TPSA Reports H1

KRAKOW, Poland -- TP Group reports results for the first half 2008

Commenting on TP Group’s performance in the first half 2008, Mr. Maciej Witucki, President of the Board and Chief Executive Officer, said:

“Our performance in the first half of the year demonstrates TP Group’s ability to meet the strategic goals it committed to, exactly one year ago. In particular, our cost reduction plans as well as our asset optimisation programs are progressing well. This also allows us to raise our revenue guidance and confirm our profitability and capital expenditure objectives for the full year. In a more challenging environment than ever before, we need to remain extremely focused on quality of service, customer adoption and fully integrated IT systems. We are determined to build on the proven strength of Orange brand, a key competitive differentiator, and defend our leadership position.”

First Half 2008: Financial Review

First half revenue up 1.1% with double digit growth in mobile and broadband

According to TP Group estimates, market growth substantially accelerated to 6.0% in value during the first half 2008 compared to 0.2% in the first half 2007, as the operating and regulatory environment2 gradually stabilizes.

In this context, TP Group is delivering a healthy performance: revenues are up 10.5%3 in mobile and 16.4%4 in broadband, both of which are essentially non-regulated markets, thus once again fully offsetting the 11.1% decrease in fixed voice revenue.

GOM rate at 43.6% in the upper range of the annual objective In the first half 2008, TP continued to optimise operating expenses and effectively reinvest these savings into commercial expenses (up 12.2%).

Although no respite was seen from inflationary pressure on wages, labour costs were down 2.0% compared with the first half 2007 and 2.4% on a comparable basis5, reflecting further headcount reduction (down 7.8% year-on-year). Despite higher commercial and interconnection costs, increases in operating expenses6 therefore did not exceed 2.0%, before provisions for claims and litigations, risks and other charges. Consequently, TP Group GOM was flat before these provisions.

Furthermore, following the quarterly risk evaluation, the net amount of provisions for claims and litigations, risks and other charges booked was only PLN 13 million compared to PLN 252 million a year ago. This contributed the reported Group’s GOM with PLN 239 million and as a result, the GOM rate was up 2.2 percentage point to 43.6%.

Net income continues increasing

The 36.1% rise in net income attributable to equity holders of TP SA can be explained by the increase in GOM and by:

The share buy-back program completed in 2007 reduced the weighted average number of shares by 2.1%. As a result, earning per share was up 40.3% year-on-year.

Telekomunikacja Polska SA