UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

Date: May 7, 2003

NETIA HOLDINGS S.A.
-------------------------------------------------------------------------------
(Translation of registrant's name into English)

UL. POLECZKI 13
02-822 WARSAW, POLAND
-------------------------------------------------------------------------------
(Address of principal executive office)

[Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.] Form 20-F |X| Form 40-F |_|

[Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.] Yes |_| No |X|

EXPLANATORY NOTE

Attached are the unaudited condensed consolidated financial statements for Netia
Holdings S.A. and its subsidiaries ("Netia", "the Company", or "we") as at and
for the three-month period ended March 31, 2003, together with certain
additional information concerning Netia. We have prepared the unaudited
condensed consolidated financial statements in accordance with International
Financial Reporting Standards ("IFRS").

PART I
FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SUPERVISORY BOARD AND SHAREHOLDERS
OF NETIA HOLDINGS S.A.

We have reviewed the accompanying condensed consolidated balance sheets of Netia
Holdings S.A. and its subsidiaries (the "Company") as at March 31, 2003, and the
related condensed consolidated statements of operations, changes in
shareholders' equity / (deficit) and cash flows for the three-month periods
ended March 31, 2003 and 2002. These condensed consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
issue a report on these condensed consolidated financial statements based on our
review.

We conducted our review in accordance with the International Standard on
Auditing applicable to review engagements. This standard requires that we plan
and perform the review to obtain reasonable assurance as to whether the
financial statements are free of material misstatement. A review is limited
primarily to inquiries of company personnel and analytical procedures applied to
financial data and thus provides less assurance than an audit. We have not
performed an audit and, accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe
that the accompanying condensed consolidated financial statements have not been
properly prepared, in all material respects, in accordance with International
Accounting Standard 34 "Interim Financial Reporting."

The convenience translations are disclosed as part of the condensed consolidated
financial statements. The convenience translations have been presented in US
dollars, as a matter of arithmetic computation using the official rate of the
National Bank of Poland at March 31, 2003 of PLN 4.0512 to US dollar 1.00. We
have not audited these translations and accordingly we do not express an opinion
thereon. The US dollar amounts presented in these condensed consolidated
financial statements should not be construed as a representation that the PLN
amounts have been or could have been converted to US dollars at this rate or at
any other rate.

We previously audited in accordance with International Standards on Auditing and
auditing standards generally accepted in the United States of America, the
consolidated balance sheet of the Company as at December 31, 2002 and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the year then ended, presented herein for comparative
purposes. In our report dated February 13, 2003, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the condensed consolidated balance sheet as of December
31, 2002 and the related condensed consolidated statements of operations,
changes in shareholders' equity and cash flows for the year then ended, is
fairly stated in all material respects in relation to the consolidated financial
statements from which it has been derived.

PricewaterhouseCoopers Sp. z o.o.

Warsaw, Poland

May 6, 2003

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)

MARCH 31, DECEMBER 31,
2003 2002
NOTE (UNAUDITED) (AUDITED)
---------- -------------------- -------------------
(PLN) (PLN)

ASSETS

CURRENT ASSETS
Cash and cash equivalents.............................................. 110,855 132,465
Restricted investments, cash and cash equivalents...................... 61,534 254,211
Accounts receivable....................................................
Trade, net of allowance for doubtful accounts of PLN 44,825 and PLN
45,278........................................................... 103,451 87,067
Government - value added tax........................................ 7,311 2,374
Other............................................................... 4,823 8,147
Inventories 1,329 854
Prepaid expenses....................................................... 14,527 8,260
-------------------- -------------------
TOTAL CURRENT ASSETS................................................... 303,830 493,378

Investments............................................................ 834 1,663
Fixed assets, net...................................................... 4 2,217,781 2,245,917
Intangible assets......................................................
Licenses, net....................................................... 5 625,264 639,176
Computer software, net.............................................. 111,258 112,685
Other long term assets................................................. 95 -
-------------------- -------------------

TOTAL ASSETS........................................................... 3,259,062 3,492,819
==================== ===================

/s/ Wojciech Madalski
- -------------------------
Wojciech Madalski
President of the Company

/s/ Zbigniew Lapinski
- --------------------------
Zbigniew Lapinski
Chief Financial Officer

Warsaw, Poland
May 6, 2003

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)

CONVENIENCE TRANSLATION
(UNAUDITED)
-------------------------------------
MARCH 31, DECEMBER 31,
NOTE 2003 2002
---------- ----------------- ------------------
(USD) (USD)

ASSETS

CURRENT ASSETS
Cash and cash equivalents.............................................. 27,363 32,698
Restricted investments, cash and cash equivalents...................... 15,189 62,750
Accounts receivable....................................................
Trade, net of allowance for doubtful accounts of USD 11,065 and USD
11,176........................................................... 25,536 21,492
Government - value added tax........................................ 1,805 586
Other............................................................... 1,191 2,011
Inventories............................................................ 328 211
Prepaid expenses....................................................... 3,586 2,039
----------------- ------------------
TOTAL CURRENT ASSETS................................................... 74,998 121,787

Investments............................................................ 206 410
Fixed assets, net...................................................... 4 547,438 554,383
Intangible assets......................................................
Licenses, net....................................................... 5 154,340 157,774
Computer software, net.............................................. 27,463 27,815
Other long term assets................................................. 23 -
----------------- ------------------

TOTAL ASSETS........................................................... 804,468 862,169
================= ==================

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)

MARCH 31, DECEMBER 31,
NOTE 2003 2002
(UNAUDITED) (AUDITED)
---------- -------------------- -------------------
(PLN) (PLN)

LIABILITIES

CURRENT LIABILITIES
Short term liabilities for licenses..................................... 5 231,586 211,247
Accounts payable and accruals...........................................
Trade................................................................ 55,647 89,864
Accruals and other................................................... 99,716 85,805
Deferred income......................................................... 8,537 6,956
-------------------- -------------------
TOTAL CURRENT LIABILITIES............................................... 395,486 393,872

Long term liabilities for licenses 5 118,689 112,260
Long term debt.......................................................... 6 - 161,756
Long term installment obligations....................................... 5,276 5,141
-------------------- -------------------
TOTAL LIABILITIES 519,451 673,029

Commitments and contingencies........................................... 12 - -

Minority interest....................................................... 17,578 17,499

SHAREHOLDERS' EQUITY 7
Share capital (nominal par value of PLN 1 and PLN 6 per share,
respectively)........................................................ 344,046 203,285
Share premium .......................................................... 1,885,730 1,713,865
Treasury shares......................................................... (2,812) (2,812)
Other reserves.......................................................... 3,507,086 3,819,712
Accumulated deficit..................................................... (3,012,017) (2,931,759)
-------------------- -------------------
TOTAL SHAREHOLDERS' EQUITY ............................................. 2,722,033 2,802,291
-------------------- -------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................. 3,259,062 3,492,819
==================== ===================

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)

CONVENIENCE TRANSLATION
(UNAUDITED)
------------------------------------------
MARCH 31, DECEMBER 31,
NOTE 2003 2002
---------- -------------------- -------------------
(USD) (USD)

LIABILITIES

CURRENT LIABILITIES
Short term liabilities for licenses..................................... 5 57,166 52,145
Accounts payable and accruals...........................................
Trade................................................................ 13,737 22,182
Accruals and other................................................... 24,614 21,180
Deferred income......................................................... 2,107 1,717
-------------------- -------------------
TOTAL CURRENT LIABILITIES............................................... 97,624 97,224

Long term liabilities for licenses 5 29,296 27,710
Long term debt.......................................................... 6 - 39,929
Long term installment obligations....................................... 1,302 1,269
-------------------- -------------------
TOTAL LIABILITIES 128,222 166,132

Commitments and contingencies........................................... 12 - -

Minority interest....................................................... 4,339 4,319

SHAREHOLDERS' EQUITY 7
Share capital (nominal par value of PLN 1 and PLN 6 per share,
respectively)........................................................ 84,924 50,179
Share premium .......................................................... 465,474 423,051
Treasury shares......................................................... (694) (694)
Other reserves.......................................................... 865,691 942,859
Accumulated deficit..................................................... (743,488) (723,677)
-------------------- -------------------
TOTAL SHAREHOLDERS' EQUITY ............................................. 671,907 691,718
-------------------- -------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................. 804,468 862,169
==================== ===================

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(ALL AMOUNTS IN THOUSANDS)

THREE-MONTH THREE-MONTH YEAR ENDED
PERIOD ENDED PERIOD ENDED
MARCH 31, 2003 MARCH 31, 2002 DECEMBER 31,
(UNAUDITED) (UNAUDITED) 2002
NOTE (AUDITED)
--------- ------------------ ------------------- -------------
(PLN) (PLN) (PLN)

REVENUE
Telecommunication services revenue
Direct voice services.............................. 122,500 127,686 503,058
Installation fees................................ 269 352 1,162
Monthly fees..................................... 30,618 31,868 126,366
Calling charges.................................. 91,613 95,466 375,530
Local calls.................................. 31,308 33,743 126,276
Domestic long distance calls................. 18,563 17,817 72,447
International long distance calls............ 7,106 8,473 33,747
Fixed-to-mobile.............................. 28,532 28,921 118,388
Other........................................ 6,104 6,512 24,672
Indirect voice..................................... 13,362 4,773 34,628
Data............................................... 7,490 4,125 20,468
Interconnection revenue............................ 1,451 1,700 6,248
Wholesale services................................. 11,178 3,143 23,769
Other telecommunication revenue.................... 2,801 1,030 8,557
------------------ ------------------- -----------------
158,782 142,457 596,728

Other revenue: 2,522 5,803 16,264
------------------ ------------------- -----------------
TOTAL REVENUE 161,304 148,260 612,992

COSTS
Interconnection charges................................. (31,021) (31,082) (126,088)
Salaries and benefits................................... (24,778) (30,282) (105,218)
Social security costs................................... (4,473) (4,824) (18,152)
Legal and financial services............................ (19,062) (18,123) (72,255)
Sales and marketing expenses............................ (7,833) (2,981) (20,816)
Cost of rented lines and network maintenance............ (8,306) (14,210) (45,470)
Depreciation of fixed assets ........................... (48,899) (48,774) (194,634)
Amortization of other intangible assets................. (20,240) (18,290) (74,046)
Impairment provision for fixed assets................... - - (149,353)
Other operating expenses................................ (22,229) (16,668) (69,768)
------------------ ------------------- -----------------
LOSS FROM OPERATIONS.................................... (25,537) (36,974) (262,808)

Financial expense, net.................................. 8 (54,493) (207,677) (417,570)
------------------ ------------------- -----------------
LOSS BEFORE INCOME TAX.................................. (80,030) (244,651) (680,378)
Income tax charge....................................... (148) (651) (1,903)
------------------ ------------------- -----------------
LOSS BEFORE MINORITY INTEREST........................... (80,178) (245,302) (682,281)
Minority share in (profits) / losses of subsidiaries.... (80) (105) 7,309
------------------ ------------------- -----------------
NET LOSS................................................ (80,258) (245,407) (674,972)
================== =================== =================

BASIC AND DILUTED
LOSS PER SHARE (not in thousands).................... 9 (0.23) (7.96) (17.89)
================== =================== =================

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(ALL AMOUNTS IN THOUSANDS)

CONVENIENCE TRANSLATION (UNAUDITED)
-----------------------------------------------------------
THREE-MONTH THREE-MONTH YEAR ENDED
PERIOD ENDED PERIOD ENDED
MARCH 31, 2003 MARCH 31, 2002 DECEMBER 31,
NOTE 2002
--------- ------------------ ------------------ -----------------
(USD) (USD) (USD)

REVENUE
Telecommunication services revenue
Direct voice services.............................. 30,238 31,517 124,175
Installation fees................................ 66 87 287
Monthly fees..................................... 7,558 7,866 31,192
Calling charges.................................. 22,614 23,564 92,696
Local calls.................................. 7,728 8,329 31,170
Domestic long distance calls................. 4,582 4,398 17,883
International long distance calls............ 1,754 2,091 8,330
Fixed-to-mobile.............................. 7,043 7,139 29,223
Other........................................ 1,507 1,607 6,090
Indirect voice..................................... 3,298 1,178 8,548
Data............................................... 1,849 1,018 5,052
Interconnection revenue............................ 358 420 1,542
Wholesale services................................. 2,759 776 5,867
Other telecommunication revenue.................... 691 254 2,112
------------------ ------------------- ----------------
39,193 35,163 147,296

Other revenue: 623 1,432 4,015
------------------ ------------------- ----------------
TOTAL REVENUE 39,816 36,595 151,311

COSTS
Interconnection charges................................. (7,657) (7,672) (31,124)
Salaries and benefits................................... (6,116) (7,475) (25,972)
Social security costs................................... (1,104) (1,191) (4,481)
Legal and financial services............................ (4,705) (4,473) (17,835)
Sales and marketing expenses............................ (1,934) (736) (5,138)
Cost of rented lines and network maintenance............ (2,050) (3,508) (11,224)
Depreciation of fixed assets ........................... (12,070) (12,039) (48,044)
Amortization of other intangible assets................. (4,996) (4,515) (18,278)
Impairment provision for long term assets............... - - (36,866)
Other operating expenses................................ (5,487) (4,114) (17,222)
------------------ ------------------- ----------------
LOSS FROM OPERATIONS ................................... (6,303) (9,128) (64,873)

Financial expense, net.................................. 8 (13,451) (51,263) (103,073)
------------------ ------------------- ----------------
LOSS BEFORE INCOME TAX.................................. (19,754) (60,391) (167,946)
Income tax charge....................................... (37) (161) (470)
------------------ ------------------- ----------------
LOSS BEFORE MINORITY INTEREST........................... (19,791) (60,552) (168,416)
Minority share in (profits) / losses of subsidiaries.... (20) (26) 1,804
------------------ ------------------- ----------------
NET LOSS................................................ (19,811) (60,578) (166,612)
================== =================== ================

BASIC AND DILUTED
LOSS PER SHARE (not in thousands).................... 9 (0.06) (1.96) (4.42)
================== =================== ================

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY /(DEFICIT)
(ALL AMOUNTS IN THOUSANDS)

TOTAL
SHARE SHARE TREASURY OTHER ACCUMULATED SHAREHOLDERS'
NOTE CAPITAL PREMIUM SHARES RESERVES DEFICIT EQUITY
------- ------------ -------------- ------------ ------------- ------------- -------------
(PLN) (PLN) (PLN) (PLN) (PLN) (PLN)

BALANCE AS AT DECEMBER 31, 2002 (AUDITED). 203,285 1,713,865 (2,812) 3,819,712 (2,931,759) 2,802,291

Registration of series H shares........... 312,626 25,831 - (338,457) - -

Transfer of shares issuance costs
up to the amount of share premium...... - (25,831) - 25,831 - -

Decrease of nominal value of shares....... 6 (171,865) 171,865 - - - -

Net loss.................................. - - - - (80,258) (80,258)
------------ -------------- ------------ ------------- --------------- --------------
BALANCE AS AT MARCH 31, 2003 (UNAUDITED).. 344,046 1,885,730 (2,812) 3,507,086 (3,012,017) 2,722,033
============ ============== ============ ============= =============== ==============

TOTAL
SHAREHOLDERS'
SHARE SHARE TREASURY OTHER ACCUMULATED EQUITY /
CAPITAL PREMIUM SHARES RESERVES DEFICIT (DEFICIT)
------------ ------------- ------------ ------------ --------------- --------------
(PLN) (PLN) (PLN)
(PLN) (PLN) (PLN)

BALANCE AS AT JANUARY 1, 2002 (AUDITED) ...... 203,285 1,713,865 (3,611) - (2,256,787) (343,248)

Net loss...................................... - - - - (245,407) (245,407)
------------ ------------- ------------ ------------ --------------- --------------
BALANCE AS AT MARCH 31, 2002 (UNAUDITED)...... 203,285 1,713,865 (3,611) - (2,502,194) (588,655)
============ ============= ============ ============ =============== ==============

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL AMOUNTS IN THOUSANDS)

THREE-MONTH THREE-MONTH YEAR ENDED
PERIOD ENDED PERIOD ENDED DECEMBER 31,
MARCH 31, 2003 MARCH 31, 2002 2002
NOTE (UNAUDITED) (UNAUDITED) (AUDITED)
---------- ------------------ ------------------ ------------------
(PLN) (PLN) (PLN)

