SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 20-F

(Mark One)

[_]  Registration statement pursuant to Section 12(b) or 12(g) of the Securities
     Exchange Act of 1934

                                       or

[X]  Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 For the fiscal year ended December 31, 2001

                                       or

[_]  Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934 For the transition period from N/A to N/A .

Commission file number 333-7668

                       POLSKA TELEFONIA CYFROWA Sp. z o.o.
             (Exact Name of Registrant as Specified in Its Charter)

                                     Poland
                 (Jurisdiction of Incorporation or Organization)

                      Al. Jerozolimskie 181, 02-222 Warsaw
                    (Address of Principal Executive Offices)

Securities  registered  or to be  registered  pursuant  to Section  12(b) of the
Exchange Act:

                                                          Name of Each Exchange
Title of Each Class                                        on Which Registered
       None                                                       None

Securities  registered  or to be  registered  pursuant  to Section  12(g) of the
Exchange Act:

                                      None
                                (Title of Class)

Securities for which there is a reporting  obligation  pursuant to Section 15(d)
of the Exchange Act:

     10 3/4% Senior Subordinated Guaranteed Discount Notes Due July 1, 2007
   11 1/4% Senior Subordinated Guaranteed Discount Notes Due December 1, 2009
      10 7/8% Senior Subordinated Guaranteed Discount Notes Due May 1, 2008

Indicate the number of  outstanding  shares of each of the  issuer's  classes of
capital  or common  stock as of the close of the  period  covered  by the annual
report.

           471,000 Outstanding Ordinary Shares of PLN 1,000 per Share

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                    Yes [X]                                 No [_]

Indicate by check mark which financial statement item the registrant has elected
to follow.

                  Item 17 [_]                             Item 18 [X]

Name and address of person Authorized to receive notices and communications from
the Securities and Exchange Commission:

                                Robert S. Trefny
                  Clifford Chance Limited Liability Partnership
                              200 Aldersgate Street
                                 London EC1A 4JJ


<PAGE>


We,  Polska  Telefonia  Cyfrowa  Sp. z o.o.,  are a  limited  liability  company
organized under the laws of the Republic of Poland.

References  to the  "10  3/4%  Notes"  are to the 10  3/4%  Senior  Subordinated
Guaranteed  Discount  Notes due July 1, 2007.  The 10 3/4% Notes were  issued in
July 1997 by PTC  International  Finance B.V., a  wholly-owned  finance  company
subsidiary of ours organized under the laws of The Netherlands.

References  to the  "11  1/4%  Notes"  are to the 11  1/4%  Senior  Subordinated
Guaranteed Notes due December 1, 2009. The 11 1/4% Notes were issued in November
1999 by PTC International Finance II S.A., a company organized under the laws of
Luxembourg.  PTC International  Finance II S.A. is a wholly-owned  subsidiary of
PTC  International  Finance  (Holding)  B.V.,  a wholly  owned  holding  company
subsidiary of ours organized under the laws of The Netherlands.

References to the "10 7/8% Notes" are to the 100% Senior Subordinated Guaranteed
Notes  due May 1,  2008.  The 10  7/8%  Notes  were  issued  in May  2001 by PTC
International Finance II S.A., a company organized under the laws of Luxembourg.
PTC  International  Finance  II  S.A.  is  a  wholly-owned   subsidiary  of  PTC
International  Finance (Holding) B.V., a wholly owned holding company subsidiary
of ours organized under the laws of The Netherlands.

The 10 3/4%  Notes,  11 1/4% Notes and 10 7/8% Notes  (together,  the  "Existing
Notes") are fully and unconditionally  guaranteed by us on a senior subordinated
basis. PTC International  Finance B.V., PTC International Finance (Holding) B.V.
and PTC  International  Finance II, S.A. do not file separate  reports under the
Securities  Exchange  Act of  1934  (the  "Exchange  Act").  We  have  no  other
subsidiaries.

We publish our Financial  Statements  in Polish Zloty.  In this annual report on
Form 20-F (the "Form  20-F"),  references  to "Zloty" or "PLN" are to the lawful
currency of the Republic of Poland, references to "U.S. dollars", "U.S.$", "USD"
or "$" are to the lawful currency of the United States of America, references to
"(euro)"  and "Euro" are to the single  currency of those  member  states of the
European  Union  participating  in the  third  stage of  European  Economic  and
Monetary Union and references to "DM" are to the lawful  currency of the Federal
Republic of Germany.  Our Financial  Statements  for the year ended December 31,
2001  included  in  this  Form  20-F  have  been  prepared  in  accordance  with
International  Accounting  Standards  ("IAS"),  which differ in certain respects
from generally accepted accounting principles in the United States ("U.S. GAAP")
(see Note 32 to the Financial  Statements).  Unless otherwise stated herein, all
financial  information  presented  in  this  Form  20-F  has  been  prepared  in
accordance with IAS.

This  report  contains  translations  of Zloty  amounts  into  U.S.  dollars  at
specified rates solely for the convenience of the reader.  No  representation is
made that the amounts  referred to in this  report as  convenience  translations
could have been or could be  converted  from  Zloty  into U.S.  dollars at these
rates,  or at any particular  rate or at all. Unless  otherwise  indicated,  all
translations  in this report of Zloty amounts into U.S.  dollars are at the rate
of $1 =  PLN3.9863,  the Fixing Rate  announced by the Polish  National  Bank on
December 31, 2001. See "Item 3. Key Information - Exchange Rate Information" for
historical information regarding the Fixing Rate for Zloty.

