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21 February 2013

Management Board intends to recommend a new distribution policy (7/2013)

The Management Board of Netia S.A. (“Netia”, the “Company”) considers the introduction of a long-term distribution policy from 2013 onwards.

Whilst the Netia Group is cash generative, high depreciation charges in the near term and the on-going possibility of impairment charges from annual impairment tests make net earnings of the Company relatively volatile. In these circumstances, the Management Board’s intention is to make distributions to the shareholders as regularly as legally possible.

For 2013 Management Board intends to propose to the Supervisory Board that approximately PLN 128m (approximately PLN 0.35 per share equivalent) be returned to the shareholders through the buy-back of the remaining 4.2% of the Company’s share capital authorized under a shareholders’ buyback resolution taken in 2011. Subject to the approval of the Supervisory Board, the buy-back would be conducted through an offer for the purchase by Netia of its shares directed to all the shareholders of the Company at a significant premium to the current market price.

Depending on the evolution of distributable reserves in Netia, which stand at PLN 481m and represent the key constraint on future distributions, Management may use dividends or offers to purchase shares directed to all shareholders or capital redemptions to facilitate payments to shareholders. Based on its free cash flow projections, Management estimates that the Company may distribute up to PLN 145m, approximately PLN 0.40 per share from 2014 onwards with some scope to moderately increase payments over time.

With due regard to continuing acquisition opportunities and given the ambitious targets to stabilise the Residential segment during 2013, Management intends to keep leverage below 1,0x Adjusted EBITDA in the medium term to maintain flexibility.
The form of the distribution to be made in 2013 is under consultation. Management’s recommendation of this distribution policy is subject to Supervisory Board’s approval and shareholders voting where applicable.