Cash flows from operating activities:
NET LOSS (80,258) (245,407) (674,972)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation of fixed assets and amortization of
goodwill, licenses and other intangible assets....... 69,139 67,064 268,680
Amortization of notes issuance
costs.................. 1,265 - 127
Amortization of discount on installment obligations... 136 - -
Write-off of notes issuance costs..................... 6 41,161 - -
Interest expense accrued on license liabilities....... 2,125 4,969 22,595
Interest expense accrued on long term debt............ 1,127 102,995 220,428
Minority share in profits / (losses) of subsidiaries.. 80 105 (7,309)
Impairment provision for long term assets............. 4 - - 149,353
Increase in long term assets.......................... (95) - -
Other provisions...................................... 886 - -
Foreign exchange losses on translation of long term
debt and restricted investments..................... 9,055 103,788 195,914
Changes in working capital............................ (20,449) (3,490) 23,660
------------------ ------------------ ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................ 24,172 30,024 198,476
Cash flows provided by / (used in) investing activities:
Purchase of fixed assets and computer software........ (37,311) (92,062) (270,548)
Decrease / (increase) of restricted cash and cash
equivalents.......................................... 6 199,293 - (197,744)
------------------ ------------------ ------------------
NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES.... 161,982 (92,062) (468,292)
Net cash used in financing activities:
Redemption of notes................................... (204,193) - -
Payments related to restructuring..................... (4,475) (20,487) (80,394)
Payments for cancellation of swap transactions........ - (29,279) (29,279)
------------------ ------------------ ------------------
NET CASH USED IN FINANCING ACTIVITIES.................... (208,668) (49,766) (109,673)

EFFECT OF EXCHANGE RATE CHANGE ON CASH
AND CASH EQUIVALENTS................................ 904 14,057 25,008

NET CHANGE IN CASH AND CASH EQUIVALENTS.................. (21,610) (97,747) (354,481)

Cash and cash equivalents at beginning of period......... 132,465 486,946 486,946
------------------ ------------------ ------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD............... 110,855 389,199 132,465
================== ================== ==================

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL AMOUNTS IN THOUSANDS)

SUPPLEMENTAL DISCLOSURES:

THREE-MONTH THREE-MONTH YEAR ENDED
PERIOD ENDED PERIOD ENDED
DECEMBER 31,
MARCH 31, 2003 MARCH 31, 2002 2002
(UNAUDITED) (UNAUDITED) (AUDITED)
----------------- ------------------ ------------------
(PLN) (PLN) (PLN)

Income taxes paid ........................... - - 1,273

NON-CASH INVESTING ACTIVITIES:

The Company incurred the following liabilities at the end of each period
that were related to fixed asset or construction in progress additions:
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED
DECEMBER 31,
MARCH 31, 2003 MARCH 31, 2002 2002
(UNAUDITED) (UNAUDITED) (AUDITED)
------------------ ------------------ ------------------
(PLN) (PLN) (PLN)

35,756 100,179 52,952

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL AMOUNTS IN THOUSANDS)

CONVENIENCE TRANSLATION
(UNAUDITED)
-----------------------------------------------------------
THREE-MONTH THREE-MONTH YEAR ENDED
PERIOD ENDED PERIOD ENDED
MARCH 31, 2003 MARCH 31, 2002 DECEMBER 31,
NOTE 2002
---------- ------------------ ------------------ ------------------
(USD) (USD) (USD)

Cash flows from operating activities:
NET LOSS (19,811) (60,578) (166,612)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation of fixed assets and amortization of
goodwill, licenses and other intangible assets....... 17,066 16,554 66,321
Amortization of notes issuance
costs.................. 312 - 31
Amortization of discount on installment obligations... 34 - -
Write-off of notes issuance costs..................... 6 10,160 - -
Interest expense accrued on license liabilities....... 525 1,227 5,577
Interest expense accrued on long term debt............ 278 25,423 54,412
Minority share in profits / (losses) of subsidiaries.. 20 26 (1,804)
Impairment provision for long term assets............. 4 - - 36,866
Increase in long term assets.......................... (23) - -
Other provisions...................................... 219 - -
Foreign exchange losses on translation of long term
debt and restricted investments..................... 2,235 25,620 48,360
Changes in working capital............................ (5,049) (861) 5,840
------------------ ------------------ ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................ 5,966 7,411 48,991
Cash flows provided by / (used in) investing activities:
Purchase of fixed assets and computer software........ (9,210) (22,725) (66,782)
Decrease / (increase) of restricted cash and cash
equivalents.......................................... 6 49,194 - (48,811)
------------------ ------------------ ------------------
NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES.... 39,984 (22,725) (115,593)
Net cash used in financing activities:
Redemption of notes................................... (50,403) - -
Payments related to restructuring..................... (1,105) (5,057) (19,844)
Payments for cancellation of swap transactions........ - (7,227) (7,227)
------------------ ------------------ ------------------
NET CASH USED IN FINANCING ACTIVITIES.................... (51,508) (12,284) (27,071)

EFFECT OF EXCHANGE RATE CHANGE ON CASH
AND CASH EQUIVALENTS................................ 223 3,470 6,173

NET CHANGE IN CASH AND CASH EQUIVALENTS.................. (5,335) (24,128) (87,500)

Cash and cash equivalents at beginning of period......... 32,698 120,198 120,198
------------------ ------------------ ------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD............... 27,363 96,070 32,698
================== ================== ==================

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

SUPPLEMENTAL DISCLOSURES:

CONVENIENCE TRANSLATION
(UNAUDITED)
----------------------------------------------------------
THREE-MONTH THREE-MONTH YEAR ENDED
PERIOD ENDED PERIOD ENDED
DECEMBER 31,
MARCH 31, 2003 MARCH 31, 2002 2002
----------------- ------------------ ------------------
(USD) (USD) (USD)

Income taxes paid............................ - - 314

NON-CASH INVESTING ACTIVITIES:

The Company incurred the following liabilities at the end of each period
that were related to fixed asset or construction in progress additions:

CONVENIENCE TRANSLATION
(UNAUDITED)
-----------------------------------------------------------
THREE-MONTH THREE-MONTH YEAR ENDED
PERIOD ENDED PERIOD ENDED
DECEMBER 31,
MARCH 31, 2003 MARCH 31, 2002 2002
------------------ ------------------ ------------------
(USD) (USD) (USD)

8,826 24,728 13,071

The accompanying notes are an integral part of these condensed consolidated
financial statements.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

1. THE COMPANY

Netia Holdings S.A. (the "Company", "Netia" or "Netia Holdings") was formed
in 1990 as a limited liability company under the laws of Poland and was
transformed into a joint stock company in 1992. The Company is engaged through
its subsidiaries (together: the "Netia Group") in the design, construction and
operation of modern digital telecommunication and data transmission networks.

The Company's subsidiaries obtained licenses from the Ministry of
Communications of Poland ("MOC") for the provision of local telephone services
in areas including six of the Poland's largest cities - Warsaw, Gdansk, Krakow,
Poznan, Katowice and Lublin. One of the Company's subsidiaries, Netia 1 Sp. z
o.o. ("Netia 1"), obtained a license for domestic long distance telephone
services. As of January 1, 2001, pursuant to the new Telecommunication Act
("NTA"), all telephone licenses were converted by virtue of law into
telecommunication permits. The Netia Group's backbone network that connects the
largest Polish cities as well as its local access networks currently allows for
provision of various voice telephone services. These services include switched,
fixed-line voice telephone service (including domestic long distance,
international long distance and fixed-to-mobile services), Integrated Services
Digital Network ("ISDN"), voice mail, dial-up and fixed-access Internet, leased
lines, Voice over Internet Protocol ("VoIP") and co-location services. The Netia
Group launched wholesale services, including the wholesale termination of
in-bound traffic, in early 2001. In September 2001, the Netia Group began
offering frame relay services. The Netia Group is one of the two operators in
Poland offering, since February 2002, services based upon an Intelligent
Network: Freephone ("0800") and Split Charge ("0801"). We offer data
transmission services utilizing network operated by our wholly-owned subsidiary
Netia Network S.A. ("Netia Network"). In the second half of 2002 the Netia Group
started offering duct, dark fibber and capacity leasing and co-location
services. In accordance with provisions of NTA liberalizing the market for
international long-distance calls, as of January 1, 2003 the Company started to
offer international long distance services in selected zones, based on standard
lines, in addition to alternative service based on VoIP technology, which were
offered previously. The Netia Group commenced offering "0-708" premium rate
services in April 2003. The Netia Group is also engaged in the installation and
supply of specialized mobile radio services (public trunking) in Poland through
its 58.2% owned subsidiary, Uni-Net Sp. z o.o. ("Uni-Net").

The Company is subject to the periodic reporting requirements in the U.S.
under the Securities Exchange Act of 1934, as amended, and under the Polish
regulations on reporting requirements for companies listed on the Warsaw Stock
Exchange. Its ordinary shares have been listed on the Warsaw Stock Exchange
since July 2000. Between August 1999 and October 2002 the Company's American
Depositary Shares ("ADSs") were listed for trading on the NASDAQ stock market
("NASDAQ"). On October 14, 2002 the NASDAQ Listing Qualifications Panel (the
"Panel") delisted Netia's ADSs from NASDAQ, effective as of the opening of the
business on October 15, 2002, due to failure by the Company to meet all
continued listing requirements. On January 21, 2003 the NASDAQ Listing and
Hearing Review Council (the "Listing Council") after its review of the decision
of the Panel and additional information submitted by the Company regarding the
status of the financial restructuring, reversed the Panel's decision and
remanded the matter to the Panel. The Listing Council noted that the Panel's
decision from October 14, 2002 to delist the Company's ADSs from the NASDAQ was
correct and appropriate at the time it was made. The Listing Council instructed
the Panel to re-list the Company's ADSs on the NASDAQ SmallCap Market upon
Panel's review of the Company's application. The Supervisory Board and
Management Board of the Company have not yet formally resolved whether or not to
file an application for re-listing the Company's ADSs on the NASDAQ SmallCap
Market.. The Company has until June 6, 2003 to file such an application for
re-listing.

The Company is incorporated in Poland with its principal executive office
located at ul. Poleczki 13, 02-822 Warsaw, Poland.

The Company's activities are not subject to any seasonal or cyclical trends
of interim operations.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

FINANCIAL RESTRUCTURING

BACKGROUND

On December 15, 2001, the Company defaulted on several interest payments on
two series of its notes. Those defaults triggered cross-default provisions under
the terms of the indentures governing the four other series of notes and, as a
result, the Company was in default on all six series of the issued notes that
were then outstanding. The Company has also defaulted on swap payments under
certain swap agreements. The Company also did not make all subsequent payments
of interest due after December 15, 2001. As a result of these defaults and a
level of shareholders' equity, which - as calculated according to Polish
Accounting Standards - has been at deficit since December 31, 2001, the Company
was required to file for bankruptcy under Polish law unless it petitioned for
the opening of arrangement proceedings. To avoid filing for bankruptcy, Netia,
Netia Telekom S.A. ("Telekom") and Netia South Sp. z o.o. ("South") petitioned
the court in Warsaw on February 20, 2002 to open arrangement proceedings.

On March 5, 2002, the Company reached an agreement on the restructuring
(the "Restructuring Agreement") of its debt with an ad hoc committee of its
noteholders, certain financial creditors, Telia AB (publ.) (currently Telia
Sonera AB (publ.)) ("Telia")) and certain companies controlled by Warburg,
Pincus & Co., (collectively "Warburg") then owning together approximately 57.4%
of the Company's share capital, with the latter two acting separately as the
largest shareholders of Netia. Subsequently the Restructuring Agreement was
signed by majority of creditors. Under the Restructuring Agreement, the parties
agreed to implement a restructuring plan designed to strengthen the Company's
balance sheet.

On June 14, 2002 an exchange agreement (the "Exchange Agreement") was
entered into by the Company, certain of its subsidiaries and a substantial
majority of the consenting creditors, parties to the Restructuring Agreement.
The Exchange Agreement was intended to specify further terms of the financial
restructuring outlined in the Restructuring Agreement, and to provide the means
for the implementation of the terms of the restructuring as set out in the
Restructuring Agreement.

The restructuring process encompassed legal proceedings in three
jurisdictions and included: Dutch moratorium proceedings, Polish arrangement
proceedings and Section 304 Proceedings in the United States of America.
Pursuant to the Restructuring Agreement and the Exchange Agreement Netia
Holdings B.V. ("NH BV"), the Company's wholly-owned Dutch subsidiary, issued EUR
49,869 10% Senior Secured Notes due 2008 (the "2002 Notes") to holders of the
existing notes and JPMorgan Chase Bank ("JPMorgan") in exchange for
relinquishing their claims in respect of the existing notes and obligations
under the swap agreements with JPMorgan. In addition, creditors of the Netia
Group had an opportunity to subscribe with their reduced claims in form of
installment obligations for series H shares issued by the Company. On December
23, 2002 312,626,040 (not in thousands) series H shares offered by the Company
were subscribed by its creditors in exchange for such installment obligations.

Under the Restructuring Agreement and the Exchange Agreement, the Company's
shareholders as of December 22, 2002 will be issued warrants to acquire up to
64,848,652 (not in thousands) ordinary shares representing 15% of the Company's
post-restructuring share capital as described in the Restructuring Agreement
(after the issuance of 18,373,785 (not in thousands) ordinary shares
representing up to 5% of the issued ordinary share capital in respect of a key
employee stock option plan). The strike price of the warrants of PLN 2.53 (not
in thousands) approved by the Supervisory Board on April 12, 2003 corresponds to
the volume-weighted average price of the Company's ordinary shares on the Warsaw
Stock Exchange for the 30 trading days beginning 31 days following the
registration of series H shares. The Company also plans to issue up to
18,373,785 (not in thousands) ordinary shares under a key employee stock option
plan. For further details see also Note 13.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

STATUS OF THE RESTRUCTURING

As a result of the Dutch court decision of November 6, 2002, whereby the
moratorium arrangements relating to the three special-purpose finance
subsidiaries of the Company were confirmed, and that became final and
unappealable on November 15, 2002, the existing liabilities of the Company's
Dutch special-purpose finance subsidiaries under the notes and swap agreements
have become unenforceable. The guarantees issued previously by Netia Holdings to
noteholders and swap counterparties have been reduced separately in the Polish
arrangement proceedings to 8.7% of their original value, which would have to be
repaid by the Company in installments between 2007 and 2012. The Polish court
decision became final and unappeable on December 3, 2002. The Polish arrangement
proceedings were also conducted separately for two subsidiaries of the Company:
Telekom and South in respect to intra-group debt and the other swap
arrangements. The arrangement plans for Telekom and South have been approved by
the Polish courts on June 25, 2002 and December 4, 2002, respectively, and the
approval decisions became final and unappealable on January 2, 2003 and December
19, 2002, respectively. The Polish arrangement proceedings resulted in reduction
of the liabilities of Telekom and South to 8.7% and 1% of their original values,
respectively.

On October 21, 2002 Netia, Telekom and South entered into an agreement (the
"Agreement and Releases") with the minority group of the Company's claimholders
(the "Dissenting Parties"), who previously objected to the restructuring.
Pursuant to the Agreement and Releases, the Dissenting Parties withdrew all
their claims in connection with the arrangement proceedings in Poland. In
addition, their appeal from the court's ruling in the United States 304
proceeding was dismissed without prejudice to reinstatement in the event that
the restructuring was not completed. On February 10, 2003, the Dissenting
Parties' objections to the United States 304 proceeding (including objection to
turnover of the deposits to Netia) were withdrawn and their appeal was dismissed
with prejudice. In an order dated March 7, 2003, the United States Bankruptcy
Court for the Southern District of New York gave full force and effect in the
United States to Netia's Polish arrangement plans and Dutch composition plans
ratified earlier by Polish and Dutch courts, respectively. The court also
ordered that the deposited amount of EUR 13,969 (PLN 61,534 at the exchange rate
prevailing at March 31, 2003) be turned over to Netia immediately following the
completion of the final step of Netia's restructuring, which requires the
issuance of warrants to pre-restructuring shareholders of Netia.

On November 29, 2002 the Polish Securities and Exchange Commission (the
"Commission") decided to admit to public trading up to 317,682,740 (not in
thousands) ordinary series H shares, 64,848,652 (not in thousands) ordinary
series J shares and 18,373,785 (not in thousands) ordinary series K shares to be
issued in connection with restructuring. Furthermore, the Commission gave its
consent for the introduction to public trading of 31,419,172 (not in thousands)
ordinary series I notes and 1,005,154 (not in thousands) ordinary series II
notes, which authorize their holders to subscribe for the series J shares on a
pre-emptive basis, with priority over the Company's shareholders (the
"Subscription Warrants"), and 18,373,785 (not in thousands) ordinary series III
notes, which authorize their holders under a key employee stock option plan to
subscribe for the series K shares on a pre-emptive basis.

On December 23, 2002 the subscription of series H shares and issuance of
the 2002 Notes were completed. 312,626,040 (not in thousands) series H shares at
PLN 1.0826241 (not in thousands) per share were allocated out of total of
317,682,740 (not in thousands) offered to the Company's creditors in accordance
with the agreed terms of the restructuring. NH BV issued EUR 49,869 2002 Notes
(PLN 198,758 at the exchange rate in effect on December 23, 2002) in exchange
for the existing notes of NH BV and Netia Holdings II B.V. ("NH II BV") and for
claims under swap arrangement with JPMorgan by Netia Holdings III B.V. ("NH III
BV") in accordance with the agreed terms of restructuring and the composition
plans for each of the Company's Dutch subsidiaries.

