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16 October 2001

Netia withdraws from acquisition of Millennium

Warsaw, Poland - October 16, 2001 - Netia Holdings S.A. (NASDAQ: NTIA, WSE: NET), Poland's largest alternative fixed-line telecommunications services provider, announced that it has decided to withdraw from the acquisition agreement to acquire the outstanding share capital of Millennium Communications S.A., a Warsaw-based provider of shared tenant telecommunications services in multi-tenant buildings, effective immediately.

Netia withdrew from the acquisition agreement, valued at up to US $20.2 million, depending on the financial performance of Millennium through the end of 2001, due to Millennium's refusal to perform its obligations under the agreement and Millennium's lack of response to Netia's final request on September 14, 2001 to perform its obligations.

On October 15, 2001, Netia modified its arbitration claim against Millennium in the proceedings initiated in December 2000 before the Arbitration Court in Warsaw, demanding compensation in the amount of PLN 8.5 million, and reserving the right to extend the scope of the arbitration claim in the future. In a separate court proceeding, Netia claims the repayment of PLN 11.5 million from Millennium.

NETIA HOLDINGS S.A. 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 was issued a nationwide domestic long distance voice license.