CAUTIONARY  STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE UNITED
STATES PRIVATE  SECURITIES  LITIGATION REFORM ACT OF 1995. This Annual Report on
Form 20-F contains certain forward looking statements (as defined in Section 21E
of the Exchange Act) with respect to our plans to complete our cellular network,
expectations  as to funding our capital  requirements  and other  statements  of
expectation,  belief, future plans and strategies,  anticipated developments and
other matters that are not historical  facts.  These forward looking  statements
are  accompanied  by, and should be read in conjunction  with, an explanation of
factors  that  could  cause  actual  results  to differ  materially  from  those
expressed as such forward looking statements.  By their nature,  forward looking
statements  involve risks and  uncertainties,  and the factors  described in the
context of such forward  looking  statements,  and other factors  referred to in
this Annual Report on Form 20-F,  particularly in "Item 3. Key  Information" and
"Item 5.


                                     - 2 -
<PAGE>


Operating and Financial  Review and  Prospects",  could cause actual results and
developments  to differ  materially  from those  expressed in or implied by such
forward looking statements. The words "believe", "expect", "anticipate", "plan",
"intend" and similar expressions are predictions of or indicate future events or
trends identifying forward looking  statements.  We are claiming the benefits of
the safe harbor provisions referred to above.

Our registered office and our headquarters are located at Al. Jerozolimskie 181,
02-222 Warsaw, Poland; our telephone number is (+48.22.413.6000).


                                     - 3 -
<PAGE>


                                TABLE OF CONTENTS
                                                                            Page

Item 1. Identity of Directors, Senior Management and Advisers..................5

Item 2. Offer Statistics and Expected Timetable................................5

Item 3. Key Information........................................................5

Item 4. Information on the Company............................................15

Item 5. Operating and Financial Review and Prospects..........................36

Item 6. Directors, Senior Management and Employees............................54

Item 7. Major Shareholders and Related Party Transactions.....................57

Item 8. Financial Information.................................................60

Item 9. The Offer and Listing.................................................62

Item 10. Additional Information...............................................62

Item 11. Quantitative and Qualitative Disclosures About Market Risk...........67

Item 12. Description of Securities other than Equity Securities...............76

Item 13. Defaults, Dividend Arrearages and Delinquencies......................76

Item 14. Material Modifications to the Rights of Security Holders and
            Use of Proceeds...................................................76

Item 15. [Reserved]...........................................................76

Item 16. [Reserved]...........................................................76

Item 17. Financial Statements.................................................76

Item 18. Financial Statements.................................................76

Item 19. Exhibits.............................................................77


                                     - 4 -
<PAGE>


PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Selected Financial Data

The following  tables set forth our selected  historical  financial data for the
years ended December 31, 2001,  2000,  1999, 1998 and 1997 and should be read in
conjunction  with "Item 5. Operating and Financial Review and Prospects" and the
Financial  Statements  (including the Notes thereto) included  elsewhere in this
Form 20-F. Our historical  financial data as of and for the years ended December
31, 2000,  1999 and 1998,  was restated in early 2001 to reflect  changes in the
revenue  recognition policy introduced under IAS to be consistent with SEC Staff
Accounting Bulletin No. 101 " Revenue Recognition" previously adopted under U.S.
GAAP.  Based on the above  bulletin and further  interpretations  we established
criteria for recognition of multiple-element  transactions (handset,  activation
and  telecommunication  services)  and their  presentation  in our IAS Financial
Statements.  The  financial  data  presented in  accordance  with  International
Accounting  Standards  included below as of and for the years ended December 31,
2001,  2000 and 1999 has been derived from the Financial  Statements  audited by
Arthur Andersen Sp. z o.o.,  independent  auditors,  included  elsewhere in this
Form 20-F. The financial  data  presented in accordance  with U.S. GAAP included
below,  as of and for the years ended December 31, 2001,  2000 and 1999 has been
derived from our Financial  Statements.  The financial data included below as of
and for the years ended  December  31, 1998 and 1997 has been  derived  from our
audited historical Financial Statements.

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                          -----------------------------------------------------------------
Statement of Operations Data                 2001          2000          1999          1998         1997
                                          ----------    ----------    ----------    ----------   ----------
                                                      (restated)(1)  (restated)(1) (restated)(1)
                                                                 (in thousands of PLN)
<S>                                        <C>           <C>           <C>           <C>            <C>
International Accounting Standards
Net Sales:
Service revenues and fees ..............   4,123,555     3,460,579     2,374,827     1,428,846      534,439
Sales of telephones and accessories ....     221,341       224,144       140,729        94,916      112,623
Total net sales ........................   4,344,896     3,684,723     2,515,556     1,523,762      647,062
                                          ==========    ==========    ==========    ==========   ==========

Cost of sales:
Cost of services sold ..................  (1,778,687)   (1,383,893)     (944,420)     (600,713)    (330,112)
Cost of sales of telephones and
accessories ............................    (948,750)     (902,533)     (641,926)     (260,652)    (181,037)
Total cost of sales ....................  (2,727,437)   (2,286,426)   (1,586,346)     (861,365)    (511,149)
                                          ==========    ==========    ==========    ==========   ==========