Registration of series H shares took place on January 30, 2003. On February
13, 2003 312,626,040 series H shares commenced trading on the Warsaw Stock
Exchange following their registration with the Polish National Securities
Depository on February 10, 2003. The registration of series H shares provided,
the Company's creditors with shares representing approximately 91% of the
Company's share capital.

As of January 2, 2003, all courts' decisions approving Dutch composition
plans and Polish arrangement plans became final and unappealable. Consequently,
the restructuring is irreversible, subject to Netia Group's compliance with and
performance of all obligations under the Dutch composition plans and Polish
arrangement plans. Management believes that the Company will comply with its
obligations under these plans.

On March 24, 2003, the Company redeemed the outstanding 2002 Notes
amounting to EUR 51,096 (PLN 221,482 at the exchange rate in effect on that
date) including interest accrued until that date, following Netia's Supervisory
Board approval and recommendation by the Company's Management Board. The
decision was driven by concerns over (i) the high costs of servicing the debt
and establishing the security for the 2002 Notes as required under the
Indenture, dated December 23, 2002 (the "Indenture") and (ii) the substantial
restrictions imposed by the Indenture covenants on Netia's flexibility to run
its daily business.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

On April 12, 2003 the Company's Supervisory Board approved the strike price
for Subscription Warrants to be issued in connection with the Company's
financial restructuring at PLN 2.53 (not in thousands). The strike price was
determined in accordance with the provisions of the Restructuring Agreement,
dated March 5, 2002. The Subscription Warrants will be issued pursuant to the
prospectus, dated April 17, 2002, prepared under Polish law and made available
in Poland on December 2, 2002. The Subscription Warrants will be issued to
holders of record of the Company's shares as of December 22, 2002. Pursuant to a
resolution of the General Meeting of Shareholders held on April 4, 2002, the
Subscription Warrant strike price is the issue price for series J shares.

CURRENT FINANCIAL CONDITION

The restructuring resulted in a surplus of PLN 3,553,712, calculated as the
difference between the amount of reduction of carrying values of all liabilities
subject to restructuring of PLN 4,096,068 and the total of: (i) net present
value of reduced liabilities in the form of installment obligations not
exchanged into shares of PLN 5,141, (ii) the value of the 2002 Notes of PLN
198,758, (iii) the issuance value of new ordinary series H shares issued of PLN
338,457, and was recorded in the other reserves of the shareholders' equity.

The conclusion of arrangements with the Company's creditors in Poland and
the Netherlands, the only remaining insignificant obligation being the issuance
of Subscription Warrants to our pre-restructuring shareholders, allowed the
Company to regain solvency. The restructuring did not lead to the elimination of
all of the Company's outstanding debt. The Company will have to repay the
outstanding installment obligations at the nominal amount of PLN 11,872
(recorded at present value of future obligations of PLN 5,276 at March 31, 2003)
between 2007 and 2012. This represents indebtedness that was not exchanged for
the ordinary series H shares offered by the Company in December 2002. The
Company has already redeemed the 2002 Notes.

As a result of the restructuring, as at March 31, 2003 the shareholders'
equity amounted to PLN 2,722,033 and the Company had a working capital deficit,
including short term license fee obligations, of PLN 91,656.

As the restructuring is virtually complete Management does not believe that
events or conditions exist which may cast significant doubt on the Company's
ability to continue as a going concern. However, Management will continue to
take steps aimed at preserving the Company's cash, such as substantial
reductions in capital and operating expenditures in comparison with the
Company's prior plans and steps aimed at seeking to confirm expiry,
cancellation, deferral or conversion of the Company's remaining license fee
obligations at March 31, 2003 of nominal value of PLN 420,190. Cash and cash
equivalents held by the Netia Group as at March 31, 2003 amounted to PLN
110,855. The Company also held PLN 61,534 in an restricted deposit account,
which is expected to be released for the use of the Company upon the
Subscription Warrants becoming available for receipt by the Company's
pre-restructuring shareholders.

3. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The Company maintains its accounting records and prepares statutory
financial statements in accordance with Polish accounting and tax regulations.
These condensed consolidated financial statements have been prepared based upon
the Company's accounting records in order to present the consolidated financial
position, results of operations and of cash flows in accordance with
International Financial Reporting Standards ("IFRS"), including International
Accounting Standards ("IAS") and Interpretations issued by International
Accounting Standards Board ("IASB").

These interim condensed consolidated financial statements are prepared in
accordance with IAS 34, Interim Financial Reporting. The accounting policies
used in the preparation of the interim condensed consolidated financial
statements are consistent with those used in the annual consolidated financial
statements for the year ended December 31, 2002. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation have been included. These interim condensed consolidated
financial statements should be read in conjunction with the audited December 31,
2002 consolidated financial statements and the related notes.

Costs that arise unevenly during the financial year are anticipated or
deferred in the interim financial statements only if it would be also
appropriate to anticipate or defer such costs at the end of the financial year.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

The U.S. Dollar amounts shown in the accompanying condensed consolidated
financial statements have been translated from Polish Zloty only as a matter of
arithmetic computation at the Polish Zloty exchange rate of PLN 4.0512 = USD
1.00, the average rate announced by the National Bank of Poland at March 31,
2003. These amounts have not been subject to review or audit procedures and are
included for the convenience of the reader only. Such translation should not be
construed as a representation that the Polish Zloty amounts have been or could
be converted into U.S. Dollars at this or any other rate.

Certain prior periods' amounts have been reclassified to conform to the
presentation for the three month period ended March 31, 2003. The major
reclassifications relate to presentation of interconnection revenues and part of
wholesale revenue, which have been previously presented net of appropriate
costs. Furthermore, items relating mainly to costs of rented lines and network
maintenance, office and car maintenance and information technology services have
been reclassified to conform to the current period presentation.

4. FIXED ASSETS AND NETWORK UNDER CONSTRUCTION

DECEMBER 31, MARCH 31,
2002 ADDITIONS TRANSFERS DISPOSALS 2003
ASSETS AT ADJUSTED COST (AUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------------ ------------------ ---------------- --------------- ----------------
(PLN) (PLN) (PLN) (PLN) (PLN)

Buildings....................... 85,426 - - - 85,426
Land............................ 17,058 - - - 17,058
Long term ground lease.......... 5,406 - - - 5,406
Transmission network ........... 1,482,820 - 22,008 - 1,504,828
Switching system................ 980,488 - 99,603 - 1,081,091
Base stations................... 13,898 - - - 13,898
Machinery and equipment......... 187,789 663 (85,787) (151) 102,514
Office furniture and equipment.. 108,210 580 - (449) 108,341
Vehicles........................ 15,339 359 - (175) 15,523
------------------ ------------------ ---------------- --------------- ----------------
2,896,434 1,602 36,824 (775) 2,934,085
Network under construction...... 199,679 19,641 (36,824) (10,350) 172,146
------------------ ------------------ ---------------- --------------- ----------------
3,096,113 21,243 - (11,125) 3,106,231
================== ================== ================ =============== ================

ACCUMULATED DEPRECIATION DECEMBER 31, DEPRECIATION MARCH 31,
2002 TRANSFERS EXPENSE DISPOSALS 2003
(AUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------------ ------------------ ----------------- ---------------- ----------------
(PLN) (PLN) (PLN) (PLN) (PLN)

Buildings....................... 10,299 - 719 - 11,018
Long term ground lease.......... 361 - 27 - 388
Transmission network............ 267,709 (2,164) 30,554 - 296,099
Switching system................ 201,458 13,134 8,917 - 223,509
Base stations................... 13,356 - 326 - 13,682
Machinery and equipment......... 42,795 (10,970) 2,527 (144) 34,208
Office furniture and equipment.. 66,118 - 5,156 (57) 71,217
Vehicles........................ 12,308 - 673 (94) 12,887
------------------ ------------------ ----------------- ---------------- ----------------
614,404 - 48,899 (295) 663,008
================== ================== ================= ================ ================

The transfers recorded in the first quarter of 2003 between machinery and
equipment and switching system and transmission network relate to the
reclassifications of the radio access equipment items.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

IMPAIRMENT CHARGE DECEMBER 31, DISPOSALS MARCH 31, 2003
2002
(AUDITED) (UNAUDITED)
------------------- --------------- ---------------
(PLN) (PLN) (PLN)

Transmission network............................. 186,618 - 186,618
Switching system ................................ 16,668 - 16,668
Office furniture and equipment................... 8,116 - 8,116
Network under construction....................... 24,390 (10,350) 14,040
------------------- --------------- ---------------
235,792 (10,350) 225,442
=================== =============== ===============

NET BOOK VALUE MARCH 31, 2003 DECEMBER 31,
2002
(UNAUDITED) (AUDITED)
----------------- ------------------
(PLN) (PLN)
Buildings ....................................... 74,408 75,127
Land............................................. 17,058 17,058
Long term ground lease........................... 5,018 5,045
Transmission network............................ 1,022,111 1,028,493
Switching system................................ 840,914 762,362
Base stations................................... 216 542
Machinery and equipment......................... 68,306 144,994
Office furniture and equipment.................. 29,008 33,976
Vehicles........................................ 2,636 3,031
----------------- ------------------
2,059,675 2,070,628
Network under construction....................... 158,106 175,289
----------------- ------------------
2,217,781 2,245,917
=====================================

5. LICENSES

Telecommunication permits

Certain subsidiaries of the Company hold fixed term permits for the
operation of local telecommunication networks on a non-exclusive basis in
specified areas throughout Poland. The companies obtained their
telecommunication permits through their conversion from telecommunication
licenses issued under the regulations of the previous Telecommunication Act. The
conversion took place by virtue of law on January 1, 2001 upon the NTA becoming
effective. In addition, all operating subsidiaries of the Company that render
basic telephone services applied to ORTP to broaden the scope of their permits.
The applications were approved in August 2002 and all operating subsidiaries may
currently provide all telecommunications services that may be rendered in a
fixed-line network. Further, Telekom applied for a new permit under the NTA to
render telecommunications services within the entire territory of Poland.
Telekom obtained this permit in June 2002. Currently, each permit holder is
required to provide public telecommunications services through its network.

The domestic and international long distance traffic is carried through the
network of Netia 1 Sp z o.o. ("Netia 1") in areas where Netia 1 has its own
network. The terms of interconnection in each area of our presence were
negotiated separately, subject to guidelines established by the Minister of
Communications ("MOC") prior to 2001 and by the telecommunications market
regulator in Poland - the President of ORTP. Based on the NTA since January 1,
2003, the Netia Group carries the international traffic through its network and
through interconnection with the international networks of Telekomunikacja
Polska S.A. ("TPSA") or other telecommunication operators.

When the licenses obtained, among other companies of Netia Group, by Netia
Telekom Silesia S.A. ("Silesia"), Netia Telekom Telmedia S.A. ("Telmedia"),
Netia Telekom Mazowsze S.A. ("Mazowsze") and Netia 1 were issued, the MOC's
policy for the development of telecommunications market in Poland envisaged the
issuance of no more than one local license to an operator who would have the
right to compete with TPSA. in such zone. An exception to this duopoly model was
made in the city of Warsaw, where licenses were issued to two operators - among
them Mazowsze. With respect to domestic long distance services, the MOC decided
that three operators in addition to TPSA would hold licenses for these services.
Accordingly, licenses for telecommunications services in Poland were issued for
15-year periods, and all business plans were planned under the assumption that
such 15-year period would enable the operators to operate in a duopolous
environment. License fees were established by the MOC and accepted by the
Company in conjunction with the terms for which the licenses were issued, under
the same assumption.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

The license fees obligations of PLN 350,275 (present value of future
obligations), remained unpaid as at March 31, 2003. In connection with the
conversion of licenses into permits as of January 1, 2001 and the freedom of
entry into the Polish telecommunications market for new operators, the Company's
subsidiaries have submitted claims to the Polish regulatory authorities seeking
to confirm expiry, cancellation or deferral of the Company's remaining license
fee obligations. As a result, the Ministry of Infrastructure (currently in
charge of telecommunications) issued decisions to the majority of the Company's
subsidiaries holding telecommunication permits, whereby it claimed that the
license fee obligations are payable according to the terms of the pre-existing
licenses. The Ministry of Infrastructure also issued decisions to companies in
the Netia Group holding permits, whereby, effective as of June 28, 2002 it has
postponed the license payments of EUR 32,943 (PLN 134,879 at the December 31,
2002 exchange rate) due on June 30, 2002 until December 31, 2002.

In December 2002, a law entered into force in Poland regarding the
conversion of the outstanding license fee obligations of local operators. This
law provides for the cancellation of license fee obligations in exchange for
telecommunication infrastructure capital expenditures or the conversion of
license fee obligations in exchange for the shares or debt of companies, which
have outstanding license fees in connection with licenses authorizing
provisioning of local services. Based on this law, the Company has submitted
applications for the cancellation of its outstanding license fee obligations
based on capital expenditures it has already incurred (the "Applications"). The
Applications are to be reviewed by the Polish Government and can only be
rejected if the Ministry responsible for the matter does not recognize the
investments already made as capital expenditures contributing to
telecommunication market development. In case certain capital expenditures are
rejected, the Company may have, according to the new regulations, up to four
years to make new investments applicable for conversion. In March the Company
received notification letters from the Polish Government dated March 21, 2003,
indicating that the Applications will be considered by June 30, 2003. The
Company is awaiting ultimate and formal resolution of the Applications by the
Polish Government before determining the appropriate accounting for the license
fee obligations. As a result of submitting the Applications the Company has not
made the license fee payments of PLN 195,384 due on December 31, 2002.
Furthermore, the Company has not made a payment of EUR 1,000 (PLN 4,094 at the
exchange rate in effect on December 31, 2002) for its long distance license fee
obligation due on January 31, 2002. On November 20, 2002 the Ministry of
Infrastructure issued to Netia 1 a decision splitting Netia 1's license fee
obligations due January 31, 2002 into two installments and deferring their
payment until December 20 and December 30, 2002, respectively. On December 2,
2002, Netia 1 applied to the Ministry of Infrastructure for a second review of
the Ministry's decision, in order to obtain a further deferral of both
installments until June 30, 2003. On December 2, 2002, Netia 1 also applied for
the deferral until June 30, 2003 of its license fee obligations due January 31,
2003. On February 6, 2003, Netia 1 received a decision from the Ministry of
Infrastructure's rejecting its request. Please also see Note 13 for further
details on this matter.

In December 2002, the Company's Supervisory Board approved a plan to
consolidate its operating subsidiaries. The Netia Group currently has a complex
legal structure with over twenty-five subsidiaries. This structure has primarily
resulted from the need to establish a separate entity for each telecommunication
license held. The consolidation was approved in an effort to reduce management
costs, tax risks and operational problems as well as to simplify the Company's
intra-group financing and legal arrangements. The plan to consolidate the
Company's subsidiaries is expected to result in most operating companies held by
the Company being merged into it. The operating subsidiaries' telecommunication
licenses (converted to permits) are not transferable. As a result, the Company
believes that the existing telecommunication permits, except for the permit
issued to Telekom in 2002, will expire when the operating subsidiaries are
merged into the parent company. The expiry of these permits will not give the
Company the right to claim the return of the license fees that were previously
paid. It is not certain whether the expiry of the permits would result in any
exemption from additional payments related to the Company's outstanding
obligations. After the merger, the parent company will continue to provide
telecommunication services under a single new permit that it intends to obtain
for the nominal fee of EUR 2.5 in 2003. Netia plans to write-off its
telecommunication licenses when the Company has started to implement its plan to
consolidate its operating subsidiaries. This is expected to occur during the
year ending December 31, 2003.

To facilitate the process of the Netia Group internal restructuring the
Company has subsequently filed to the ORTP to release the Company's subsidiaries
from obligations to obtain the ORTP's consents for changes in their
shareholdings.

LICENSE REQUIREMENTS

The terms of licenses issued to the Company's subsidiaries prior to January
1, 2001, required them to meet annual connected capacity milestones, as measured
at the end of each year, subject to demand in each of the respective areas. At
March 31, 2003 and for almost all prior periods, the Company's subsidiaries did
not meet these milestones for any of their licenses. While under the regulatory
scheme in effect prior to January 1, 2001, it was possible for the regulatory
authorities to take action against companies which failed to meet capacity
milestones, including seeking revocation of the licenses (which action would
have had a material adverse effect on the Company, including on the value of its
related telecommunications network assets and its ability to continue its
operations), no such action has ever been taken.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

On January 1, 2001, the NTA became effective in Poland. Under the NTA, all
of the Company's telephone licenses were converted into permits. The
confirmation of the terms of these permits had to be made in the course of an
administrative process before the President of the Office for the Regulations of
Telecommunications and Post (the "ORTP"). The Company's subsidiaries that hold
permits (converted from the old licenses) have applied to ORTP for confirmation
of their terms in April and May 2001. All of the Company's subsidiaries had
received letters from the ORTP in March and August 2002, whereby it refused to
confirm that certain conditions of the existing licenses have expired upon the
conversion of those licenses into permits. The President of the ORTP's position
is that the terms of the licenses, their territorial scopes, specific conditions
for the performance of services and requirements regarding changes in
shareholding, remain applicable to the permits into which the licenses have
converted. In his explanation, the President of the ORTP stated that the only
conditions of the previously existing licenses that have expired are those that
would lead to a violation of an explicit obligation or prohibition contained in
the NTA. The ORTP also stated in its decision that none of the conditions
contained in the previously existing licenses fulfils this criterion. Management
has appealed the ruling with the President of the ORTP and has appealed the
ruling with the Supreme Administrative Court. There can be no assurance that
such decisions will not be upheld. As a result, new permits may incorporate
burdensome requirements, and assurance cannot be given that the regulatory
authorities will not take action against the Company based on failure to meet
these requirements. The new law regulating the conversion of the license fee
obligations, enacted in December 2002, does not refer to the license
requirements other than financial obligations. Given the historical experience,
Management of the Company does not believe that this matter will have a material
adverse effect on the Company's financial condition and operations.

