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24 June 2004

The terms of merger between Netia and its subsidiaries

WARSAW, Poland. - June 24, 2004 - Netia SA (“Netia”, “Company”) (WSE: NET), Poland’s largest alternative provider of fixed-line telecommunications services, announced today that as part of the ongoing process of internal consolidation of Netia subsidiaries (the “Netia Group”) a decision has been made, in accordance with Article 492, section 1 subsection 1 of the Polish Commercial Companies Code (“CCC”), to merge the Company with its wholly owned subsidiaries which have their registered seats in Warsaw and which operate under the following names:
  • Regionalne Sieci Telekomunikacyjne El-Net SA;
  • Netia Świat SA; and
  • Polbox Sp. z o.o. (the “Acquired Companies”).

    The purpose of the internal consolidation is to simplify and make the Netia Group’s capital structure more transparent. The Management Board believes that this will positively impact the Netia Group’s operations and, in particular, facilitate the implementation of the five-year strategic plan (see current report No. 051/2003 of May 22, 2003). The above mentioned Acquired Companies, except for Regionalne Sieci Telekomunikacyjne El-Net SA, do not conduct telecommunications operations. Consequently, the Company’s Management Board and the Acquired Companies’ Management Boards executed on June 24, 2004 an agreement implementing the following Terms of Merger. "Terms of Merger
    1. The merger applies to the publicly listed company Netia Spółka Akcyjna with its registered seat in Warsaw (hereinafter “Netia”) (the acquiring company) and its single shareholder companies (the acquired companies) with their seats in Warsaw, operating under the following names: (i) Regionalne Sieci Telekomunikacyjne El-Net SA, (ii) Netia Świat SA, (iii) Polbox Sp. z o.o., hereinafter jointly referred to as the “Companies”.
    2. The merger shall be carried out pursuant to Article 492, §1, subsection 1 of the Commercial Companies Code (hereinafter the “CCC”) in relation to Article 515, §1 of the CCC through the transfer of the Companies’ assets to Netia without any increase in Netia’s share capital, without any share exchanges and without amending Netia’s Statute.
    3. As the merger shall not involve an exchange of the Companies’ shares into Netia’s shares, the information required under Article 499, §1, subsections 2 – 4 of the CCC has been omitted as unnecessary.
    4. The merger shall not result in any of the rights referred to in Article 499 §1 subsection 5 of the CCC being granted, nor any special benefits as referred to in Article 499 §1 subsection 6 of the CCC.
    5. Pursuant to Article 499 §2 of the CCC, the following documents are attached as Schedules to these Terms of Merger:
      1. a draft resolution of Netia’s general meeting on the merger (Schedule No. 1);
      2. draft resolutions of the Companies’ General Meetings or Meetings of Shareholders on the merger (Schedule No. 2);
      3. an appraisal of the Acquired Companies’ assets as of May 31, 2004 (Schedule No. 3);
      4. a representation containing information on Netia’s accounting statement made as of May 31, 2004 (Schedule No. 4);
      5. a representation containing information on the Companies’ accounting statements made as of May 31, 2004 (Schedule No. 5).”
    Below please find the material Schedules to the Terms of Merger concerning Netia:
    1. a draft resolution of Netia’s general meeting on the merger;
    2. a representation containing information on Netia’s accounting statement made as of May 31, 2004.

    The Company's Management Board notes that the information relating to the assets the Acquired Companies, as well as the representations containing information on Netia's and the Acquired Companies' accounting statements as referred to above, have been made exclusively for the purposes of the internal consolidation of the Netia Group, do not constitute the financial statements of Netia or the Acquired Companies. The consolidated financial statement of the Netia Group for the second quarter of 2004 shall be published on August 13, 2004 (see current report No. 6/2004 of January 30, 2004).

    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, as well as Current Reports on Form 6-K it has furnished to the Commission since filing its Annual Report. Netia undertakes no obligation to publicly update or revise any forward-looking statements.