Gross margin ...........................   1,617,459     1,398,297       929,210       662,397      135,913

Operating expenses:
Selling and distribution costs .........    (585,463)     (576,318)     (454,807)     (277,123)    (139,685)
Administration and other operating costs    (199,966)     (189,698)     (157,752)     (104,152)     (46,910)
Total operating expenses ...............    (785,429)     (766,016)     (612,559)     (381,275)    (186,595)
                                          ==========    ==========    ==========    ==========   ==========

Operating profit/(loss) ................     832,030       632,281       316,651       281,122      (50,682)
Net income/(loss) ......................     427,221       109,387      (122,503)        5,516     (120,436)
                                          ==========    ==========    ==========    ==========   ==========

U.S. GAAP
Revenues ...............................   4,345,206     3,518,959(2)  2,592,061     1,610,811      647,062
Cost of sales ..........................  (2,707,206)   (2,113,063)   (1,656,459)     (948,031)    (504,652)
Operating expenses .....................    (785,429)     (766,016)     (622,027)     (384,860)    (196,570)
Net income/(loss) ......................     499,022       121,607      (140,865)      (19,160)    (150,875)
                                          ==========    ==========    ==========    ==========   ==========
</TABLE>

(1)  The above restatements relate only to the IAS Financial Statements.


                                     - 5 -
<PAGE>


<TABLE>
<CAPTION>
Balance Sheet Data                                               As at December 31,
                                        ---------------------------------------------------------------------
                                            2001          2000          1999         1998          1997
                                        ------------- ------------- -----------------------------------------
                                                      (restated)(1) (restated)(1) (restated)(1)
                                                               (in thousands of PLN)
<S>                                       <C>            <C>           <C>           <C>           <C>
International Accounting Standards
Long-term assets and deferred taxes ...   6,372,128      6,127,889     4,175,316     2,421,160     1,473,602
Total assets ..........................   7,217,453      7,039,989     6,117,518     2,841,450     1,928,642
Long-term liabilities, deferred tax
liabilities and provisions ............   5,350,528      4,171,058     4,773,052     1,979,378     1,500,020
Total liabilities .....................   6,221,708      6,353,042     5,949,712     2,551,141     1,643,842

Shareholders' equity ..................     995,745        686,947       167,806       290,309       284,800

U.S. GAAP
Long-term assets ......................   6,414,619      6,099,364     3,969,987     2,283,177     1,477,858
Total assets ..........................   7,470,922      7,011,464     5,939,661     2,750,018     1,888,576
Shareholders' equity ..................     999,557        609,704        78,343       219,208       238,375
</TABLE>

Exchange Rate Information

The table  below  sets  forth,  for the  periods  and dates  indicated,  certain
information  concerning  the Zloty to U.S.  dollar  exchange  rate as determined
using the daily fixing rate for Zloty to U. S. dollar set by the  National  Bank
of Poland during the periods indicated below.

-----------------------  -------------  ----------     ------         ------
        Period           At period end  Average(3)      High           Low
-----------------------  -------------  ----------     ------         ------
1997                     3.5180         3.2808         3.5625         2.8645
-----------------------  -------------  ----------     ------         ------
1998                     3.5040         3.4937         3.8150         3.3635
-----------------------  -------------  ----------     ------         ------
1999                     4.1483         3.9675         4.3494         3.4130
-----------------------  -------------  ----------     ------         ------
2000                     4.1432         4.3457         4.7116         4.0350
-----------------------  -------------  ----------     ------         ------
2001                     3.9863         4.0986         4.5004         3.9432
-----------------------  -------------  ----------     ------         ------


-----------------------     ------     ------
        Period               High       Low
-----------------------     ------     ------
September 2001              4.2602     4.1305
-----------------------     ------     ------
October 2001                4.2318     4.0830
-----------------------     ------     ------
November 2001               4.1401     4.0639
-----------------------     ------     ------
December 2001               4.0847     3.9557
-----------------------     ------     ------
January 2002                4.1880     3.9079
-----------------------     ------     ------
February 2002               4.2628     4.1476
-----------------------     ------     ------

The Fixing Rate  announced by the National Bank of Poland on March 27, 2002, the
latest practicable date prior filing this report was U.S.$ 1 = PLN 4.1159.

(2)  During  2000,  we  adopted  the  revenue  recognition  principles  of Staff
     Accounting  Bulletin No. 101 "Revenue  Recognition" or "SAB 101", issued by
     the Securities and Exchange Commission.  Accordingly, in 2000 we instituted
     accounting procedures that are consistent with SAB 101. For the years ended
     prior to December  31, 1998 our  internal  accounting  procedures  were not
     recognized  in a manner that allowed us to gather data required by SAB 101.
     The cumulative net effect of the  introduction of SAB 101 on our net assets
     as of January 1, 2000 resulted in a decrease of PLN 0.3 million.

(3)  The average of the monthly average fixing rates the fiscal year.


                                     - 6 -
<PAGE>


Risk Factors

Since we have substantial debt and may incur additional debt, we may not be able
to generate sufficient cash flow to service our existing and future debt.