6. LONG TERM DEBT

MARCH 31, 2003 DECEMBER 31,
2002
(UNAUDITED) (AUDITED)
---------------- ------------------
(PLN) (PLN)

10% Senior Notes due 2008 ("2002 Notes") ................. - 161,756
---------------- ------------------
- 161,756
================ ==================

On December 23, 2002, NH BV issued EUR 49.9 million (PLN 198.8 million at
the exchange rate in effect on December 23, 2002) aggregate principal amount of
the 2002 Notes to consenting holders of existing notes and financial creditors
in exchange for relinquishing their claims under existing notes and swap
obligations. The 2002 Notes were fully and unconditionally guaranteed by the
Company. The 2002 Notes were originally to mature on December 23, 2008. On March
24, 2003 the Company redeemed the 2002 Notes at par value plus accrued and
unpaid interest from the date of issuance paying EUR 51,096 (PLN 221,482 at
March 24, 2003 exchange rate). Interest expense during the three month period
ended March 31, 2003 was EUR 1,145 (PLN 4,820 at the exchange rate in effect on
that date). The cost of issuance of the 2002 Notes amounted to PLN 42,550 and
was to be charged to the statements of operations through the maturity of the
2002 Notes. The charge for the three month period ended March 31, 2003 amounted
to PLN 1,265 and the one-off write off of the unamortized part of the issuance
cost pursuant to the 2002 Notes redemption amounted to PLN 41,161. The early
redemption of 2002 Notes was financed mostly from cash deposited on restricted
accounts of PLN 199,293 and remaining part from cash held on bank account of PLN
4,900.

7. SHAREHOLDERS' EQUITY

SHAREHOLDERS' RIGHTS (NOT IN THOUSANDS)

At December 31, 2002, the Company's share capital consisted of 31,418,172
ordinary shares and of 1,000 of series A1 preferred shares. Each ordinary share
had one vote at shareholders' meetings. The holder of 1,000 series A1 preferred
shares had the right to nominate one member of the Supervisory Board. The
Management Board was elected by the majority of votes of the Supervisory Board.

On December 23, 2002 the subscription of series H ordinary shares and
issuance new notes was completed and as described in Note 2, 312,626,040 series
H shares at PLN 1.00 par value were subscribed for by the Company's creditors in
accordance with the agreed terms of restructuring. The issuance price of the new
shares was PLN 1.0826241. The terms and conditions of ordinary H shares are
identical to the terms and conditions of the Company's existing ordinary shares.
The issuance costs of PLN 72,457 have been recorded as a deduction from share
premium up to the amount of excess of share price over the nominal value of
shares (PLN 25,831) and the remaining amount was deducted from other reserves.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

On January 30, 2003 the Polish Regional Court in Warsaw registered (i) the
increase of the Company's share capital resulting from the issuance of series H
shares and (ii) the decrease of par value of existing shares from PLN 6.00 to
PLN 1.00 per share. Upon this registration the share capital of the Company
amounted to PLN 344,045,212 (not in thousands) and consisted of 344,044,212
ordinary shares and 1,000 series A1 preferred shares. As of the registration of
series H shares the noteholders and certain financial creditors held shares
representing 91% of the Company's share capital without taking into account
shares to be issued upon exercise of the Subscription Warrants to be issued in
connection with restructuring and shares to be issued under the key employee
stock option plan.

In accordance with received notices by the Company, as of February 10,
2003, each of the following entities owned significant stakes in the Company's
share capital:

(1) affiliates of Montpelier Asset Management Ltd together acquired
33,932,573 (not in thousands) series H shares representing 9.86% of
the Company's share capital and 9.86% of the total voting power at
Netia's general meeting of shareholders. In addition, they owned
40,000 (not in thousands) series A shares and Nicholas Cournoyer,
Managing Director of Montpelier Asset Management Ltd owned 3,000 (not
in thousands) series A shares of the Company;

(2) affiliates of SISU Capital Limited together acquired 23,743,225 (not
in thousands) series H shares representing 6.9% of Netia's share
capital and 6.9% of the total voting power at Netia's general meeting
of shareholders;

(3) affiliates of Griffin Capital Management Ltd together acquired
20,464,626 (not in thousands) series H shares representing 5.95% of
the share capital of Netia Holdings S.A. and 5.95% of the total voting
power at Netia's general meeting of shareholders.

As of March 31, 2003 the Company has not received any further notices.

STOCK OPTIONS(NUMBER OF SHARES AND PRICE PER SHARE NOT IN THOUSANDS)

During the three-month period ended March 31, 2003, the Company granted
93,334 options to purchase ordinary shares of the Company under the Netia
Performance Stock Option Plan (the "Old Plan"). No options were exercised, nor
did any expire during the three-month period ended March 31, 2003. The total
number of outstanding granted options as at March 31, 2003 was 1,094,846. The
vesting period for the options ranges from the date of grant to two years from
the date of grant or upon achieving certain specified conditions. The options
are exercisable for up to four years. The majority of the options are
exercisable only if the market price of the Company's shares as at the date of
exercise exceeds the stated exercise price of the option by at least 20%. Upon
exercise of an option, the option holder is entitled to receive a number of
shares calculated in the following manner: the difference between the trading
price of the Company's shares established in accordance with the Old Plan and
the strike price is multiplied by the number of the exercised options and later
divided by the trading price of the Company's shares. As of March 31, 2003 the
total number of vested options was 1,001,512.

8. FINANCIAL EXPENSE, NET

Interest income................................................... 3,999 4,089 14,804
Foreign exchange gains............................................ 7,134 15,158 30,892
Interest expense.................................................. (5,880) (108,437) (244,505)
Foreign exchange losses........................................... (17,184) (118,487) (218,634)
Amortization of notes issuance costs ............................. (1,265) - (127)
Write-off of notes issuance costs due to early redemption
of notes (See Note 6)........................................... (41,161) - -
Amortization of discount on installment obligations............... (136) - -
------------------ ----------------- ------------------
(54,493) (207,677) (417,570)
================== ================= ==================

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

9. LOSS PER SHARE

BASIC:

Losses per share have been calculated based on net losses for each
period divided by the weighted average number of shares in issue during the
period.

Net loss.......................................................... (80,258) (245,407) (674,972)
Weighted average number of shares in issue (not in thousands) .... 343,576,564 30,817,291 37,730,692
Basic loss per share (not in thousands)........................... (0.23) (7.96) (17.89)

Weighted average number of shares in issue for the periods ended March
31, 2003 and December 31, 2002 includes 312,626,040 (not in thousands)
series H shares issued on December 23, 2002.

Weighted average number of shares in issue (not in thousands) excludes
601,881, 468,648 and 468,648 treasury shares as at March 31, 2002, December
31, 2002 and March 31, 2003, respectively.

No diluted loss per share was computed in the period ended March 31,
2003, the year ended December 31, 2002 and the period ended March 31, 2002
as the effect of the Plan was anti-dilutive during those periods, if
applicable.

10. SEGMENTAL REPORTING

The following tables contain segment information for the Company's
telecommunications business and other business (primarily radio
communications services and sales of equipment through Uni-Net).

THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED
MARCH 31, MARCH 31, DECEMBER 31,
2003 2002 2002
(UNAUDITED) (UNAUDITED) (AUDITED)
------------------ ----------------- ------------------
(PLN) (PLN) (PLN)
Revenue
Telecommunications.................................. 158,782 140,757 588,120
Other businesses.................................... 2,522 5,803 16,264
------------------ ----------------- ------------------
161,304 146,560 604,384

(Loss) / income from operations
Telecommunications.................................. (25,843) (37,255) (263,295)
Other businesses.................................... 306 281 487
------------------ ----------------- ------------------
(25,537) (36,974) (262,808)

All operations and revenues are derived and conducted within Poland.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

11. RELATED PARTY TRANSACTIONS

CHANGES IN MANAGEMENT BOARD

Effective February 7, 2003 Mr. Dariusz Wojcieszek resigned from his
position in the Management Board.

Effective February 28, 2003 Mr. Mariusz Chmielewski resigned from his
position in the Management Board

Effective March 6, 2003 Mrs. Ewa Don-Siemion and Mr. Avraham Hochman
resigned from their positions in the Management Board.

Effective March 6, 2003, Mr. Zbigniew Lapinski was appointed a member
of the Management Board.

For further changes in Management Board see also Note 13.

OPTIONS GRANTED TO MEMBERS OF THE MANAGEMENT BOARD (NOT IN THOUSANDS)

As at March 31, 2003 the total number of options granted to Members of the
Management Board of the Company under the Old Plan was 36,000. 9,000 new options
were granted in the three-month period ended March 31, 2003. Strike prices for
the options granted to the Management Board range between 19.25 USD to 33.26 USD
per share. In connection with the resignation of Members of the Management Board
in February and March 2003, 198,000 options held by them are no longer
considered to be options held by Members of the Management Board.

MANAGEMENT BOARD REMUNERATION AND SUPERVISORY BOARD REMUNERATION

Compensation and other costs (including consulting agreements) associated
with members of the Company's various management boards during the three-month
periods ended March 31, 2003 and March 31, 2002 amounted to PLN 7,647 and PLN
2,647, respectively. The compensation expense for the three-month period ended
March 31, 2003 includes termination benefits paid to Members of the Management
Board pursuant to their resignation.

12. COMMITMENTS AND CONTINGENCIES

Capital expenditures contracted for at the balance sheet date but not
recognized in these condensed consolidated financial statements amount to PLN
21,942 as at December 31, 2002 and PLN 79,526 (USD 19,630 at the March 31, 2003
exchange rate) as at March 31, 2003.

MILLENNIUM (NOT IN THOUSANDS)

In August and September 2000, the Company entered into certain agreements
to acquire all of the outstanding equity of Millennium Communications S.A.
("Millennium"), a provider of telecommunications services to multi-tenant
buildings in Warsaw, for a total consideration of between US$ 10.8 million and
US$ 20.2 million, based on Millennium's financial performance through the end of
2001. Following the execution of the agreements, the Company advanced to
Millennium a total of PLN 8.5 million and Euro 2.9 million (PLN 12.8 million at
the March 31, 2003 exchange rate), of which PLN 8.5 million was subsequently
repaid by Millennium in January 2001. In December 2000, the Company initiated
court and arbitration proceedings, which were amended in October 2001, in
response to the failure by Millennium to perform the agreement. The Company
claimed the remaining part of the advance made to Millennium included in our
balance sheet and additional damages of PLN 8.5 million. In 2001, a valuation
allowance of PLN 17.0 million was recorded as other operating expense against
the outstanding amount receivable from Millennium as a result of the events
described above.

On October 15, 2002, the Company received a ruling of the Polish Chamber of
Commerce Arbitration Court, dated October 1, 2002, dismissing Millennium and its
shareholder's request for a declaration that share subscription agreement was
void and ineffective and their claims for payment of PLN 11.5 million by the
Company. The court also dismissed the Company's claim for damages against
Millennium in the amount of PLN 8.5 million. On November 12, 2002 the Company
petitioned the Regional Court in Warsaw to set aside the ruling of the
arbitration court. Millennium petitioned the Regional Court in Warsaw to enforce
the ruling of the arbitration court. Both cases are currently pending. Also the
Company's claim brought against Millennium in the Regional Court in Warsaw,
petitioning for the repayment of loan of Euro 2.9 million (PLN 12.8 million at
the March 31, 2003 exchange rate), is still pending. On February 11, 2003, the
court ruled in our favor for the return of the principal amount of the loan and
the related interest. That ruling was appealed by Millennium.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

On February 28, 2001, Millennium filed a motion against us for certain acts
of unfair competition. In its motion, Millennium requested that the court order
us to pay Millennium damages of PLN 50 million. Management believes that the
Millennium suit was filed as a litigation tactic in connection with our lawsuit
against Millennium and that Millennium's unfair competition claim does not have
any merit.

Management, having obtained legal advice, does not believe that the
settlement of this matter will have a material adverse effect on our financial
condition.

MINORITY SHAREHOLDERS

On August 1, 2002 the Company received a copy of a claim by an individual
shareholder filed with the District Court in Warsaw (Sad Okregowy w Warszawie)
with a demand for the invalidation of sections 10, 11 and 13 of Resolution No. 2
adopted by the Company's General Shareholders' Meeting on April 4, 2002. The
individual shareholder claimed that the distribution of the Subscription
Warrants to be issued by the Company under the pending financial restructuring
was harmful to the minority shareholders and violates good customs. On August
14, 2002, the Company filed an answer to this claim and requested the District
Court to dismiss it.

The Company received copy of a claim filed by another minority shareholder,
also for the cancellation of a resolution adopted by the Company's General
Shareholders' Meeting on April 4, 2002. The claim is substantively based on the
same grounds as the previous minority shareholder's claim. On January 17, 2003,
the Company filed an answer to this claim and requested the District Court to
dismiss it.

The Company also received a decision from the District Court of July 1,
2002 in which the District Court resolved to forward a claim filed by another
minority shareholder requesting the invalidation of a resolution adopted by the
Company's General Shareholders' Meeting on April 4, 2002 to the Regional Court
for the capital city of Warsaw for its determination. The Company has not
received a copy of the claim and is not aware of its merits. If, however, the
claim is based on the same grounds as the previous minority shareholder claim
received on August 1, 2002, the Company expects that it will file for this
claim's dismissal as well.

CONSULTING SERVICES CLAIMS

The Company received a letter dated January 8, 1999 with a claim for USD
10,000 in connection with consulting services provided to the Company by an
outside consultant. Management is of the opinion, having obtained legal advice,
that it is impossible to determine whether any liability with respect to this
matter is likely to arise or to estimate the amount of this liability if it, in
fact, were to arise. Accordingly no liability has been recorded for this claim.
Management does not believe that this matter will have a material adverse effect
on the Company's financial condition.

The Company is defending a legal claim for USD 4,450 (including damages)
brought in France in January 1998, also in connection with consulting services
provided to the Company by an outside consultant. Management is of the opinion,
having obtained legal advice that it is impossible to determine whether any
liability with respect to this matter is likely to arise. Accordingly, no
liability has been recorded for this claim. Management does not believe that
this matter will have a material adverse effect on the Company's financial
condition.

TELECOMMUNICATIONS PERMITS

For commitments and contingencies relating to telecommunications permits
held by the Company see Note 5.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

13. POST BALANCE SHEET EVENTS

Purchase of TDC Internet Polska S.A.

On April 1, 2003 Netia Swiat S.A. ("Netia Swiat"), one of the Company's
subsidiaries, agreed to acquire from TDC Internet A/S ("TDC Internet") 100% of
the share capital of TDC Internet Polska S.A. ("TDC IP"), a Polish Internet
service provider for EUR 1,000 (not in thousands). TDC IP controls the following
seven entities: Polbox Sp. z o.o., Pik Net Sp. z o.o., Publiczny Dostep do
Internetu Sp. z o.o., Multinet S.A., Internet Data Systems S.A., Polska On-Line
Holding S.A. and Polska On-Line Sp. z o.o. Pursuant to the agreement, Netia
aewiat acquired on April 8, 2003 17,424,332 (not in thousands) shares of TDC IP
from TDC Internet A/S.

On April 8, 2003, at the general shareholders meeting of TDC IP, the
shareholders increased the share capital of TDC IP by PLN 2,680 (not in
thousands) through issuance of 268 not in thousand registered shares of the
nominal value of PLN 10 (not in thousands) each in exchange for the cash
contribution of PLN 26,800. Within 3 business days following the registration in
the National Court Register of the share capital increase as described above,
Netia aewiat must notify TDC Internet thereof. Following delivery of such
notification, but not later than within 3 business days thereafter, TDC Internet
will sell and transfer to Netia aewiat these new shares pursuant to the
acquisition agreement.

Management believes that the above transaction does not have material
impact of the Company's financial statements.

Decision of Ministry of Infrastructure regarding Netia 1

On April 2, 2003 the Ministry of Infrastructure issued a decision refusing
a deferral of the domestic long distance license fee obligation due January 1,
2003 amounting to EUR 1,000 (PLN 4,405 at the exchange rate in effect on March
31, 2003). The Company previously applied for the deferral until June 30, 2003
on December 2, 2002.

