The rationale for merger between Netia and its subsidiaries
WARSAW, Poland – September 15, 2003 – Netia S.A. (“Netia” or the “Company”) (WSE: NET), Poland’s largest alternative provider of fixed-line telecommunications services today announced the rationale for its merger with Netia’s subsidiaries, in connection with the ongoing process of internal consolidation of the Netia group companies (the ”Netia Group”). The following announcement is made in accordance with the requirements of the Polish law and follows the announcement of terms of the Company’s merger with its subsidiaries (the “Consolidation Plan”) on July 22, 2003.
Report by the Management Board of Netia S.A. providing the rationale for the Company’s consolidation with its subsidiaries
This Report by the Company’s Management Board is prepared pursuant to Art. 501 of the Polish Commercial Companies Code (the “Code”) in connection with a contemplated consolidation by transferring all assets of the following companies (the “Merging Companies”) to Netia, the surviving entity, to be effected in accordance with the Consolidation Plan: Netia Telekom S.A. Netia South Sp. z o.o. Netia Telekom Mazowsze S.A. Netia Telekom Warszawa S.A. Netia Telekom Modlin S.A. Netia Telekom Lublin S.A. Netia Telekom Ostrowiec S.A. Netia Telekom Świdnik S.A. Netia Telekom Toruń S.A. Netia Telekom Włocławek S.A. Netia Telekom Kalisz S.A. Netia Telekom Piła Sp. z o.o. Netia Telekom Silesia S.A. Netia Telekom Telmedia S.A. Optimus Inwest S.A. Netia Network S.A. Telekom Building Sp. z o.o. Netia 1 Sp. z o.o. Telko Sp. z o.o.
1. Rationale The main rationale justifying the Company’s consolidation with the Merging Companies is to optimize the utilization of the assets concentrated in the Netia Group in order to maximize economic results. The simplification of the Netia Group’s structure by merging Netia’s wholly owned subsidiaries into Netia is further justified by the intention of making the Netia Group management more efficient and increase the efficiency of its consolidated entities.
2. Legal Grounds for the Consolidation The consolidation shall be carried out in accordance with Art. 492 §1 point 1 of the Code, in connection with Art. 515 §1 of the Code, by way of transferring all assets of the Merging Companies to Netia without increasing Netia’s share capital, without any conversion of shares and without amending Netia’s Statute. As at the date of this report, Netia owns 100% of the share capital of all Merging Companies.
3. Economic Grounds The existing organizational structure of the Netia Group is based on the multi-entity holding structure controlled by Netia S.A. Such structure was justified historically as it was a consequence of the previous telecommunications law, which prevented the concentration of multiple licenses by one entity. Presently, under amended telecommunications law it is no longer necessary to create complex holding structures in order to conduct licensed telecommunications activities. The Netia Group conducts its activities as a functional whole and the existence of individual companies is dependent upon their close mutual cooperation. The contemplated consolidation was preceded by a debt restructuring of the Netia Group as well as changes in the ownership structure of the entities operating within the group through the buy-out of minority shareholders of Netia’s subsidiaries and the transfer to Netia of shares in companies indirectly controlled by Netia. Further simplification of the Netia Group structure will result in increased efficiency of the management of Netia Group’s policy and operations as well as the management of its resources. The Netia Group’s internal consolidation will help increase profitability, reduce general management and financial costs, and increase competitiveness. Efficient management, concentrated assets and simplified structure will result in the strengthening of the Company’s position in the market. The contemplated transparent organizational structure will also help increase the Company’s value, thus protecting the best interests of the Company’s shareholders.
4. Conversion Rate for the Shares Netia’s consolidation with the Merging Subsidiaries will be effected without any increase in Netia’s share capital, without any conversion of shares and without any amendments to Netia’s Statute. In view of the foregoing, the determination of a conversion rate for the shares is unnecessary.
Some of the information contained in this news release contains forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors. For a more detailed description of these risks and factors, please see Netia's filings with the Securities and Exchange Commission, including its Annual Report on Form 20-F filed with the Commission on June 27, 2003, its Current Report on Form 6-K filed with the Commission on June 30, 2003, its Current Report on Form 6-K filed with the Commission on August 8, 2003 and a current report dated August 13, 2003. Netia undertakes no obligation to publicly update or revise any forward-looking statements.