We are a highly  leveraged  company.  As of  December  31,  2001,  we had,  on a
consolidated  basis, PLN 4,767.8(4)  million in principal amount of indebtedness
outstanding.  The  Indentures  governing  the Existing  Notes limit,  but do not
prohibit  us from  incurring  additional  debt.  In light of the  amount  of our
existing indebtedness and the potential need to incur additional indebtedness to
expand our operations, we anticipate that we will be substantially leveraged for
the foreseeable future. This leverage poses risks that:

     o    we may not be able to  sustain  sufficient  cash flow to  service  our
          indebtedness;

     o    a significant portion of our cash flow will be required to service our
          indebtedness,  which may  adversely  affect our ability to  adequately
          fund our planned capital expenditures and operations;

     o    we could be more vulnerable to changes in general economic conditions,
          which may limit our  ability to  compete  effectively  against  better
          capitalized competitors;

     o    our  ability  to obtain  additional  financing  for  working  capital,
          capital  expenditures,  repayment  of  indebtedness  or other  general
          corporate purposes may be limited; and

     o    our ability to pursue future business opportunities may be impaired.

Since our current business plan may require additional financing,  we may not be
able to raise  additional  financing on satisfactory or commercially  acceptable
terms, if at all.

Under our current business plan, we expect that borrowings under our Bank Credit
Facilities (defined elsewhere in this Form 20-F), together with anticipated cash
from operations and future potential vendor financing,  will provide us with the
financing we require to fund our operations. We cannot be certain, however, that
we will not need additional  financing or that such additional financing will be
available on satisfactory and commercially acceptable terms or at all.

The need for additional  financing depends upon our revenue growth,  the capital
expenditures  required  to  further  build  out  our GSM  and  Universal  Mobile
Telecommunications  System ("UMTS")  networks and the rate of growth of expenses
involved  in our  operations,  and can be  materially  impacted  by a number  of
elements, including:

     o    our ability to meet build-out schedules;

     o    growth  in  our  market   penetration,   our  market   share  and  the
          effectiveness of our competitors in such markets;

     o    cost of new network  equipment and maintenance of our new and existing
          networks;

     o    regulatory changes;

     o    currency exchange rate fluctuations;

     o    the availability and terms of vendor financing;

     o    changes in technology; and

     o    the availability of UMTS infrastructure and handsets.

As our capital  expenditure  and operating  expenses are linked  directly to our
subscriber  growth, our actual capital  expenditure  requirements and other cash
operating needs may also increase if we add more new subscribers  than expected.
If our capital  expenditure  requirements and other cash operating needs were to
increase, we may also need other additional financing. We cannot be certain that
any additional  financing  would be available on satisfactory  and  commercially
acceptable terms or at all.

Since transfer of our  telecommunication  licenses is prohibited and transfer of
our shares is restricted, investors may not be able to recover amounts due under
the Existing Notes upon a default,  and attempts to collect on a guarantee could
be limited by United States, Luxembourg and Polish laws.

(4)  Outstanding   indebtedness   reflects  the  Existing  Notes,   Bank  Credit
     Facilities and finance lease payables including embedded derivatives 9index
     swaps).


                                     - 7 -
<PAGE>


Our  primary  assets,  our GSM and UMTS  Licenses,  are not  transferable.  As a
result,  any transfer by us of our business  would  require the  revocation  and
reissuance of the GSM and UMTS  Licenses.  In addition,  certain  changes in our
ownership would effectively require the prior approval of the Polish Ministry of
Infrastructure. In the event of a default by us under our Bank Credit Facilities
and an attempted  realization by the holders of our senior  indebtedness  on the
collateral securing such senior indebtedness,  these creditors would likely seek
to sell  our  company  as a going  concern  in order to  maximize  the  proceeds
realized.  Such a sale would  require  the  approval  of the Polish  Ministry of
Infrastructure.  The price obtained on any such sale could be adversely affected
by the application of the foregoing and other regulatory restrictions applicable
to us and our business, as well as other applicable governmental regulations and
laws and foreign exchange  controls.  The amounts (and the timing of the receipt
of any  amounts)  available  to satisfy  the claims of the holders of any of our
indebtedness which is subordinated to that owed under our Bank Credit Facilities
after any such sale could be further adversely affected by U.S.,  Luxembourg and
Polish insolvency, bankruptcy and administrative laws favoring secured creditors
and limiting the rights of unsecured creditors.  See "Item 4. Information on the
Company - The Licenses".

Since our business  depends on the future growth of the wireless phone market in
Poland, our business may be adversely affected if there is no growth in wireless
penetration in our market.

The development of our business continues to depend, in large part, on the level
of wireless  penetration in Poland.  We expect continued growth in the number of
wireless subscribers in Poland.  However, the size of our future subscriber base
will be affected by a number of  factors.  Many of these  factors are beyond our
control,  including  general  economic  conditions  such as GDP per capita,  the
relative  development of the GSM market and the future UMTS market and any rival
market for the provision of wireless services,  the price of handsets, the price
of services,  dealer  commissions and the availability,  quality and cost to the
subscriber of competing services. Any significant slowdown in economic growth in
Poland  could  hurt us by  slowing  the rate of  increase  in the  number of our
subscribers or causing a decline in average usage or revenue  generated by these
subscribers. Given these factors, as well as the relatively short history of the
wireless telecommunications industry, it is difficult to predict with any degree
of certainty  the growth of wireless  services in Poland or of the number of our
subscribers.  In addition,  as the  penetration  of wireless  phones into Poland
increases,  we believe that an increasing proportion of subscribers will be from
segments of the population with lower usage rates. Accordingly,  we believe that
average use and revenue per  subscriber  from voice  services  will  continue to
decline. See "Item 5. Operating and Financial Review and Prospects".