On April 9, 2003 the Ministry of Infrastructure issued another decision
refusing changes to the terms established in the previous decision dated
November 20, 2002 regarding the license fee obligation of EUR 1,000 (PLN 4,405
at the exchange rate in effect on March 31, 2003) due on January 1, 2002.
Pursuant to the initial decision the installment had been split into two
payments of EUR 500 (PLN 2,203 at the exchange rate in effect on March 31, 2003)
each payable on December 20, 2002 and December 30, 2002, respectively.

On April 18, 2003 the Company paid the two outstanding license fee
obligation installments amounting to EUR 2,000 (PLN 8,526 at the exchange rate
prevailing at that day) and the applicable prolongation fees of PLN 320 and
penalty interest amounting to PLN 314.

Approval of Strike Price for Subscription Warrants

On April 12, 2003 the Company's Supervisory Board approved the strike price
for Subscription Warrants to be issued in connection with the Company's
financial restructuring at PLN 2.53 (not in thousands). The strike price was
determined in accordance with the provisions of the Restructuring Agreement. The
Subscription Warrants will be issued pursuant to the prospectus, dated April 17,
2002, prepared under Polish law and made available in Poland on December 2,
2002. The Subscription Warrants will be issued to holders of record of the
Company's shares as of December 22, 2002. Pursuant to a resolution of the
General Meeting of Shareholders held on April 4, 2002, the warrant strike price
is the issue price for series J shares.

Changes in Management Board

Effective April 10, 2003 the Company's Supervisory Board appointed Mrs.
Elizabeth McElroy as member of the Management Board. At the same meeting,
Netia's Supervisory Board accepted the resignation of Mr. Stefan Albertsson from
his position as member of the Management Board.

NETIA HOLDINGS S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS)

Approval of Stock Option Plan

In addition, the Company's Supervisory Board adopted detailed conditions in
order to implement the Stock Option Plan adopted by the Supervisory Board on
June 28, 2002 (the "Stock Option Plan"). The aim of the Stock Option Plan is to
create the incentives that will encourage and motivate highly qualified persons
holding senior management positions, employees, co-operators, consultants and
members of the management board of Netia Group by granting them options to
acquire series K shares. The Company's Supervisory Board was authorized to
implement the Stock Option Plan and determine the list of its participants. The
options will not be exercisable prior to the issuance of the Subscription
Warrants to be issued pursuant to the Restructuring Agreement. Upon exercise of
the options, the Company will issue to each exercising participant the number of
shares representing such participant's gain resulting from the exercise of the
options. The participant will not be required to pay the exercise price. The
Company's Supervisory Board granted options to three members of the Management
Board and to other four key employees. The options granted to Management Board
represent 2.05% of the Company's share capital on a fully diluted basis. These
options will expire on December 20, 2007.

On April 14, 2003 the Company announced that its Supervisory Board
determined the exercise price for options granted on April 10, 2003 under the
Stock Option Plan to be PLN 2.53. The total number of series K shares that may
be issued under the Stock Option Plan will not exceed 5% of the Company's
post-restructuring share capital.

Reimbursement of Value Added Tax by the Tax Office

On April 17, 2003 the Tax Office in Warsaw issued a decision to one of the
subsidiaries of the Company pursuant to which it has repaid the VAT including
the interest previously paid by the Company amounting to PLN 4,478.

Amendments to the Polish Prospectus

On April 22, 2003 the Polish Stock and Exchanges Commission granted its
consent to introduce the amendments concerning issuance of Subscription Warrants
to the Company's Polish Prospectus, dated April 17, 2002, prepared under Polish
law in connection with the issuance of warrants and series J shares and series K
shares and made available in Poland on December 2, 2002.

Purchase of shares in Telko (not in thousands)

On April 24, 2003, in connection with the contemplated internal
consolidation of the Netia group companies and pursuant to the option agreement
dated December 17, 1996, Netia bought from Mr. Andrzej Radziminski, member of
its Supervisory Board, 21 shares, PLN 50 par value per share of Telko Sp. z o.o.
("Telko") with its seat in Warsaw, constituting 26.25% of Telko's share capital
and representing 13.29% of the voting power at Telko's general meeting of
shareholders. Total consideration paid was PLN 1,050. Netia financed the
transaction from its own financial resources. Following consummation of this
acquisition, Netia will own 60 shares of Telko constituting 75% of Telko's share
capital representing 87.34% of Telko's voting power. Telko does not conduct any
telecommunications services.

Subscription and allocation of series I, II and III notes.

On April 29, 2003, the subscription and allocation for series I, II and III
bearer notes (50,798,111 notes in total) were completed, with a price of PLN
0.01 (not in thousands). The notes entitle their holders to subscribe for series
J shares in the case of 31,419,172 (not in thousands) series I and 1,005,154
(not in thousands) series II notes, and series K shares in the case of series
18,373,785 (not in thousands) III notes. The only entity entitled to subscribe
for series I and II notes was Netia Holdings Incentive Share Company Limited,
with its seat in St. Helier Jersey. The only entity entitled to subscribe for
series III notes was CDM Pekao S.A. with its seat in Warsaw, acting as the full
commitment underwriter under the agreement dated April 28, 2003. The purpose of
the issue of series I and II notes is to facilitate the delivery of the
Subscription Warrants, entitling their holders to subscribe for series J shares
by April 30, 2005, or April 30, 2006, as the case may be. The issue of series
III shares is aimed at facilitating the implementation of the Stock Option Plan.

Setting the deadline to submit orders for the Subscription Warrants and the
commencement of the distribution process for the Subscription Warrants.

On April 25, 2003, the Company's Management and Supervisory Boards adopted
resolutions under which the period for filing applications for the Subscription
Warrants separated from series II notes should begin at 8:00am on May 5, 2003,
and end at 6:00pm on May 13, 2003. Those entitled shareholders who for any
reason do not agree to the crediting of the Subscription Warrants attached to
the series I notes to their securities accounts or, in their name, in the issue
sponsor's register, may place an irrevocable objection thereto between April 30,
2003, and May 13, 2003. As a result of lodging such objection, the objecting
entitled shareholder shall not receive any of the Subscription Warrants allotted
to such shareholder.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements, including the notes thereto included
elsewhere in this Report.

OVERVIEW

This report contains forward-looking statements. These statements appear in
a number of places in this report and include statements regarding our
intentions, beliefs or current expectations concerning, among other things, the
development of the Polish telecommunications market; the growth in demand for
business Internet services; our plans for the development of our business, our
financing plans and our need for substantial capital resources to fund our
operating losses; trends affecting our financial condition or results of
operations; the impact of competition on our business; changes in the regulatory
environment affecting our business; and the build-out of our telecommunications
network;.

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. You should read the section titled
"Risk Factors" in our Annual Report on Form 20-F for the fiscal year ended
December 31, 2001 (the "2001 Annual Report") for a discussion of some of these
factors. We undertake no obligation to publicly update or revise any
forward-looking statements.

Netia Holdings S.A. ("Netia", the "Company", collectively with its
subsidiaries: the "Netia Group", or "we"), is the largest alternative fixed-line
telecommunications provider in Poland (in terms of value of generated revenues).
We own and operate a backbone network and we own, operate and are continuing to
build local access networks. At March 31, 2003, our access network had 345,447
active subscriber lines, including 108,603 business lines, and our backbone
network stretched for 3,840 kilometers. Our telecommunications services include
switched, fixed-line voice telephone service (including domestic long distance.
international long distance and fixed-to-mobile services), ISDN, voice mail,
dial-up and fixed-access Internet, leased lines, VoIP and co-location services.
We launched wholesale services, including the wholesale termination of in-bound
traffic, in early 2001. In September 2001, we began offering frame relay
services. We are one of the two operators in Poland offering, since February
2002, services based upon an Intelligent Network: Freephone ("0800") and Split
Charge ("0801"). We offer data transmission services utilizing network operated
by our wholly-owned subsidiary Netia Network S.A. ("Netia Network"). In the
second half of 2002 we started offering duct, dark fibber and capacity leasing
and co-location services. In accordance with provisions of the new
Telecommunications Act liberalizing the market for international long-distance
calls, as of January 1, 2003, we started to offer international long distance
services in selected zones, based on standard lines, in addition to the
alternative service based on VoIP technology. We commenced offering "0-708"
premium rate services early in April 2003. We are also engaged in the
installation and supply of specialized mobile radio services (public trunking)
in Poland through our 58.2% owned subsidiary, Uni-Net Sp. z o.o. ("Uni-Net"). We
have focused on servicing Poland's growing business market. Business customers
accounted for 31.4%, 31.0%, 28.5% and 25.3% of our total active subscriber lines
at March 31, 2003, December 31, 2002, December 31, 2001 and December 31, 2000,
respectively.

In August 2001, following our execution of an interconnection agreement
with Telekomunikacja Polska S.A. ("TPSA"), Poland's incumbent telecommunications
provider, we began providing domestic long-distance service. We also offer
international long distance services (using both VoIP technology as well as
standard lines) and fixed-to-mobile (two-stage) access. Customers, including
those of TPSA, can access our domestic long-distance service by dialing a "1055"
prefix after they have entered into a subscription agreement with us. We are
currently providing these services using our backbone network and leased lines
in areas not yet reached by our backbone.

We continue to offer selected wholesale services to other
telecommunications carriers operating in Poland. We believe providing these
services will give us a significant opportunity to enhance our operating margins
by leveraging our investment in our infrastructure through the greater
utilization of our network. We believe that our substantial capacity will give
us the flexibility to sell capacity and dark fiber, domestically and
internationally.

Our nationwide backbone network connecting Poland's largest urban areas now
stretches to 3,840 kilometers. The construction of the duct system of our
nationwide backbone network is completed. In the future this infrastructure can
be extended by additional fiber optic cables and transmission equipment, in
accordance with the growth of the customer base. We are also constructing
broadband radio access networks in several large cities, including Warsaw, using
radio frequency spectrum we acquired in February 2000. We believe these radio
access networks will allow us to rapidly connect business customers while our
intra-city networks are under construction and will continue to complement our
fiber-optic access networks when they are completed.

We continually review our plans to take into account business developments
and opportunities and changes in the competitive and regulatory environment in
which we operate. Our plans are also affected by macro-economic factors, such as
the general slowdown of the Polish economy. Consistent with our continuing
review, we are currently in the process of making adjustments to the
organizational structure of our sales, marketing and product development
departments.

As discussed below under "-- Liquidity and Capital Resources," we continue
to take steps aimed at preserving our cash, such as substantial reductions in
capital and operating expenditures in comparison with our prior plans and steps
aimed at seeking to confirm expiry, cancellation, deferral or conversion of our
remaining license fee obligations.

All of the above factors may influence our results for 2003 and beyond.

RESTRUCTURING

On December 15, 2001, we defaulted on several interest payments on two
series of our notes. Those defaults triggered cross-default provisions under the
terms of the indentures governing four other series of our notes and, as a
result, we were in default on all six series of the issued notes that were then
outstanding. We also defaulted on swap payments under certain swap agreements
that we had entered with JPMorgan. We also failed to make all subsequent
payments of interest in connection with the outstanding notes due after December
15, 2001. As a result of these defaults and our level of shareholders' equity,
which, as calculated according to Polish Accounting Standards, was in deficit
starting as of December 31, 2001, we were required to file for bankruptcy under
Polish law unless we petitioned for the opening of arrangement proceedings. To
avoid filing for bankruptcy, Netia and our two principal Polish subsidiaries,
Netia Telekom S.A. ("Telekom"), and Netia South Sp. z o.o. ("South"), petitioned
the court in Warsaw on February 20, 2002 to open arrangement proceedings.

On March 5, 2002, we reached an agreement on the restructuring (the
"Restructuring Agreement"), of our debt with an ad hoc committee of our
noteholders, certain financial creditors, Telia, Warburg. Telia and Warburg then
owned together approximately 57.4% of our share capital and they acted
separately during our restructuring process as our two largest shareholders.
Subsequently the majority of our creditors agreed to and signed the
Restructuring Agreement. Under our Restructuring Agreement, the parties agreed
to implement a restructuring plan designed to strengthen our balance sheet.

On June 14, 2002, the Exchange Agreement was entered into by us, certain of
our subsidiaries and a substantial majority of our creditors, parties to the
Restructuring Agreement. The Exchange Agreement was intended to specify further
terms of our financial restructuring outlined in the Restructuring Agreement and
to provide the means for the implementation of the terms of the restructuring as
set out in the Restructuring Agreement.

The restructuring process encompassed legal proceedings in three
jurisdictions consisting of Dutch moratorium proceedings, Polish arrangement
proceedings and Section 304 Proceedings under the United States Bankruptcy Code
in the United States of America.

Pursuant to the Restructuring Agreement, the Polish arrangement proceedings
and the Dutch moratorium plans, one of our finance subsidiaries issued EUR 49.9
million 10% Senior Secured Notes due 2008 ("2002 Notes"), to holders of the
existing notes and JPMorgan in exchange for relinquishing their claims in
respect of the existing notes and obligations under the JPMorgan swap
agreements. We have since redeemed these notes.

On December 23, 2002, our creditors subscribed for 312,626,040 of our
series H shares thus relinquishing their reduced claims against us, which had
been reduced under the Polish arrangement plan. Our series H shares were
registered with the Polish court on January 30, 2003 and at that point our
former creditors became holders of approximately 91% of our share capital.

Under the Restructuring Agreement, our shareholders as of December 22, 2002
will be issued warrants to acquire up to 64,848,652 ordinary shares representing
15% of our post-restructuring share capital as described in the Restructuring
Agreement (after the issuance of 18,373,785 ordinary shares representing up to
5% of the issued ordinary share capital in respect of a key employee stock
option plan). The strike price of the warrants of PLN 2.53 (not in thousands)
approved by our Supervisory Board on April 12, 2003 corresponds to the
volume-weighted average price of the ordinary shares on the Warsaw Stock
Exchange for the 30 trading days beginning 31 days following the successful
closing of registration of series H shares. We also plan to issue up to
18,373,785 (not in thousands) ordinary shares under a key employee stock option
plan. For further details see also Note 13 to the condensed consolidated
financial statements.

RECENT EVENTS -REDEMPTION OF NOTES

On February 13, 2003, our supervisory board authorized the redemption of
our 2002 Notes. On March 24, 2003, we redeemed the 2002 Notes paying an
aggregate EUR 51,096 thousand of the principal and accrued interest. Due to the
redemption of the 2002 Notes, Netia no longer has any substantial long-term
liabilities under any notes.

SERVICES

We provide our customers with a broad range of voice, data transmission,
Internet and wholesale services under the "Netia" (or "Internetia," in the case
of dial-up Internet access) brand name. We also provide mobile radio trunking
services through our majority-owned subsidiary, Uni-Net. We provide our services
to the customers connected to our own network ("direct customers") and to
customers of other operators, mainly TPSA ("indirect customers").

The services we presently offer to our direct customers include the
following:

o Switched telephone services. We provide basic voice telephone
services, which include local, domestic and international
long-distance calling to our basic telephony subscribers. We also
provide enhanced voice services, such as voice-mail, call waiting,
call forwarding, wake-up calls, personalized ("easy-to-remember")
phone numbers, conference calling, call barring, call divert, hotline
service, bill limitation, automatic information on the change of phone
number and itemized billing as part of a basic monthly service
package. As of March 31, 2003, we had 345,447 subscriber lines for our
basic voice telephone services. To date, we have derived a significant
majority of our telecommunications revenues from providing voice
telephone services.

o Voice mail and fax mail. Our customers can use a virtual mailbox
offered by our network. Both voice and fax data can be stored in a
mailbox, depending on the customer's choice.

o Payphones. As of March 31, 2003, we operated 1,186 publicly available
payphones, most of which can be operated using both pay cards and
coins.

o VoIP. We currently provide VoIP services and terminate VoIP traffic
from other operators in our network. The industry offers international
long-distance VoIP services at lower prices, compared to fixed-line
services although VoIP quality can be lower.

o Centrex. Netia Centrex is a virtual switch enabling our customers to
use the services of a typical office switchboard by using the
resources of our network. These services are primarily used by
medium-sized enterprises having their sites in many locations. We
assign telephone numbers within the virtual switch abbreviated numbers
for the internal purposes of the client serviced. Netia Centrex
enables a client to define a few numbers functioning as the main
exchange. A customer using Netia Centrex services can use all
supplementary services.

o ISDN. All of our switches are ISDN-equipped, and all of our existing
or potential customers have access to this service. ISDN is a digital
telephone network over which voice, data and video transmission is
possible at the same time. An ISDN network provides higher-quality
data and much faster transmission than does a traditional network. We
offer additional services together with ISDN including multiple line
numbering, which provides up to eight numbers per line to different
equipment serviced, telephone number identification, call diversion,
diverted number identification, call waiting and mobile terminal. ISDN
also enables customers to transfer short text messages among one
another. We offer all of our ISDN clients fast Internet dial-up
access.

o Dial-up Internet services. We offer our dial-up Internet services
under the brand name "Internetia." We launched them in April 2000. We
also operate the "www.internetia.pl" Internet portal. Established
providers provide the content, including the British Broadcasting
Corporation, with whom we have entered into an exclusive rights
agreement.

o Fixed Internet access. Since 2001, we have offered fixed Internet
access under the brand name "BDI." The service is based on a
technology called Digital Subscriber Line (DSL) using existing copper
network. We charge subscribers a monthly fixed rate according to a
selected link capacity which can vary from 128Kb/sec to 2Mb/sec.
Currently, we offer two types of these services: BDI Standard and BDI
Professional. The main difference between these services is speed. In
both cases, a customer may choose an enhanced version of BDI (called
BDI+) which provides e-mail accounts and web-page capacity in addition
to the standard service.

o Data services and leased lines. We offer our customers leased-line
connections having transmission speeds from 64 kilobits per second to
two megabits per second, which covers a typical range of transmission
speed required by our customers. We also offer higher transmission
speeds on request. We expect further growth in our leased-line
business. Since September 2001, we have also been offering data
transmission services based on frame relay protocol, which is an
industry standard for data transmission. We will soon introduce
agreements providing enhanced quality services, which will be
available for, among others, leased lines and frame relay customers.

o Intelligent Network-type services. Based on our domestic long-distance
network, in March 2002, we began to offer new services addressed
mainly to the business sector: a 0800 toll-free service and a 0801
split charge service, in which calling and called parties share the
fee. We commenced offering "0-708" premium rate services in April
2003.

o Wholesale services. In order to maximize revenues from our investment
in our backbone, we offer wholesale services to other
telecommunications carriers. These services include two main
categories: termination of domestic and international in-bound
traffic, which we have provided since early 2001, and wholesale
services, including duct, dark fiber and capacity leasing and
co-location services, which we began providing in the second half of
2002.

