Netia concludes an agreement on lease of the telecommunications infrastructure with its subsidiary Świat Internet SA
WARSAW, Poland – February 1, 2007 – Netia SA (“Netia”) (WSE: NET), Poland’s largest alternative provider of fixed-line telecommunications services, today announced that on February 1, 2007, it concluded an agreement with one of its wholly-owned subsidiaries operating under the business name Świat Internet Spółka Akcyjna (the “Company”), with regard to the lease of the elements of the telecommunications network, and including, in particular, telecommunications lines and ducts (the “Subject of Lease”), and the said agreement fulfills the criterion of a significant agreement.
Based on the agreement, Netia has leased from the Company certain elements of the telecommunications network, which had been previously contributed in kind by Netia to the Company (see Netia’s press releases dated January 23, 2007 and February 1, 2007). The lease fee is based on the operating costs, including depreciation, and a certain margin. The monthly lease fee is estimated at PLN 6,010,000. The agreement was concluded for a definite period of 15 years, commencing on February 1, 2007. The estimated aggregate amount of the rent for the whole period of the lease will amount to PLN 1,081,800,000.
In accordance with the agreement Netia is entitled to use the telecommunications infrastructure, described in the agreement, in the scope of carrying out its telecommunications activities, as well as any other related benefits.
On the basis of the agreement, Netia undertakes to perform the repairs and maintenance works on the telecommunications infrastructure as well as to perform all other activities in order to ensure the conservation of the Subject of the Lease in such condition which allows for the use of the Subject of the Lease for the purposes as described in the agreement. The outlays made in relation to the performance of the repairs and conservation works of the telecommunications infrastructure shall be born solely by Netia, which shall not reserve the right to re-bill this expense to the Company. Netia is entitled to modernize and expand the telecommunications infrastructure, which is the Subject of the Lease, including: the installation of the new telecommunications cables, ducts and other telecommunications equipment as described in the agreement. Within the scope of the exploitation of the telecommunications infrastructure, Netia is entitled to carry out the installment and development of the telecommunications equipment, which are functionally related to the Subject of the Lease, and which are, at the same time, necessary for the purpose of the provision of the telecommunications services, access services as well as any other services provided by Netia.
The modernisation or extension of the telecommunications infrastructure by Netia requires, at each instance, the mutual consent, as well as the acceptance, of the Company.
In the case of Netia’s performing any improvements to the Subject of Lease, the improvements will be retained by the Company and will remain within the Subject of Lease, unless the parties decide otherwise. In such a case the Company is obliged to pay for the benefit of Netia the amount equal to the amount of the outlays for the improvements, and the said amount will be established at the day of the agreement’s termination.
Each of the parties may terminate the agreement, due to important grounds, under a one-year notice period, effective as of the last day of a calendar month. The termination requires a written form or else is null and void. The parties agree that the important grounds for the termination of the agreement are: the discontinuance of providing telecommunications services by Netia; the change of strategy of the Netia group in Poland, causing the further binding of the agreement on present conditions either not compatible with the interest of the Netia group or seriously contravening to the interest of any of the parties; the technological changes within the exploitation of the telecommunications infrastructure, either causing the further execution of the agreement on present conditions impossible, or causing the lease to be unprofitable for any of the parties.
In case of severe infringement of the agreement’s provisions by any of the parties, and the failure to remedy the breach within 30 days upon the receipt of the written demand to remove the said infringement, the other party may terminate the agreement with an immediate effect. The termination must be made in writing or else null and void.
The above lease agreement was classified as significant based on the criterion of the total lease value throughout the 15 year period relative to current value of Netia’s equity.
The Company is a subsidiary of Netia – Netia owns the shares representing 99.99% of the share capital of the Company as well as 99.99% of the overall number of votes at the Company’s general shareholders’ meeting. Pro Futuro SA, Netia’s wholly-owned subsidiary, is the second shareholder of the Company, whose shares represent 0,01% of the Company’s share capital and 0,01% of votes at the general shareholders’ meeting. Moreover, the following persons being members of the bodies of the Company also serve in Netia’s bodies: Mr. Piotr Czapski, Mr. Paul Kearney and Mr. Jonathan Eastick – as management board members in both Netia and the Company; Mr. Piotr Nowak - as a proxy in Netia and a management board member in the Company; Mr. Paweł Karłowski and Mr. Tom Ruhan - as management board members in Netia and supervisory board members in the Company.
The leasing expenditures of Netia and the leasing incomes of the Company will have no impact on the consolidated group financial statements of Netia.