Since a favorable  market for UMTS services in Poland may not develop,  this may
materially affect our revenue growth and financial condition.

In  December  2000,  we acquired a third  generation  mobile  telephone  or UMTS
License to commence  operations of UMTS services in Poland. As a result, we will
be required to make  substantial  investments  during the next several  years in
order to build out UMTS networks and develop related products and services.

Our business  plan is, in large  measure,  based on the  anticipated  widespread
market acceptance of UMTS technology,  which is still unproven.  UMTS technology
may not  develop in a timely  manner or, if  developed,  it may not  provide the
expected advantages over existing or other as yet undeveloped  technologies.  In
addition,  demand is unproven for UMTS-based  services and may not develop as we
anticipate.  Accordingly,  no assurances can be given that a significant  market
for UMTS services  will develop or, even if such a market does develop,  that we
will be able to achieve our desired  sales  volumes for UMTS  services.  If UMTS
technology is not developed on a timely basis,  if we fail to integrate our UMTS
network  into our  existing  network,  if UMTS does not deliver the  anticipated
advantages or gain widespread acceptance or if we derive a smaller percentage of
our total  revenues  than  expected from our  UMTS-related  services,  we may be
required to amend our business plan and our business,  results of operations and
financial  condition may be  materially  and  adversely  affected.  See "Item 4.
Information on the Company - Network and Facilities - Suppliers".


                                     - 8 -
<PAGE>


Since we have  incurred  losses in the past, we may not be able to meet our debt
obligations if we incur losses again.

Although we had net income of approximately PLN 427.2 million for the year ended
December 31, 2001,  and net income of  approximately  PLN 109.4  million for the
year ended  December 31, 2000, we incurred net losses in the earlier  years.  We
cannot guarantee that our future operations will be profitable. Until we achieve
adequate  free cash  flow,  we cannot be  certain  that we will have  sufficient
resources  to  make  principal  and  interest   payments  with  respect  to  our
indebtedness unless we obtain additional financing,  which we may not be able to
do on  satisfactory  terms or at all. In addition,  if we are unable to generate
sufficient cash flow from operations in the future, we may be required to reduce
the scope of our  presently  anticipated  expansion  of  operations  and capital
expenditures,  including  operations  and  capital  expenditures  under our UMTS
business plan, refinance all or a portion of our existing indebtedness or obtain
additional financing.

If the Zloty devalues,  our ability to service our foreign currency  denominated
debt may be adversely affected.

During its transition from a state controlled  economy to a free market economy,
Poland has experienced  high levels of inflation and significant  fluctuation in
the exchange  rate for its  currency,  the Zloty.  From October 1997 until April
2000, Poland used a "crawling peg" system pursuant to which the National Bank of
Poland  announced a monthly rate of devaluation of the Zloty against a basket of
weighted currencies.  In April 2000, Poland abandoned the "crawling peg" system.
Since  then,  foreign  exchange  rates  have not been set or  controlled  by the
National Bank of Poland and have been allowed to float freely. The National Bank
of Poland is permitted, however, to intervene in the foreign exchange markets in
order to meet the Polish  government's  monetary  policy  goals with  respect to
inflation.  The exchange  rate has changed  from PLN 2.8755 per  U.S.$1.00 as of
December  31, 1996 to PLN 3.9863 per  U.S.$1.00 as of December 31, 2001 and from
PLN 4.0670 per  (euro)1.00 as of January 4, 1999 to PLN 3.5219 per (euro)1.00 as
of December 31, 2001.  Consumer price inflation was 13.2% in 1997, 8.6% in 1998,
9.8% in 1999, 8.5% in 2000 and 3.6% in 2001.

A large  portion of our debt  obligations  and expenses are, and are expected to
continue to be, denominated in Euro or U.S. dollars. By contrast,  almost all of
our revenues are  denominated  in Zloty.  Therefore,  we are exposed to currency
exchange rate risks that could significantly impact our ability to meet our debt
obligations and finance our business.  If the Zloty devalues  significantly,  we
may not be  able  to  offset  the  impact  of  such  devaluation  through  price
adjustments.  We will then have to use a larger  portion of our  revenues to pay
our non-Zloty  obligations.  In March 2000, we adopted a hedging policy aimed at
protecting us, in part,  against the effects of any such currency  exchange rate
fluctuations and we entered into transactions to hedge the risk of exchange rate
fluctuations.  Since then, we have hedged various short and long term exposures,
although  inflation and currency  exchange  fluctuations have still had, and may
continue to have, an adverse effect on our financial results.  In April 2001, we
started to hedge long-term  exposure relating to our financing.  We have entered
into a number of  cross-currency  interest rate swap  transactions  to hedge our
coupon payments on our Existing Notes.  We may undertake  hedging  activities in
order to hedge part of our foreign  currency  interest  payments  under our Bank
Credit  Facilities as well as our floating  interest rate Polish Zloty payments.
See "Item 5. Operating and Financial Review and Prospects".

A failure by our  shareholders  to resolve  their  disputes  may have a material
adverse effect on our business.

