Netia and P4 sign service provisioning contract (conclusion of a material agreement)
WARSAW, Poland – December 8, 2007 – Netia SA (“Netia”) (WSE: NET), Poland’s largest alternative provider of fixed-line telecommunications services, today announced that on December 7, 2007, the Company concluded a service provision agreement (the “Agreement”) with its affiliate company P4 Sp. z o. o. with its seat in Warsaw (“P4”). The Agreement provides for cooperation with respect to:
· incorporation of P4’s mobile products and services to the offer available to Netia’s clients or/and
· introduction of a joint offer of fixed-line and mobile services
and the distribution of the said products by Netia, in its own name and on its own behalf.
The service provisioning agreement with P4 will allow Netia to offer both mobile and convergent products under its own brand. The expansion of Netia’s product portfolio with these services constitutes one of the Company’s strategic targets in reaching Netia’s goal to become the leading alternative provider for broadband services in Poland. The commercial launch of mobile and convergent services by Netia is planned for 2008.
This Agreement shall come into force upon obtaining by P4 a written approval from China Development Bank, and shall remain in force until December 31, 2022, or until P4 ceases to carry out its business activities in any form, whichever occurs later.
The Agreement may be terminated before the lapse of the above deadlines only in the cases provided for therein, and subject to the contractual notice periods.
Due to the fact that the cash flows under the contract will depend on the size of Netia’s future mobile service provisioning business, the Company is currently unable to specifically determine the exact value of the performances under the Agreement. The Company estimates the gross value of incomes and expenditures under the Agreement for the first five years to be approximately PLN 397 million. This amount exceeds 10% of Netia’s equity and hence it is a material agreement.
The Agreement contains clauses concerning contractual penalties. The maximum amount of the contractual penalties payable in the cases of major breach specified in the Agreement is the PLN equivalent of EUR 50 million. Either party breaching termination clauses or a failure by P4 to provide basic mobile products to Netia constitute major breaches of the agreement. The amount may be increased by penalties for the non-performance or inappropriate performance of the particular provisions of the Agreement. The payment of the contractual penalties does not prevent the parties from seeking damages based on general provisions of law.
The total liabilities of the parties for the non-performance or improper performance of the Agreement is limited to the actual amount of the damage, unless the damage results from wilful misconduct or gross negligence.
§5 section 1.3 o the Regulation of the Minister of Finance on the Current and Periodic Disclosures to be Made by Issuers of Securities dated 19 October 2005 (Journal of Laws of 2005, No. 209, item 1744).