Netia acquires alternative telecom carrier El-Net S.A.
WARSAW, Poland – January 29, 2004 – Netia S.A. (“Netia”) (WSE: NET), Poland's largest alternative provider of fixed-line telecommunications services, today announced the acquisition of Regionalne Sieci Telekomunikacyjne El-Net S.A. (“El-Net”), marking an important step in Netia’s consolidation of the Polish telecommunications market. El-Net is a one of the largest alternative fixed-line telecommunications operators in Poland, providing services to over 61 thousand customers, including 17 thousand business customers, located in the cities of Warsaw and Bydgoszcz. El-Net’s product portfolio includes fixed-line telephony, ISDN, Internet access, leased lines and cable TV services. In 2003 El-Net expects to report approximately PLN 115 million in revenues and PLN 24 million in EBITDA. Approximately 59% of El-Net’s voice service revenues are from business customers. This acquisition represents an evolution of Netia’s cooperation with other alternative carriers. Netia and El-Net already work together on the basis of several specific commercial contracts as well as within a three-party general cooperation agreement that also includes the alternative operator Dialog, signed in 2002. Commenting on the acquisition, Wojciech Madalski, Netia’s Chief Executive Officer, said: “The acquisition of El-Net is in line with Netia’s strategy to double revenues by 2008 based on a superior customer proposition supplemented by M&A activity. Following our acquisition of TDC Internet Polska (currently Świat Internet) last year, this transaction confirms Netia’s role as a leading player in the sector’s consolidation. “Netia has been successfully attracting business customers and growing revenues from value-added / advanced telecommunications solutions. The combined company will have a stronger base to deliver continued revenue growth and margin improvements. In addition to the new foothold in Bydgoszcz, the acquisition strengthens Netia’s position within its business customer base in Warsaw.” Zbigniew Łapiński, Netia’s Chief Financial Officer, said: “Netia purchased 100% of El-Net’s share capital and all of the long-term liabilities to its parent, Elektrim Telekomunikacja Sp. z o.o., and the consortium of banks for a price of PLN 96.5 million. We financed this transaction from internal resources and will include El-Net in Netia’s consolidated financial statements for the first quarter of 2004. The transaction will allow for financial restructuring of El-Net’s debt. In addition, El-Net has applied to convert its outstanding license fee liabilities of around EUR 114 million into the investments in telecom infrastructure. We intend to merge Netia’s and El-Net’s operations in a manner similar to the recently completed process involving Świat Internet.”
Details of the transaction On January 29, 2004, Netia purchased through its wholly-owned subsidiary Netia Ventures Sp. z o.o., with its seat in Warsaw (“Ventures”), from Tele-Tech Investment Sp. z o.o., with its seat in Warsaw (“Tele-Tech”), 3,100,000 (three million one hundred thousand) ordinary registered shares of Regionalne Sieci Telekomunikacyjne El-Net S.A. (the “El-Net Shares”), with a nominal value of PLN 310,000,000 (three hundred and ten million), representing 100% of the share capital and authorizing their holder to exercise 100% of votes at the shareholders’ meeting of Regionalne Sieci Telekomunikacyjne El-Net S.A., with its seat in Warsaw (“El-Net”). Further, Ventures, purchased from BRE Bank S.A., with its seat in Warsaw (“BRE”) certain receivables from El-Net under certain loans granted by its previous shareholders and affiliates at a principal amount of PLN 570.0 million increased by the due interests, secured by registered pledges on El-Net’s property in Warsaw (the “El-Net Receivables”) and receivables from El-Net under a syndicated bank loan for a principal amount of PLN 160.0 million increased by the due interests, secured by registered pledges on El-Net’s property in Warsaw and Bydgoszcz (the “Loan Receivables”). The price paid by Netia for all of the purchased interests was PLN 96.5 million, and the costs of the transaction are approximately 3% of the purchase price. The value of the transaction does not exceed 10% of the value of the equity of Netia. Netia financed the purchase from its own funds. The investment in the El-Net Shares has a long-term nature. Neither Netia nor the members of its management or supervisory bodies have any relations with Tele-Tech or BRE, or the members of their respective management or supervisory bodies. According to unaudited financial information, as at December 31, 2003, El-Net’s total license fee obligations, which are subject to a similar restructuring process as that applied to Netia, whose license fees were cancelled in December 2003, amount to approximately EUR 114 million (PLN 540 million at the exchange rate prevailing on January 28, 2004). El-Net’s long-term liabilities, excluding license fee liabilities and liabilities to Netia resulting from the purchase of El-Net receivables by Ventures, are below PLN 3 million. El-Net’s current liabilities (including a bank loan amounting to less than PLN 1 million), decreased by its current receivables and cash and cash equivalents, are below PLN 21 million.
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, its Current Report dated August 13, 2003, its Current Report dated September 23, 2003, its Current Report dated October 1, 2003, its Current Report dated November 4, 2003 and its Current Report dated November 6, 2003 , its Current Report dated November 6, 2003 and its Current Report dated December 29, 2003. Netia undertakes no obligation to publicly update or revise any forward-looking statements.