Deutsche  Telekom  MobilNet  GmbH  ("DeTeMobil"),  MediaOne  International  B.V.
("MediaOne",  part of Deutsche Telekom Group) and Elektrim Telekomunikacja Sp. z
o.o. (a joint venture between Elektrim S.A.  ("Elektrim") and Vivendi  Universal
S.A.  and  certain  of its  affiliates  ("Vivendi"))  (together  the  "Operating
Parties") are our three principal shareholders.  Each of DeTeMobil, MediaOne and
Elektrim  entered into a  Shareholders'  Agreement  dated  December 21, 1995 (as
amended,  the  "Shareholders'   Agreement")  governing  the  Operating  Parties'
involvement in our business and their  agreement as to how it should be managed.
Elektrim subsequently transferred a portion of its shares to


                                     - 9 -
<PAGE>


Elektrim  Telekomunikacja  Sp. z o.o.  Under the  Shareholders'  Agreement,  our
business is managed by a Management Board and controlled by a Supervisory Board.
In addition,  the Shareholders'  Agreement  provides,  among other things,  that
certain  decisions of the  Management  Board may not be taken  without the prior
approval of the  Supervisory  Board.  This prior approval cannot be given unless
all members of the Supervisory Board who were appointed by the Operating Parties
vote or consent to approve such actions.

These  actions  include  amendments  to our  business  plan and annual  budgets,
acquisitions  or   dispositions  of  assets  above  certain  values,   incurring
additional  indebtedness (other than in the ordinary course of business or below
certain   limits)  and  the  entry  into  long-term   contracts   (with  certain
exceptions).  Deutsche  Telekom  (the  parent  company  of  DeTeMobil)  acquired
MediaOne in 2000.  As a result,  Deutsche  Telekom  currently  owns directly and
indirectly 45% of our outstanding  shares.  Prior to August 1999, Elektrim owned
34.1% of the shares.  However,  in August 1999,  Elektrim  announced that it had
acquired an  additional  15.8% of our shares for a purchase  price of U.S.$679.4
million.

Deutsche  Telekom is  disputing  the  legality of  Elektrim's  acquisition  of a
portion of these acquired  shares  (representing  approximately  3% of our total
471,000  outstanding  shares),  claiming that it had a right of first refusal to
purchase these shares under our  Shareholders'  Agreement.  On December 9, 1999,
Elektrim  registered  with the Warsaw Regional Court the transfer of 47.9998% of
our shares to Elektrim  Telekomunikacja Sp. z o.o. retaining one share of direct
ownership.  Notwithstanding  the  foregoing,  at the  request of  Elektrim,  our
Management  Board filed these  changes in our share  registry book and agreed to
file an updated list of shareholders  with the Warsaw Regional Court as required
under Polish law. Two of our five Management Board members objected, however, to
Elektrim's  request and did not sign the change in our share  registry book. The
updated  list of  shareholders,  together  with formal  statements  from the two
dissenting  Board members,  were filed with the Warsaw Regional Court.  Deutsche
Telekom  sought an  injunction  from the Warsaw  Regional  Court to disallow the
change in our share  registry book and prevent the filing of the updated list of
shareholders.  This was  rejected by the Court on February  16,  2000.  Deutsche
Telekom has announced that it would appeal this decision.  Deutsche Telekom also
announced  in October  1999 the  commencement  of an  arbitration  claim (at the
International  Arbitration Court in Vienna) against Elektrim and certain smaller
shareholders.  This claim was suspended in December 2000  following the entry by
Deutsche  Telekom  into a letter of intent  with  Elektrim  for the  purchase by
Deutsche  Telekom  of a  51%  stake  in  six  Elektrim  companies  that  provide
fixed-line and data transmission services. However, this claim was renewed after
this letter of intent expired and  negotiations  with Elektrim ended.  The court
hearings  began in the  fourth  quarter  of 2001 and are  expected  to  continue
through the first half of 2002.

Moreover,  Elektrim received a second offer from Vivendi.  On June 27, 2001, the
Management  Board of Elektrim  entered into a memorandum of  understanding  with
Vivendi, pursuant to which Elektrim agreed to sell Vivendi 2% of the outstanding
stock  of  Elektrim  Telekomunikacja  and 1% of  Carcom,  which  are  two of our
shareholders,  thereby giving Vivendi control over Elektrim  Telekomunikacja and
Carcom,  respectively.  See  "Item  7.  Major  Shareholders  and  Related  Party
Transactions".  In addition,  the  memorandum  of  understanding  provided  that
Elektrim  will sell all of its fixed line and  Internet  businesses  to Elektrim
Telekomunikacja.  Vivendi also agreed to implement an initial public offering of
the shares of Elektrim  Telekomunikacja  within an 18 month period. The contract
between Elektrim and Vivendi was signed on September 4, 2001.

Further,  on March 15, 2002,  Vivendi entered into a memorandum of understanding
pursuant  to  which  Vivendi  agreed  to  sell  its  49%  interest  in  Elektrim
Telekomunikacja to a consortium of investors led by Citigroup  Investments.  The
definitive  agreements  relating to this memorandum of understanding are subject
to  the  satisfaction  of  a  number  of  conditions  precedent,  including  the
settlement of the dispute between Deutsche Telekom and Elektrim discussed above.
In addition, in the above referenced memorandum of understanding, Vivendi agreed
to enter into a put and call option with respect to the  remaining 2% of Elektim
Telekomunikacja that it controls,  pursuant to which the consortium of investors
may call such  shares and  Vivendi  may put such  shares to the  consortium.  No
definitive   agreements   have  been  entered  into  in  connection  with  these
transactions.  If the  definitive  agreements  are entered into,  the conditions
precedent are met and the put/call arrangements are effected, Vivendi


                                     - 10 -
<PAGE>


would completely withdraw from its investment in Elektrim  Telekomunikacja.  See
"Item 3. Key Information - Risk Factors - We may not be able to finance a change
of control offer required by our indentures.