The services we presently offer to our indirect customers include the following:

o Long distance domestic, fixed-to-mobile and international services. We
offer long distance domestic, fixed-to-mobile and international
services (both using VOIP technology as well as standard lines)
through our "1055" prefix for customers on other networks.

o Dial-up Internet services. We offer our dial-up Internet services
based on a call-back principle for TPSA customers located where we
operate. We are now ready to offer direct access (using our 0209267
access number) for TPSA customers. However, we postponed the launch of
this service due to an inability to reach a suitable interconnection
agreement with TPSA. In February 2002, we received a decision from the
President of the ORTP confirming our rights to provide such services.
However, the decision has been challenged by TPSA and we are currently
awaiting a final court decision in this matter.

Apart from services to our direct and indirect customers, we also offer,
through our joint venture, Uni-Net, mobile radio services called trunking
services. These services include radio individual and group connections, alarm
connections and radio connections to the public telephone network (through
operator assistance).

PRICING

Direct telephone services. We charge a fixed monthly fee in addition to
call charges for our voice telephone services. Our call charges for telephone
calls originated over our network depend on a number of factors, including the
type of call (local, domestic long distance or international), the duration of
the call, the time of day and the day of the week on which the call is placed
and the volume of calls the customer typically makes. We bill our customers
based on connection time. Our fixed monthly fees vary based on the service
package for which the customer subscribes. In addition to fixed monthly fees and
call charges, we charge installation fees for installing direct connections to
our customers.

On October 1, 2001, we announced tariff packages for analogue and ISDN
lines. Clients using analogue lines are now offered three calling plans, all of
which are net of VAT:

o Relaxed, with a monthly fee of PLN 19;

o Practical, with a monthly fee of PLN 30; and

o Chatty, with a monthly fee of PLN 40.

Clients using ISDN lines may choose between two tariff plans that are net of
VAT:

o Versatile (for BRA access clients), with a fixed monthly fee of PLN
46; or

o Professional (for PRA access clients), with a fixed monthly fee of PLN
700.

The various packages differ primarily with respect to monthly fees and
charges for local calls. All other charges (domestic long distance,
international long distance, fixed-to-mobile and Internet) are the same in each
of the new tariff plans. Moreover, we bill all charges other than local voice
and Internet charges on a per-minute basis. Since October 1, 2001, existing
customers have had a choice of either keeping their previously chosen tariff
plans or switching to one of the newly offered packages. At the moment, we are
in the process of moving our existing customers to the new tariff plans offering
each a choice from among the new tariff plans.

Indirect telephone services. In July 2001, we announced our domestic
long-distance services tariff (Netia 1055), which range from PLN 0.21 (off peak)
to PLN 0.35 (peak), net of VAT, per minute. In June 2002, we introduced a new
DLD tariff of PLN 0.31(peak) per minute based on the actual duration of the
call, charged per second, with a set-up charge of PLN 0.10, net of VAT. This
tariff is also available for our direct ISDN PRA customers.

On January 2, 2003 we also announced the introduction of new tariff plans
for international long-distance calls in selected zones, based on standard lines
and VoIP technology, with prices ranging from PLN 0.80 to PLN 5.50, net of VAT
per minute.

On April 1, 2003 we introduced of new tariff plans for domestic
long-distance calls. The changes apply to all Netia tariff plans, offered both
to subscribers of Netia's direct voice services as well as customers using the
services offered through Netia's prefix (1055). For tariff plans with per-minute
billing, the price for connection during peak hours will change from PLN 0.35,
net of VAT to PLN 0.33, net of VAT per minute.

Dial-up Internet. Our direct clients have a variety of dial-up Internet
access tariffs. The simplest is a pay-per-use tariff of PLN 0.23 per minute
(charged at three-minute or six-minute intervals, at peak and off-peak times,
respectively). Alternatively, a customer can purchase flat-rate packages: 50
hours for PLN 70, 100 hours for PLN 100 (120 in the case of ISDN) or Internet by
Night for PLN 50. All prices related to Internet access are subject to 7% VAT
only. The same tariffs apply in case of indirect (call-back) customers. However,
we will probably stop offering the call-back service (at least in the case of
flat-rate tariffs) after the implementation of a new interconnection agreement
with TPSA, which we expect to occur in 2003.

Fixed Internet access, leased lines and frame relay. We charge BDI clients
a fixed monthly fee which depends on access line capacity that varies from
customer to customer and whether the customer has BDI Professional or BDI
Standard (the latter for service up to 1Mb/sec). In the case of BDI+, we apply
an additional monthly charge. The amount of the additional fee depends on the
number of e-mail and web packages ordered by the customer. Leased line customers
are charged a fixed monthly fee which depends on capacity and line length. In
the case of frame relay, a fixed monthly fee is also charged which depends on
length, Permanent Virtual Channel capacity and Committed Information Rate value.

Intelligent network type service. We charge customers of our Freephone and
split charge services according to the number of minutes of traffic terminated
at their 0800 or 0801 numbers. We apply a fixed charge per minute independently
of the location from which a given call originates. In addition, we apply a
fixed monthly fee, which depends on a selected service package (so-called
platinum, gold and silver numbers).

REVENUES

The majority of our telecommunications revenues are currently derived from
call charges, monthly fixed fees and installation fees associated with providing
basic voice telephone services. We expect that as our network and our subscriber
base grow, call charges and monthly fees for basic voice services will continue
to account for a significant portion of our total revenues but that other
services, including indirect voice, data and wholesale services, will increase
as a percentage of our total revenues. During the last few years, installation
fees have declined as a percentage of our total revenues due to the increase in
other service-related charges as our operations have matured, and we expect this
trend to continue in the future. Part of our revenues is interconnection revenue
from domestic (mainly long distance and mobile-to-fixed) and international
(VoIP) termination calls. We anticipate that this sector will grow after a new
interconnection model is implemented with TPSA and the current model of
bill-and-keep settlements of our local operating companies will end. This change
should be implemented by a review of new interconnection fees performed by state
regulators and is expected in mid-2003.

PART XXXI Our revenue trends depend in part on the number of new customers we
add, the pricing of our services and our mix of business customers to total
customers as we realize greater revenue per customer from our business
customers. At March 31, 2003, our cumulative business/total customer lines mix
was 31.4%, an 6.8% increase over our business/total customer lines mix at March
31, 2002. The following table shows the periodic incremental business/total
customer mix and the cumulative business/total customer lines mix for each
quarter of 2000, 2001, 2002 and the first quarter of 2003.

2000 2001 2002 2003
-------------------------------- ------------------------------------- ---------------------------------- -------
Q1 Q2 Q3 Q4 Q1(3) Q2(3) Q3(4) Q4(5) Q1 Q2 Q3 Q4 Q1
-------------------------------- ------------------------------------- ---------------------------------- -------

Period incremental
Business/total
customer mix (1)

29.0% 44.6% 44.3% 62.9% 13.2% 60.8% 108.0% 2,548.2% n/a(6) n/a(7) n/a(8) 261.7% 69.2%

Cumulative
business/total
customer mix (2) 21.0% 22.1% 23.6% 25.3% 25.0% 26.0% 27.3% 28.5% 29.4% 29.8% 30.3% 31.0% 31.4%

- ----------------------------
(1) Period incremental business/total customer mix represents the net change in
subscriber business lines during the referenced periods as a percentage of
total net change in active subscriber lines during those periods.

(2) Cumulative business/total customer mix represents the number of subscriber
business lines as a percentage of total active subscriber lines at the end
of the referenced periods.

(3) The number of active subscriber lines reported previously has been
corrected as a result of discovering an error in the IT reporting system.
This also resulted in a recalculation of reported figures for the average
revenue per line, number of business lines and business customers' mix.
This adjustment had no impact on our previously reported revenues.

(4) In the third quarter of 2001, the number of ringing lines increased by
5,296. Due to churn, the net change in the number of non-business customers
was negative 425. As a result, the business mix for the period reached
108.0%

(5) In the fourth quarter of 2001, the number of ringing lines increased by
168. Due to churn, the number of non-business customers decreased by 4,113.
As a result, the business mix for the period reached 2,548.2%

(6) In the first quarter of 2002, due to churn, the net change in the total
number of ringing lines decreased by 1,514. The number of business
customers' lines in the same period increased by 2,569.

(7) In the second quarter of 2002, due to churn, the net change in the total
number of ringing lines decreased by 143. The number of business customers'
lines in the same period increased by 1,434.

(8) In the third quarter of 2002, due to churn, the net change in the total
number of ringing lines decreased by 1,913. The number of business customer
lines in the same period increased by 1,212.

OPERATING EXPENSES

We divide our costs and expenses into the following categories:
interconnection charges; salaries, benefits and social security costs; legal and
financial services, sales and marketing expenses, cost of rented lines and
network maintenance, depreciation and amortization; and other operating
expenses. Below we comment on major categories of our operating expenses.

Interconnection Costs

Interconnection costs accounted for 26% of our operating expenses for the
three-month period ended on March 31, 2003. The Netia Group companies are
currently party to two interconnection regimes, using: (i) a revenue-based
formula and (ii) a cost-based formula. The Netia Group companies operating on
the basis of a local license granted under the previous telecommunications law,
pay interconnection costs based on a certain percentage of revenues collected.
Generally, under these interconnection agreements, settlement costs paid to TPSA
for outgoing (i.e., those originating from our customers) international calls
are up to 72.0% of TPSA's tariffs for these calls and, for outgoing domestic
long-distance calls, from 22.5% to 40.0% of TPSA's tariffs. Mobile operators are
paid between 0.87 PLN to 1.13 PLN per call minute (peak time). These settlement
costs are independent of the rates we charge our customers for placing these
calls, although our basic tariff option is effectively pegged to the rates
charged by TPSA for similar calls. We pay to, and are paid by, mobile operators
(but not fixed-line operators) who directly connect to our network for calls
originating in and terminating on our network. Netia 1, which provides domestic
long-distance services, is charged by local loop operators on the basis of the
number of switches required to connect a telephone call, as provided in EU
guidelines. Those rates, which were substantially reduced at the end of 2001,
are currently PLN 0.05 for single transit and PLN 0.068 (in peak time) for
double transit. Despite expected changes in the interconnection settlement
regime, these costs are expected to remain a significant item of our operating
costs in the foreseeable future.

Salaries, Benefits and Social Security Costs

The level of salaries, benefits and social security costs accounted for 25%
of our total operating costs for the three-month period ended on March 31, 2003.
The number of employees in the Netia Group decreased from 1,289 at the end of
2002 to 1,283 at the end of March 2003.

Depreciation and Amortization

Depreciation and amortization expenses consist of the depreciation of
property, plant and equipment, primarily related to our network, and the
amortization of intangible assets, principally of our licenses. We commence
amortization of licenses for a territory when we commence operations in that
territory. We expect depreciation and amortization expenses to remain at stable
level in the future, except if any future impairment of fixed assets is
recorded.

Other

Our other operating expenses primarily include maintenance and related
expenses necessary to service, maintain and operate our network; selling,
general and administrative expenses; and customer service expenses. We are
implementing cost-saving actions; however, we expect that our other operating
expenses may continue to increase in connection with the expansion of the
geographic scope of our network, the expansion of our operations and the
expansion of our product and service offerings.

Certain prior periods' amounts have been reclassified to conform to the
presentation for the three month period ended March 31, 2003. The major
reclassifications relate to presentation of interconnection revenues and part of
wholesale revenue, which have been previously presented net of appropriate
costs. Furthermore, items relating mainly to costs of rented lines and network
maintenance, office and car maintenance, information technology services have
been reclassified to conform to the current period presentation.

TAXES

The Polish tax system has restrictive provisions for grouping of tax losses
for multiple legal entities under common control, such as us and our
subsidiaries. Thus, each of our subsidiaries only utilizes its own tax losses to
offset taxable income in subsequent years. Losses are not indexed to inflation.
Deferred tax assets related to these losses have been reserved for. Tax losses
incurred in 1999 and subsequent years are permitted to be utilized over five
years with a 50% utilization restriction per annum.

Although we believe we have structured our inter-company funding
arrangements to accommodate the rules that are presently in effect, we cannot be
certain that the tax authorities will concur with our position, or that we will
be able to structure our future funding arrangements to accommodate the rules.
Additionally, we have constructed the realization of the Restructuring Agreement
in a tax-efficient manner, but we cannot assure you that we will be able to
avoid taxation in all of the jurisdictions concerned. As a result, we may be
required either to pay increased amounts of Polish or Dutch corporate taxes
and/or transfer tax, or to restructure our inter-company funding arrangements in
a manner that would be less tax-efficient than our present arrangements.

MINORITY INTERESTS

Minority interests represent that share of the net results of operations of
subsidiaries that are not attributable to our ownership interest. Minority
interests are adjusted out of the net loss of the group in accordance with IFRS.
Accordingly, the portion of the losses assigned to the minority interest
shareholders is not recognized by us. Negative minority interest resulting from
negative net assets of subsidiaries is not recognized unless there is a
contractual commitment.

SEGMENT REPORTING

We report our operating results in two segments: the telecommunications
business and other businesses. Our other businesses consist of the provision of
specialized trunking services, the sale of related equipment. We conduct our
specialized mobile radio business through Uni-Net.

The following table shows certain financial data related to our
telecommunications businesses and other business:

REVENUES OPERATING PROFIT/(LOSS)
-------- -----------------------
YEAR YEAR
2000 2001 2002 1Q 03 2000 2001 2002 1Q 03
---- ---- ---- ----- ---- ---- ---- -----
(PLN in millions)

Telecommunications businesses......... 395.2 512.2 588.1 158.8 (160.7) (530.5) (263.3) (25.8)

Other businesses....................... 47.5 26.7 16.3 2.5 4.2 1.6 (0.5) 0.3
---- ---- ---- --- --- --- ----- ---

442.7 538.9 604.4 161.3 (156.5) (528.9) 262.8 (25.5)
===== ===== ===== ===== ======= ======= ===== ======

RESULTS OF OPERATIONS

THREE-MONTH PERIOD ENDED MARCH 31, 2003 COMPARED TO THE THREE-MONTH PERIOD ENDED
MARCH 31, 2002

Please note that due to the changes of presentation format introduced as of
January 1, 2003 and related reclassification of interconnection charges and
revenues as well as part of voice termination charges and revenues (previously
shown net), the revenues and operating costs for periods ended through December
31, 2002 were adjusted accordingly to reflect these changes and therefore vary
from the figures reported previously. In addition, revenues per line presented
in this report are given for a relevant three-month period as opposed to figures
for a last month in a period reported previously.

