Press Releases

Budapest, January 17, 2005

The Privatization Council of the Republic of Montenegro has selected Matáv to enter into exclusive negotiations to acquire the Montenegrin telecommunications company Telekom Crne Gore AD (TCG).

Elek Straub, Chairman and CEO of Matáv said: "We are very pleased that the Government of Montenegro has selected us. This positive step has once again proved that our experience and track record as an international strategic investor is acknowledged by the region's decision makers. We anticipate that this acquisition will enable Matáv to create further growth opportunities in line with our mid-term strategic targets."

Upon conclusion of the Share Purchase Agreement which will close the upcoming negotiations, Matáv will acquire 51.12% of the shares for EUR 114 million from the Government of Montenegro and submit an offer to the minority shareholders to acquire an additional stake of up to 48.88%. The maximum price offered for 100% of TCG by Matáv is EUR 165 million, which will mainly be financed from debt. Financial closing is expected to take place in the first half of 2005. Matáv's relevant commitments and further details will be disclosed following the signature of the final agreements. Matáv will fully consolidate TCG in its accounts from the time of the closing of the transaction. The acquisition of TCG will temporarily increase the indebtedness of Matáv but will not result in a change in Matáv's dividend policy.

The TCG Group provides fixed line, mobile and Internet services. Based on the audited financial statements of the TCG Group companies, consolidated group revenues amounted to EUR 92.4 million in 2003, with an EBITDA margin of 37% (EBITDA: EUR 34.4 million). The Group's net debt ratio (net debt to net debt + equity + minorities) stood at 11% at the end of 2003 and the Group had around 1,300 employees. With a 28% fixed line penetration at the end of 2003, TCG had around 191,000 access lines and operated with a line/employee ratio of around 160. The fixed line segment produced revenues of EUR 72.1 million and a 31.6% EBITDA margin in 2003 (EBITDA: EUR 22.8 million). Monet, the mobile segment of the TCG Group, is Montenegro's second mobile carrier with increasing share (42% in 2003) in a market with 57% penetration of revenue producing customers. Monet's EBITDA margin amounted to 37.1% in 2003 (revenue: EUR 31.2 million, EBITDA: EUR 11.6 million). The Group's Internet segment, Internet CG, is a fast growing ISP having managed to maintain its dominant position despite increasing competition in a market with 5.7% penetration. The EBITDA margin of Internet CG reached 30%, while revenues amounted to EUR 2.3 million (EBITDA: 0.7 million) in 2003 but was consolidated only from 2004.