We may not be able  to  finance  a  change  of  control  offer  required  by our
indentures

On March 15, 2002, Vivendi,  which directly owns 51% of our shareholder Elektrim
Telekomunikacja, entered into a memorandum of understanding with a consortium of
investors led by Citigroup Investments with respect to the sale if its 49% stake
in Elektrim Telekomunikacja.  Elektrim Telekomunikacja owns approximately 51% of
our shares  (subject to dispute  with  Deutsche  Telekom  discussed  above).  In
addition, in the above referenced memorandum of understanding, Vivendi agreed to
enter into a put and call option  with  respect to the  remaining  2% of Elektim
Telekomunikacja that it controls,  pursuant to which the consortium of investors
may call such shares and Vivendi may put such shares to the consortium. Although
no definitive agreements have been entered in connection with these transaction,
and although it is  contemplated  that such definitive  agreements  would have a
number of conditions precedent,  including the settlement of the dispute between
Deutsche  Telekom and Elektrim,  as discussed  above,  the entry by Vivendi into
definitive agreements and the option agreements referenced above would lead to a
change of control under the indentures relating to the Existing Notes.

Upon a change of control,  we will be required  to offer to  repurchase  all the
Existing  Notes at 101% of the principal  amount thereof plus accrued and unpaid
interest and additional amounts, if any, to the date of repurchase.  If a change
of control  were to occur,  we cannot  assure you that we would have  sufficient
funds  available at the time to pay the purchase  price of the Existing Notes or
that the restrictions in our Bank Credit  Facilities would allow us to make such
required repurchases.  In addition, before we can purchase any notes, we will be
required to:

     o    Repay debt under our Bank Credit Facilities or, possibly, other future
          debt that ranks senior to the Existing Notes; or

     o    Obtain a consent from lenders of senior debt to permit the  repurchase
          of the Existing Bonds.

A change of  control  may result in an event of  default  under our Bank  Credit
Facilities and may cause the  acceleration  of other  indebtedness  which may be
senior to the Existing  Notes.  In any case, we expect that we would be required
to obtain  third-party  financing to make a change of control  offer.  We cannot
assure you that we would be able to obtain this financing.

Poland's wireless  telecommunications  market has only recently been liberalized
and we face competition in Poland's telecommunications industry.

The wireless  telecommunications  market is highly competitive.  We believe that
the  level  of   competition   is   increasing   in  all  areas  of  the  Polish
telecommunications  market and, with the  liberalization  of the Polish domestic
market and the anticipated  liberalization  of the  international  long distance
market,  will  continue to increase  further over the next few years.  Increased
competition,  in the form of both new entrants and existing operators that widen
the  scope  of  their  telecommunication  activities,  could  force  us and  our
competitors  to take measures  that could raise  subscriber  acquisition  costs,
reduce  our  share of net  subscriber  additions  or  reduce  the  prices of our
services.

We face  competition  primarily from the other mobile  operators  Polkomtel S.A.
("Polkomtel")  and PTK  Centertel Sp. z o.o.  ("Centertel")  as well as wireline
telephone services.  Competition between ourselves, Polkomtel and Centertel, and
to  a  lesser  extent,   wireline  telephone  service  providers,  is  based  on
promotional discounts,  services offered,  quality of service and coverage area.
Competitive  pressures  may also result in reduced  tariff  rates which would in
turn reduce our average  revenue per  subscriber,  which has declined over time.
See "Item 4.  Information on the Company -  Competition"  and "Item 5. Operating
and Financial Review and Prospects".

We face competition from both our direct  competitors and potentially from their
significant  shareholders that operate in other  telecommunications  businesses,
including those providing local  fixed-line  access,  long distance voice,  data
transmission and other services. These significant shareholders


                                     - 11 -
<PAGE>


may  believe in  creating  synergies  in their  businesses  by  providing  their
respective mobile operators with better terms than those made available to us in
areas   such   as   interconnection,    leased   lines,   site   access/sharing,
co-distribution, etc. In such circumstances we would have recourse to the Polish
Courts and Urzad Regulacji Telekomunikacji, or the Office for Telecommunications
Regulations  ("OTR"),  but we can provide no  assurance as to the outcome of any
such action.

In  addition,  the Polish  Government  announced  that it may run a tender for a
fourth mobile operator during 2002.

The telecommunications  industry is subject to rapid and significant changes. We
may face  competition in the future both from the introduction of existing rival
telecommunications  technologies  into  Poland and from the  development  of new
wireless technologies. See "Item 4. Information on the Company - Competition".

If there is legal, political,  social or economic change in Poland, our business
may be adversely affected.

In recent years, Poland has undergone significant political and economic change.
Political,  economic,  social and other developments in Poland may in the future
hurt our business. In particular, changes in laws or regulations, whether caused
by a change in the government of Poland or otherwise, could materially adversely
affect us.