TELECOMMUNICATIONS BUSINESS

Revenues. Telecommunication revenues increased by 11% to 158.8 PLN million
during the three-month period ended March 31, 2003 from PLN 142.5 million during
the three-month period ended March 31, 2002. The increase was attributable to an
increase in the number of business lines from 100,563 at March 31, 2002 to
108,603 at March 31, 2003 and an increase in business mix of lines (from 29.4%
of all subscribers in the first quarter of 2002 to 31.4% in the first quarter of
2003) as well as expansion of products other than traditional direct voice, such
as indirect voice, data transmission, interconnection revenues and wholesale
services. The share of revenues from these products increased to 23% of total
revenues from telecommunications services in the three month period ended March
31, 2003 as compared to 10% in the three-month period ended March 31, 2002. In
particular, revenues from wholesale services increased between these periods by
261% to PLN 11.2 million in the first quarter of 2003 from PLN 3.1 million in
the first quarter of 2002 while revenues from indirect voice services increased
by 179% to PLN 13.4 million in the first quarter of 2003 from PLN 4.8 million in
the first quarter of 2002.

Overall average revenue from direct voice services per line decreased to
119 PLN for the three-month period ended March 31, 2003 from PLN 124 for the
three-month period ended March 31, 2002. Average monthly revenue from direct
voice services per line for business customers also decreased to 215 PLN for the
three-month period ended March 31, 2003 from PLN 243 for the three-month period
ended March 31, 2002. Decreasing average revenue ratios for both residential and
business lines reflect continued overall telecom tariff reduction trends. The
total number of subscribers increased from 342,288 at March 31, 2002 to 345,447
at March 31, 2003.

Costs and expenses. Total costs and expenses increased to PLN 184.6 million
during the three-month period ended March 31, 2003 from PLN 179.7 million during
the three-month period ended March 31, 2002, or 3%. This increase was
attributable to a stable level of interconnection charges, whereas the decrease
of salaries and benefits was offset by an increase of other operating costs.
Depreciation of fixed assets did not change significantly compared to the
respective period in 2002. Amortization of other intangible assets increased due
to the increased level of computer software associated with the Company's
information technology systems.

Financial expenses, net. Financial expenses decreased to PLN 54.5
million during the three-month period ended March 31, 2003 from PLN 207.8
million during the three-month period ended March 31, 2002. The decrease in
financial expenses was primarily attributable to the successful financial
restructuring and debt-for-equity swap which resulted in, among other things,
the elimination of obligations under notes issued by Netia in the past. The cost
for the three-month period ended March 31, 2003 was attributable primarily to
the write off of debt issuance costs of PLN 41.1 million in connection with
early redemption of 2002 Notes.

Taxes. No tax was recorded during the three-month period ended March 31,
2003 as compared to 0.5 PLN million of tax charge recorded during the
three-month period ended March 31, 2002.

Net losses. As a result of the factors discussed above, we incurred net
losses of PLN 80.4 million during three-month period ended March 31, 2003 as
compared to net losses of PLN 245.7 million during three-month period ended
March 31, 2002.

OTHER BUSINESSES

Revenues from other businesses decreased by 57%, to PLN 2.5 million during
the three-month period ended March 31, 2003 from PLN 5.8 million during the
three-month period ended March 31, 2002. This decrease was primarily
attributable to substitution of radio trunking services by mobile telephony
services. Operating profit of PLN 0.3 million was recorded in the three month
period ended March 31, 2003, at the same level as during the three-month period
ended March 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

As a result of our financial restructuring, as of March 31, 2003, we had an
accumulated deficit of PLN 3,012 million, shareholders' equity of PLN 2,722
million and net working capital deficit of PLN 92 million, including short term
license fee obligations, as computed according to IAS. The conclusion of
arrangements with our creditors in Poland and the Netherlands, the only
remaining obligation being the issuance of Subscription Warrants to our
pre-restructuring shareholders, allowed us to regain solvency. As of January 2,
2003, all court decisions approving the Dutch composition plans and Polish
arrangement plans became final and unappealable. Consequently, the restructuring
is irreversible, subject to our compliance with and performance of all
obligations under the Dutch composition plans and Polish arrangement plans. We
believe that we will comply with our obligations under these plans.

The restructuring did not lead to the elimination of all of the Company's
outstanding debt. We will have to repay outstanding installment obligations of
the nominal amount of PLN 11,872 between 2007 and 2012, not exchanged for the
ordinary series H shares offered by us but we have already redeemed the 2002
Notes.

In relation to the conversion of licenses to permits, we are currently
contesting the requirement to pay the license fees due under the licenses held
by us prior to January 1, 2001. As of March 31, 2003, the liabilities under
local license fees equaled approximately EUR 91.4 million (recorded at nominal
value of PLN 402.6 million at the exchange rate prevailing at March 31, 2003),
further increased pursuant to the decision of the Ministry of Infrastructure by
a prolongation fee of PLN 15.8 million.

Further a law was enacted in Poland regarding the restructuring of license
fee obligations. Based on this law, we have submitted applications for the
cancellation of its license fee obligation amounting to PLN 351 million (present
value of the license obligations at March 31, 2003) based on capital
expenditures we have already incurred. These applications are to be reviewed by
the Polish Government and according to the law can only be refused if the
Minister responsible for this matter does not recognize the investments already
made by us as qualifying capital expenditure. In this respect, we received
notification letters from the Polish Government dated March 21, 2003, indicating
that the applications will be considered by June 30, 2003.

As the restructuring is virtually complete, we do not believe that events
or conditions exist which may cast significant doubt on our ability to continue
as a going concern. However, we will continue to take steps aimed at preserving
Netia's cash, such as substantial reductions in capital and operating
expenditures in comparison with our prior plans and steps aimed at seeking to
confirm expiry, cancellation, deferral or conversion of our remaining license
fee obligations. Cash and cash equivalents held by Netia as at March 31, 2003
amounted to PLN 110.9 million. We also held PLN 61.5 million in a restricted
deposit account, which is expected to be released for the Company when the
subscription warrants to be issued pursuant to the restructuring become
available for receipt by the pre- restructuring shareholders of the Company.

Net cash provided by operating activities was PLN 24.3 million during the
three-month period ended March 31, 2003 and PLN 30.0 million during the
three-month period ended March 31, 2002. This decrease was mainly driven by the
changes of working capital components. Our telecommunication revenues were
greater than our cash operating expenditures during both these periods, which
contributed to positive operating cash flow.

Net cash provided by investing activities was PLN 162.0 million during the
three-month period ended March 31, 2003 compared to net cash used of PLN 92.1
million during the three-month period ended March 31, 2002. This change includes
a release of PLN 199.3 million deposited in December 2002 in a restricted
account as temporary security for obligations arising under the 2002 Notes. Net
cash used for the purchase of fixed assets and computer software decreased by
60% to PLN 37.3 million during the three-month period ended March 31, 2003 from
PLN 92.1 million during the three-month period ended March 31, 2002, in
accordance with the revised business plan approved in late 2001, aimed at
preserving cash.

Net cash used in financing activities in the three-month period ended March
31, 2003 was PLN 208.7 million, relating primarily to the redemption of the 2002
Notes of PLN 204.2 million. In the three-month period ended March 31, 2002,
outflow from financial activities was PLN 49.8 including payments related to the
restructuring of PLN 20.4 million and PLN 29.3 million of the payment to Merrill
Lynch Capital Services, Inc. in January 2002, relating to the cancellation of
our swap transactions.

Cash and cash equivalents are held in Polish Zlotys, Euro and US dollars in
Poland.

CRITICAL ACCOUNTING POLICIES

Below we present our critical accounting policies. It should be noted that
we prepare our interim condensed consolidated financial statements in accordance
with IFRS.

ESTIMATING THE IMPAIRMENT OF ASSETS

We are required to estimate the recoverable amount of an asset whenever
there is an indication that the asset may be impaired. Factors considered
important that could trigger an impairment review include significant negative
industry or economic trends as well as conditions within Netia Group. We are
required to recognize an impairment loss whenever the carrying amount of an
asset exceeds its recoverable amount. The recoverable amount of an asset is
measured as the higher of net selling price and value in use. The net selling
price is the amount obtainable from the sale of an asset in an arm's-length
transaction between knowledgeable, willing parties, after deducting any direct
incremental disposal costs; while the value in use is the present value of
estimated future cash flows expected to arise from the continuing use of an
asset and from its disposal at the end of its useful life. In determining an
asset's value in use, we are required to estimate the future cash inflows and
outflows to be derived from continuing use of the asset and from its ultimate
disposal, and applying the appropriate discount rate to these future cash flows

In December 2002, our Supervisory Board approved a plan to consolidate our
operating subsidiaries. We currently have a complex legal structure with over
twenty-five subsidiaries. This structure has primarily resulted from the need to
establish a separate entity for each telecommunication license held. The
consolidation was approved in an effort to reduce management costs, tax risks
and operational problems as well as to simplify our intra-group financing and
legal arrangements. The plan to consolidate our subsidiaries is expected to
result in most operating companies held by us being merged into it. The
operating subsidiaries' telecommunication licenses (converted to permits) are
not transferable. As a result, we believe that the existing telecommunication
permits, except for the permit issued to Telekom in 2002, will expire when the
operating subsidiaries are merged into the parent company. The expiry of these
permits will not give us the right to claim the return of the license fees that
were previously paid. It is not certain whether the expiry of the permits would
result in any exemption from additional payments related to our outstanding
obligations. After the merger, the parent company will continue to provide
telecommunication services under a single new permit that it intends to obtain
for the nominal fee of EUR 2.5 in 2003. We plan to write-off its
telecommunication licenses when we have started to implement the plan to
consolidate our operating subsidiaries. This is expected to occur during the
year ending December 31, 2003.

REVENUE RECOGNITION

We measure our telecommunications and other revenue net of discounts and
value added tax. Our telecommunications revenue includes mainly installation
fees, monthly charges and calling charges. We record revenue from installation
fees, which are not in excess of selling costs, when the customer is connected
to the network. Our other telecommunications revenue comprises the provision of
Internet, leased lines, frame relay and ISDN services as well as the sale of
telecommunications accessories; and we recognize revenues for these transactions
when the service is provided or when the goods are sold.

Our other revenue includes revenue from specialized mobile radio service
(public trunking), through our subsidiary Uni-Net. We record service revenues
when the service is provided. Revenue from the sale of equipment is recorded
when the customer takes delivery.

DEFERRED INCOME TAXES

As part of the process of preparing our consolidated financial statements,
we are required to estimate the tax incomes and losses of our subsidiaries. To
do this, we estimate our actual current tax liabilities, whilst deferred income
tax is provided, using the liability method, for all temporary differences
arising between the tax bases of assets and liabilities and their carrying
values for financial reporting purposes.

We use currently enacted tax rates to determine deferred income tax. The
principal temporary differences arise from interest and foreign exchange
differences and tax losses carried forward. We record valuation allowances for
deferred tax assets when it is likely that tax benefits will not be realized. To
the extent we establish a valuation allowance or increase this allowance in the
period, we must include an expense within the tax provision in the statement of
operations.

These critical accounting policies are not intended to be a comprehensive
list of all of our accounting policies. In many cases, the accounting treatment
of a particular transaction is specifically dictated by IFRS, with no need for
management's judgment in their application. There are also areas in which the
exercise of management's judgment in selecting an available alternative would
not produce a materially different result.

UNI-NET COMFORT LETTERS

In January 1998, we issued two letters of comfort to ING Lease (Polska) Sp.
z o.o., which we refer to as ING Lease, in support of the obligations of
Uni-Net, our 58.2% subsidiary, under two agreements pursuant to which Uni-Net
leases equipment from ING Lease. Similar comfort letters were provided to ING
Lease by the other principal shareholder of Uni-Net. Under the comfort letters,
which expressly provided that they did not constitute guarantees, we agreed to
use our best efforts to ensure that Uni-Net would have sufficient funds at its
disposal to satisfy its obligations under the underlying leases; we further
agreed that if we had desired to sell more than 51% of our interest in Uni-Net,
we would either: (i) arrange for the purchaser to assume our obligations under
the comfort letters; or (ii) provide a guarantee to ING Lease of Uni-Net's
obligations under the leases up to a maximum amount of approximately DM 1
million. The guarantee was subject to the Polish arrangement proceedings of
Netia and was reduced to 8.7% of its original value.

INFLATION

In connection with its transition from a state-controlled to a free-market
economy, Poland experienced high levels of inflation and significant fluctuation
in the exchange rate for the Polish zloty.

The Polish government has adopted policies that slowed the annual rate of
consumer price inflation from an average of 250.0% in 1990 to approximately
13.2% in 1997, 8.6% in 1998, 9.8% in 1999, 8.5% in 2000, 3.6% in 2001 and 0.8%
in 2002. Inflation in the twelve-month period ended March 31, 2003 amounted to
approximately 0.6%. Substantial portions of our operating expenses are, and are
expected to continue to be, denominated in Polish Zloty and tend to increase
with inflation. Inflation has had and if the inflation rate grows again, it may
continue to have, a material adverse effect on our financial condition and
results of operations. We may increase our tariffs to account for Polish price
inflation. The NTA, however, grants the ORTP the authority to review and, in
certain situations, effectively overrule the prices we and other
telecommunications service providers propose to charge for our services.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATES

Our income and operating cash flows are substantially independent of
changes in market interest rates. Our policy is to maintain approximately all of
our borrowings in fixed rate instruments.

As at March 31, 2003, we did not have any floating or fixed-rate debt.

Our license fee obligations are not interest bearing.

FOREIGN EXCHANGE RISK

Our revenues and costs are predominantly denominated in Polish zloty, other
than payments made under the construction contracts, which are linked to the
U.S. Dollar and Euro. In the previous years we raised long term debt on
international financial markets and are exposed to foreign exchange risk arising
from various currency exposures primarily with respect to the U.S. Dollar and
Euro.

We will face foreign exchange risk in respect of our capital
expenditure-related liabilities and license fee obligations.

Our license fee obligations are denominated in euro. Any devaluation of the
Polish zloty against the euro that we are unable to offset through price
adjustments will require us to use a larger portion of our revenues to service
our non-zloty-denominated debt. Shifts in currency exchange rates may have an
adverse effect on our ability to service our non-zloty-denominated obligations
and, therefore, on our financial condition and results of operations.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

RESTRUCTURING

On December 15, 2001, we defaulted on several interest payments on two
series of our notes. Those defaults triggered cross-default provisions under the
terms of the indentures governing four other series of our notes and, as a
result, we were in default on all six series of the issued notes that were then
outstanding. We also defaulted on swap payments under certain swap agreements
that we had entered with JPMorgan. We also failed to make all subsequent
payments of interest in connection with the outstanding notes due after December
15, 2001. As a result of these defaults and our level of shareholders' equity,
which, as calculated according to Polish Accounting Standards, was in deficit
starting as of December 31, 2001, we were required to file for bankruptcy under
Polish law unless we petitioned for the opening of arrangement proceedings. To
avoid filing for bankruptcy, Netia and our two principal Polish subsidiaries,
Telekom and South, petitioned the court in Warsaw on February 20, 2002 to open
arrangement proceedings.

On March 5, 2002, we reached Restructuring Agreement, of our debt with an
ad hoc committee of our noteholders, certain financial creditors, Telia and
Warburg. Telia and Warburg then owned together approximately 57.4% of our share
capital and they acted separately during our restructuring process as our two
largest shareholders. Subsequently a majority of our creditors agreed to and
signed the Restructuring Agreement. Under our Restructuring Agreement, the
parties agreed to implement a restructuring plan designed to strengthen our
balance sheet.

On June 14, 2002, the Exchange Agreement was entered into by us, certain of
our subsidiaries and a substantial majority of our creditors, parties to the
Restructuring Agreement. The Exchange Agreement was intended to specify further
terms of our financial restructuring outlined in the Restructuring Agreement and
to provide the means for the implementation of the terms of thee restructuring
as set out in the Restructuring Agreement.

Pursuant to the Restructuring Agreement, the Polish arrangement
proceedings, and the Dutch moratorium plans, one of our finance subsidiaries
issued EUR 49,869 thousand 10% Senior Secured Notes due 2008 ("2002 Notes"), to
holders of the existing notes and JPMorgan Chase Bank in exchange for
relinquishing their claims in respect of the existing notes and obligations
under the JPMorgan swap agreements. In addition, our creditors had an
opportunity to subscribe for series H shares issued by Netia in exchange for
relinquishing their claims against us which had been reduced under the Polish
arrangement plan.

Under the Restructuring Agreement the Company's shareholders as of December
22, 2002 will be issued Subscription Warrants to acquire up to 64,848,652 (not
in thousands) ordinary shares representing 15% of the Company's
post-restructuring share capital as described in the Restructuring Agreement
(after the issuance of 18,373,785 (not in thousands) ordinary shares
representing up to 5% of the issued ordinary share capital in respect of a key
employee stock option plan). The strike price of the Subscription Warrants of
PLN 2.53 (not in thousands) approved by the Supervisory Board on April 12, 2003
corresponds to the volume-weighted average price of the Company's ordinary
shares on the Warsaw Stock Exchange for the 30 trading days beginning 31 days
following the successful closing of registration of series H shares. We also
plan to issue up to 18,373,785 (not in thousands) ordinary shares under a key
employee stock option plan.

On December 23, 2002, our creditors subscribed for 312,626,040 of our
series H shares thus relinquishing their reduced claims against us and on that
same day we issued our 2002 Notes. Our series H shares were registered with the
Polish court on January 30, 2003 and at that point our former creditors became
the owners of approximately 91% of our share capital.

