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22 February 2008

The execution of an agreement to sell Netia Mobile’s 23.4% interest in P4 for EUR130 million (the conclusion of a material agreement) (11/2008)

WARSAW, Poland, February 22, 2008: Netia SA (the “Company”), Poland’s largest alternative provider of fixed-line telecommunications services, announced that on February 22, 2008 the Company concluded an agreement to sell the 23.4% interest in P4 sp. z o.o. (“P4”) held by the Company’s subsidiary, Netia Spółka Akcyjna UMTS S.K.A. (“Netia”) (formerly Netia Mobile sp. z o.o.) to Tollerton Investments Limited (“Tollerton”) and Novator Telecom Poland S.a.r.l (“Novator”).

The Company announced in the current report No. 4/2008 dated January 31, 2008 that it had signed a non-binding letter of intent to sell all Netia’s shares in P4 (presently representing 23.4% of P4 share capital) for the price of EUR 130 million to Tollerton and Novator.

Following negotiations, the Company, Tollerton and Novator today signed a binding agreement in which the Company agreed to sell 1,605 of Netia’s shares in P4 to Tollerton (presently representing 3% of P4 share capital) and 10,914 of Netia’s shares in P4 to Novator (presently representing 20.4% of P4 share capital), on the following terms:
(i) the price of EUR 130 million, payable in cash on closing;
(ii) an additional amount payable to the Company in case of a future change of control over P4 or the disposal of the enterprise of P4 by Tollerton and Novator during the 12 months after signing of the agreement;
(iii) The agreement foresees changes to be made to the commercial agreements between the Company and P4 that will bring them into line with non-related party agreements (such changes to be executed after the closing).

The completion of the transaction is dependant on the satisfaction or waiver of the following conditions precedent:
(i) the Company and Netia receive from China Development Bank, Comverse Limited and Huawei the release and confirmation of the full discharge from all obligations and liability of the Company and Netia under the CDB Facility Agreement and subordinate agreements (see current report dated October 31, 2006). The Company is entitled to waive this condition and upon such waiver Tollerton, Novator will be obliged to indemnify the Company and Netia for all loses incurred under the Facility Agreement and subordinate agreements;
(ii) the Company receives confirmation from P4’s Facility Agent stating that the Facility Agent has received a duly-executed Accession Deed together with the documents required by the Share Retention Agreement. By executing the Accession Deed the new shareholder of P4 assumes all rights and duties of the former shareholder under the Guarantee and Share Retention Agreement (see current report dated October 31, 2006);
(iii) the audited financial statements of Novator One L.P. indicate that its net assets comply with the required net asset level as specified in the Share Retention Agreement (see current report dated October 31, 2006);
The sale agreement does not contain clauses regarding contractual penalties.

On February 21, 2008 the management board of the Company received the unanimous consent of the Supervisory Board of the Company to sign the agreement described above. Supervisory Board members affiliated with P4’s majority shareholder (Novator), Constantine Gonticas and Bruce McInroy, neither participated in the Supervisory Board’s discussions nor voted on the resolution on this matter.

In Management’s opinion, the price of Euro 130 million is very attractive for a minority stake and will provide the funding necessary for the Company to implement its broadband-driven growth strategy. Moreover, in line with its strategy, the Company expects to continue to leverage the results of its founding investment in P4 through the continuation of existing UMTS Transmission and Mobile Service Provider contracts. Management reached this opinion partly on the basis of a fairness opinion received on February 21, 2008 from ING Bank N.V. who acted as financial advisor to the Company with respect to the transaction.

The fairness opinion is attached to this current report. 

The total price for the P4 shares is EUR 130 million (which is subject to increase if certain conditions are fulfilled), which exceeds 10% of the Company equity and hence the sale is a material agreement.

Legal basis:
§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).