February 13, 2003, following the recommendation of Netia's Management Board. The decision was driven by the sufficient cash position and concerns over (i) the high costs of servicing the debt and of establishing the security for the Notes as required by the Indenture governing the Notes and (ii) the substantial restrictions imposed by the Indenture covenants on Netia's flexibility to operate its business. The Notes were issued on December 23, 2002 in connection with Netia's financial restructuring. Netia expects to redeem the Notes by the end of March 2003.

Key Figures