On March 24, 2003 we redeemed the outstanding 2002 Notes at their aggregate
principal amount together with the interest accrued until that day.

SECTION 304 PROCEEDINGS IN THE UNITED STATES

In connection with the arrangement proceedings in Poland, we commenced an
ancillary proceeding in the US Bankruptcy Court of the Southern District of New
York, which we refer to as the US Bankruptcy Court, pursuant to section 304 of
the US Bankruptcy Code. The ancillary proceeding sought, among other things, the
turnover to us of deposits that we set aside to fund certain interest payments
under the 13.75% Senior Notes due 2010. Pursuant to the agreement with the
minority group of our claimholders, who previously objected to the restructuring
they withdrew all their claims in connection with the arrangement proceedings in
Poland. In addition, their appeal from the court's ruling in the United States
304 proceeding was dismissed without prejudice to reinstatement in the event
that the restructuring was not completed. On February 10, 2003, the Dissenting
Parties' objections to the United States 304 proceeding (including objection to
turnover of the deposits to Netia) were withdrawn and their appeal was dismissed
with prejudice. In an order dated March 7, 2003, the United States Bankruptcy
Court for the Southern District of New York gave force and effect in the United
States to Netia's Polish arrangement plans and Dutch composition plans ratified
earlier by Polish and Dutch courts, respectively. The court also ordered that
the deposited amount of EUR 13.9 million (PLN 61.5 million at the exchange rate
prevailing at March 31, 2003) be turned over to Netia immediately following the
completion of the final step of Netia's restructuring, which requires the
issuance of Subscription Warrants to pre-restructuring shareholders of Netia.

MILLENNIUM

In August and September 2000, we entered into certain agreements to acquire
all of the outstanding equity of Millennium, a provider of telecommunications
services to multi-tenant buildings in Warsaw, for a total consideration of
between US$ 10.8 million and US$ 20.2 million, based on Millennium's financial
performance through the end of 2001. Following the execution of the agreements,
we advanced to Millennium a total of PLN 8.5 million and Euro 2.9 million (PLN
12.8 million at the March 31, 2003 exchange rate), of which PLN 8.5 million was
subsequently repaid by Millennium in January 2001. In December 2000, we
initiated court and arbitration proceedings, which we amended in October 2001,
in response to the failure by Millennium to perform the agreement. We claimed
the remaining part of the advance made to Millennium included in our balance
sheet and additional damages of PLN 8.5 million. In 2001, a valuation allowance
of PLN 17.0 million was recorded as other operating expense against the
outstanding amount receivable from Millennium as a result of the events
described above.

On October 15, 2002, we received a ruling of the Polish Chamber of Commerce
Arbitration Court, dated October 1, 2002, dismissing Millennium and its
shareholder's direct claims against us for declaration of the share subscription
agreement void and ineffective and payment of PLN 11.5 million by us. The court
also dismissed our claim for damages against Millennium in the amount of PLN 8.5
million. On November 12, 2002 we petitioned the Regional Court in Warsaw to set
aside the ruling of the arbitration court. Millennium petitioned the Regional
Court in Warsaw to enforce the ruling of the arbitration court. Both cases are
currently pending. Also our claim brought against Millennium in the Regional
Court in Warsaw, petitioning for the repayment of of loan of Euro 2.9 million
(PLN 12.8 million at the March 31, 2003 exchange rate),is still pending. On
February 11, 2003, the court ruled in our favor for the return of the principal
amount of the loan and the related interest. That ruling was appealed by
Millennium.

On February 28, 2001, Millennium filed a motion against us for certain acts
of unfair competition. In its motion, Millennium requested that the court order
us to pay Millennium damages of PLN 50 million. We believe that the Millennium
suit was filed as a litigation tactic in connection with our lawsuit against
Millennium and that Millennium's unfair competition claim does not have any
merit.

We, having obtained legal advice, do not believe that the settlement of
this matter will have a material adverse effect on our financial condition.

SOFITEC

In January 1998, Sofitec International, a company incorporated in France,
commenced proceedings in the Commercial Court of Paris against us and two of our
officers claiming payment of approximately USD 4.1 million together with damages
of USD 0.4 million. Sofitec's claim relates to work and services allegedly
performed under an agreement that was entered into in January 1992 under which
we agreed to pay Sofitec a fee in the event that we obtained financing or other
benefits from an entity or entities to whom we had been introduced by Sofitec
acting according to the Sofitec agreement.

In the proceedings, Sofitec alleges that, as a result of the work and
services performed by it under the Sofitec agreement, we obtained financing from
the European Bank for Reconstruction and Development ("EBRD"), in 1996. We
presented our defense motion in which we denied that Sofitec or any of its
agents or employees performed any work or services under the Sofitec agreement,
which would entitle it to payment of a fee. Specifically, we denied that Sofitec
either introduced us to EBRD or that Sofitec performed any work or services in
connection with the financing that we obtained from EBRD in 1996 which would
entitle it to payment of any fee under the Sofitec agreement.

The first hearing in the proceedings took place in March 1998. At that
hearing Sofitec was ordered to produce the documents and evidence in support of
its claim by April 1998, at which time a second hearing took place. We presented
our defense motion at a hearing held in September 1998. The proceedings are
still pending. Management is of the opinion that, having obtained legal advice,
it is impossible to determine whether any liability with respect to this matter
is likely to arise. Accordingly, no liability has been recorded for this claim.
We do not believe that this matter will have a material adverse effect on our
financial condition.

KEVIN DAROCH

We received a letter, dated January 8, 1999, with a claim for USD 10
million in connection with consulting services provided to us by an outside
consultant. We are of the opinion, having obtained legal advice, that it is
impossible to determine whether any liability with respect to this matter is
likely to arise or to estimate the amount of this liability if it, in fact, were
to arise. Accordingly, no liability has been recorded for this claim. We do not
believe that this matter will have a material adverse effect on our financial
condition.

MINORITY SHAREHOLDERS

On August 1, 2002, we received a copy of a claim by an individual
shareholder filed with the District Court in Warsaw with a demand for the
invalidation of certain sections of a resolution adopted by our General
Shareholders' Meeting on April 4, 2002. The individual shareholder claimed that
the distribution of the Subscription Warrants offered hereby under the
restructuring was harmful to the minority shareholders and violates good
customs. On August 14, 2002, we filed an answer to this claim and requested the
District Court to dismiss it.

We received a claim filed by another minority shareholder, also for the
cancellation of a resolution adopted by our General Shareholders' Meeting on
April 4, 2002. The claim is substantively based on the same grounds as the other
minority shareholder's claim. On January 17, 2003, we filed an answer to this
claim and requested the District Court to dismiss it.

We also received a decision from the District Court of July 1, 2002 in
which the District Court resolved to forward a claim filed by another minority
shareholder requesting the invalidation of a resolution adopted by our General
Shareholders' Meeting on April 4, 2002 to the Regional Court for the capital
city of Warsaw for its determination. We have not received a copy of the claim
and is not aware of its merits. If, however, the claim is based on the same
grounds as the previous minority shareholder claim received on August 1, 2002,
we expect that it will file for this claim's dismissal as well.

DOMESTIC LONG-DISTANCE FEE OBLIGATIONS

In April 2001, we filed a petition with the ORTP seeking the return of the
EUR 24.0 million in license fee obligations that we have paid to date with
respect to the domestic long-distance license that we received in May 2000. In
our petition, the period during which we were to have the semi-exclusive right
to provide domestic long-distance services in the original license has been
unfairly shortened due to three factors. First, we claim that the NTA, which
came into effect on January 1, 2001, allows any operator to apply for a permit
to provide domestic long-distance services after January 1, 2002, whilst our
license would have been valid for 15 years. Second, the Ministry of
Infrastructure (formerly the Ministry of Communications) delayed for a number of
months both the tender process and the actual grant of a license to us. Third,
the Ministry of Infrastructure's failure to issue timely and effective
regulations with respect to the interconnection regime and its failure to
require TPSA to execute an interconnection agreement with us with respect to
domestic long-distance service further continues to hinder our ability to
provide domestic long-distance services.

We have filed similar petitions with the ORTP with respect to the fee
obligations under our other telecommunications permits.

Furthermore, we have not made a payment of EUR 1 (PLN 4.4 at the exchange
rate in effect on March 31, 2003) for our long distance license fee obligation
due on January 31, 2002. On November 20, 2002 the Ministry of Infrastructure
issued to Netia 1 a decision splitting Netia 1's license fee obligations due
January 31, 2002 into two installments and deferring their payment until
December 20 and December 30, 2002, respectively. On December 2, 2002, Netia 1
applied to the Ministry of Infrastructure for a second review of the Ministry's
decision, in order to obtain a further deferral of both installments until June
30, 2003. On December 2, 2002, Netia 1 also applied for the deferral until June
30, 2003 of its license fee obligations due January 31, 2003. On February 6,
2003, Netia 1 received a decision from the Ministry of Infrastructure's
rejecting its request. On April 2, 2003 the Ministry of Infrastructure issued a
decision refusing a deferral of the domestic long distance license fee
obligation due January 1, 2003 amounting to EUR 1 million. The Company
previously applied for the deferral until June 30, 2003 on December 2, 2002. On
April 9, 2003 the Ministry of Infrastructure issued another decision refusing
changes to the terms established in the previous decision dated November 20,
2002 regarding the license fee obligation of EUR 1 milllion due on January 1,
2002. Pursuant to the initial decision the installment had been split into two
payments of EUR 0.5 million (PLN 2.2 million at the exchange rate in effect on
March 31, 2003) each payable on December 20, 2002 and December 30, 2002,
respectively. On April 18, 2003 the Company paid the two outstanding license fee
obligation installments amounting to EUR 2 million (PLN 8.5 million at the
exchange rate prevailing at that day) and the applicable prolongation fees of
PLN 0.3 million and penalty interest amounting to PLN 0.3 million.

UMTS TENDER

In November 2000, the Ministry of Communications (now the Ministry of
Infrastructure) cancelled its planned tender process and issued a UMTS license
to each of Plus GSM, Era GSM and Centertel. We chose not to participate in the
tender process after careful analysis of the terms upon which the licenses were
to be granted. However, when the licenses were granted (without a tender), many
of the terms that we had found objectionable were not included. As a result, in
December 2000, we initiated proceedings with the Ministry of Communications with
respect to the grant of UMTS licenses to the other operators and we also
submitted to the Ministry of Communications a statement of our intention to
acquire a license to provide UMTS services on the same terms as those granted to
Plus GSM, Era GSM and Centertel. In these proceedings, we sought the revocation
of the licenses granted to these operators and the initiation of a new tender
for the three UMTS licenses. In the alternative, we have requested that the
Ministry of Communications grant a UMTS license to us on terms no less
advantageous than those licenses granted to the other operators. In January
2001, we received notice that the Ministry of Communications had ruled against
us in these proceedings. We have resubmitted our submissions to the Ministry of
Communications on appeal and filed a claim with the Supreme Administrative Court
regarding the Minister's delay in reviewing the appeal and are currently
awaiting a ruling.

MISCELLANEOUS

From time to time, we are involved in various other legal proceedings
arising in the ordinary course of business. We are not currently a party to any
other litigation or regulatory proceeding that we believe could have a material
adverse effect on our business, financial condition or operating results.

PROPERTY, PLANT AND EQUIPMENT

Our principal properties consist of our headquarters and our
telecommunications network located throughout Poland. Our headquarters, which
include technical facilities, is located in Warsaw and consists of approximately
11,300 square meters of office space, which we own. We also have approximately
nine major lease agreements for offices, storage space and land adjacent to
buildings. The aggregate area leased by us is approximately 2,500 square meters
(most of which is land adjacent to buildings). In Warsaw, we also own two
additional office buildings, which contain 4,700 square meters and 2,800 square
meters of office space, respectively.

In addition, we rent or lease various properties (land and buildings)
throughout Poland to support our technical plant which we use, for example for
housing our switches and remote switching units, to provide premises for our
customer care centers and in certain cases to provide accommodation for our
employees.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) Not applicable

(b) Not applicable

(d) Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

(a) Not applicable

(b) Not applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

(a) During the three-month period ended March 31, 2003, we held the following
General Shareholders' Meetings:

o On January 15, 2003 we held an Extraordinary General Shareholders'
Meeting during which our shareholders approved, among other things,
resolutions to amend the Company's Statute, to adopt the unified text
of the Company's Statute, to change the composition of the Company's
Supervisory Board, to adopt the "Rules of Remunerating the Supervisory
Board's Members" and to grant consent for the creation of collateral
on Company's assets as security against the guarantee of the issuance
of 2002 Notes.

(b) In accordance with the changes in the Company's Statute adopted by the
Extraordinary General Shareholders' Meeting on January 15, 20032003, the
number of members of the Company's Supervisory Board was reduced to seven
as of February 27, 2003, the date of registration of the changes to the
Company's' Statute by the Polish court. On January 15, 2003 the
Extraordinary General Shareholders' Meeting dismissed four members and
appointed three new members of the Company's Supervisory Board. On January
15, 2003 TeliaSonera AB (publ.) and Warburg Pincus each appointed their new
representative to the Supervisory Board.

Set forth below is a list of the current Supervisory Board members:

o Nicholas N. Cournoyer (Chairman of the Supervisory Board)

o Jaroslaw Bauc

o Morgan Ekberg

o Richard James Moon

o Andrzej Radziminski

o Ewa Maria Robertson

o Andrzej Michal Wiercinski

As of February 7, 2003 Mr. Antoni Dariusz Wojcieszek resigned from his
position as a member of the Netia's Management Board.

Effective February 28, 2003, Mr. Mariusz Chmielewski resigned from his
position as a member of Netia's Management Board.

Effective March 6, 2003, Mrs. Ewa Don-Siemion and Mr. Avraham Hochman
resigned from their positions as members of Netia's Management Board.

Effective March 6, 2003 Netia's supervisory board appointed Mr. Zbigniew
Lapinski as a member of the Management Board.

Effective April 10, 2003 the Company's Supervisory Board appointed Mrs.
Elizabeth McElroy as a member of the Management Board. At the same meeting,
Netia's Supervisory Board accepted resignation of Mr. Stefan Albertsson's
from the Management Board.

The members of the Management Board as of the date of issuance of
this report are:

o Wojciech Madalski

o Zbigniew Lapinski

o Mariusz Piwowarczyk

o Elizabeth McElroy

Since January 1, 2003 the following General Shareholders' Meetings of Netia
Holdings S.A. have been held:

1) The Extraordinary General Shareholders' Meeting of January 15, 2003,
adopted the following resolutions:

a) Resolution No. 1 concerning adopting the changes to the meeting's
agenda, which was adopted with 19,824,318 votes in favour and
3,000 votes abstaining;

b) Resolution No. 2 concerning adopting amendments to the Company's
Statute, which was adopted with 19,827,318 votes in favour;

c) Resolution No. 3 concerning adopting the unified text of the
Company's Statute, which was adopted with 19,827,318 votes in
favour;

d) Resolution No. 4 concerning the dismissal of David Oertle as a
member of the Supervisory Board, which was adopted with
19,788,315 votes in favour and 39,003 votes against;

e) Resolution No. 5 concerning the dismissal of Donald Mucha as a
member of the Supervisory Board, which was adopted with
19,788,215 votes in favour and 39,103 votes against;

f) Resolution No. 6 concerning the dismissal of Jan Guz as a member
of the Supervisory Board, which was adopted with 19,788,315 votes
in favour and 39,003 votes against;

g) Resolution No. 7 concerning the dismissal of Przemyslaw Jaronski
as a member of the Supervisory Board, which was adopted with
19,788,315 votes in favour and 39,003 votes against;

h) Resolution No. 8 concerning the appointment of Jaroslaw Bauc as a
member of the Supervisory Board, which was adopted with
19,788,215 votes in favour and 39,103 votes against;

i) Resolution No. 9 concerning the appointment of Richard James Moon
as a member of the Supervisory Board, which was adopted with
19,788,215 votes in favour and 39,103 votes against;

j) Resolution No. 10 concerning the appointment of Andrzej Michal
Wiercinski as a member of the Supervisory Board, which was
adopted with 19,788,315 votes in favour and 39,003 votes against;

k) Resolution No. 11 concerning adopting the "Rules of Remunerating
the Supervisory Board's Members", which was adopted with
19,786,315 votes in favour, 40,003 votes against and 1,000 votes
abstaining; and

l) Resolution No. 12 on Company's consent for the creation of
collateral on Company's assets as security against the guarantee
of the issuance of 2002 Notes, which was adopted with 19,826,318
votes in favour and 1,000 votes against.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Date: May 7, 2003

NETIA HOLDINGS S.A.

By: /s/ Wojciech Madalski
-------------------------------
Name: Wojciech Madalski
Title: President of the Company

By: /s/ Zbigniew Lapinski
--------------------------------
Name: Zbigniew Lapinski
Title: Chief Financial Officer