Poland has been one of the fastest  growing  economies  in Europe over the years
that we have been in operation.  Real GDP growth in Poland was 4.1% in both 1999
and 2000.  During 2001, in line with the global  economic  slowdown,  the Polish
economy also faced a slowdown  with real GDP growth of only 0.8%.  Although 2002
is generally expected to be another challenging year for the Polish economy, the
Polish economy is expected to recover in the second half of the year.  According
to government  assumptions,  GDP growth is planned at 1% and inflation is set to
remain low at about 4.5%. In the absence of any unforeseen  negative events,  we
expect stable yet admittedly difficult economic conditions, with inflation under
control,  no major Zloty  depreciation and certain positive  developments on the
domestic  demand  side by the end of the  year and in 2003;  however  we  cannot
assure you of these  positive  economic  developments.  Any further  significant
slowdown in Poland's  economic growth could  materially  adversely  affect us by
slowing  the rate of  increase  in the  number of our  subscribers  or causing a
further decline in average usage or revenue per subscriber.

Currently,  there are no foreign  exchange or other controls on the repatriation
of capital and dividends  from Poland that would be applicable to the payment of
interest or  principal  on our  indebtedness  or under our  guarantees  thereof.
However,   there  can  be  no  assurance  that  such  foreign  exchange  control
restrictions,  taxes or  limitations  will not be  imposed or  increased  in the
future.

Poland is  generally  considered  by  international  investors to be an emerging
market and has a sovereign  rating of A+ for local currency and BBB+ for foreign
currency. In general, investing in the securities of companies such as ours with
substantial  operations  in markets such as Poland  involves a higher  degree of
risk than investing in the securities of companies having substantial operations
in the United  States,  the  countries  of the European  Union or other  similar
jurisdictions.  There can be no assurance that political, economic, social or in
other  developments in other emerging markets will not have an adverse effect on
our business, financial condition and results of operations.

Since there is volatility  in the Polish tax system,  our cash flows and ability
to service our debt may be adversely affected.

The Polish tax system is  characterized  by frequent changes in tax regulations,
as a result of which many tax  regulations  are either not the subject of firmly
established    interpretations   or   are   subject   to   frequently   changing
interpretation.  The  volatility  of the Polish tax  system  makes tax  planning
difficult  and results in an  increased  risk of tax  non-compliance  for Polish
companies.  Furthermore,  changing interpretations of tax regulations by the tax
authorities,  extended  time  periods  relating to overdue  liabilities  and the
possible imposition of high penalties and other sanctions result in the tax risk
for a Polish  company  being  significantly  higher than in countries  with more
stable tax systems.


                                     - 12 -
<PAGE>


If  there  are  changes  in  the  Polish  wireless   telecommunication  industry
regulatory environment, our business could be adversely affected.

Our business is subject to extensive governmental  regulation.  Changes in laws,
regulations or governmental policy, or the interpretation thereof, affecting our
business activities,  including the imposition of price controls,  may adversely
affect  our  results of  operations.  Decisions  by  regulators,  including  the
granting of additional mobile telephony licenses to competitors or new entrants,
or limitations on licenses necessary for our operations,  could adversely affect
our business. The imposition of significant additional charges and the denial of
governmental  concessions  that we may seek in expanding our network,  including
non-allocation  of  additional  channels  in the 900 or 1800 GSM  bands,  or the
failure by the Polish Armed Forces to fulfill their  obligations  to abandon the
UMTS band  awarded  to us could  have a  material  adverse  impact on the future
development  of our  operations.  In  addition,  the  OTR  may  seek  to  impose
obligations  not included in our licenses  that require us to allow  competitors
roaming or  site-sharing  rights on our  network  or  otherwise  cause  material
changes to the regulatory environment. See "Item 4. Information on the Company -
The Licenses".

Since we rely on lines leased from TPSA in a certain portion of our network,  if
TPSA is unable to provide us with access to these  leased  lines,  we may not be
able to provide services to our subscribers.

We are  obligated to lease lines from  Telekomunikacja  Polska S.A.  ("TPSA") in
order to connect elements of our network.  Although we have reduced our reliance
on TPSA leased lines by, among other things,  developing our own SDH network, we
continue to use TPSA leased  lines in certain  portions of our  network.  We are
also dependent on connecting with TPSA to provide international  coverage and to
access  both the TPSA  network and our SDH  backbone.  In the event that TPSA is
unable to provide us with these services, we may not be able to provide services
to our subscribers.

If we fail to retain our key  management  and personnel  and attract  additional
qualified personnel, our business could be adversely affected.

We believe that success in our business  and in attaining  our  financial  goals
depends on our  executive  officers.  If any of them is unable or  unwilling  to
continue  their  employment  with us,  our  business,  financial  condition  and
operating results could be materially  adversely  affected.  Although our use of
employees seconded from the Operating Parties has diminished  significantly,  as
of December 31, 2001, five of these key seconded employees remain with us.

Our growth and success will also depend on our ability to attract talent for our
telecommunications team and our ability to train, retain and motivate additional
highly skilled and qualified personnel.  This is important to us in light of the
intense competition for qualified personnel in the  telecommunications  industry
in Europe and the limited  availability of persons with the requisite  knowledge
and experience to operate in Poland.

Our  financial  condition  and our ability to pay interest and  principal on our
indebtedness depend, in part, on a successful business plan being implemented by
qualified  personnel.  The  loss  of key  personnel,  or the  inability  to find
additional qualified personnel, could adversely affect our business.

If we do not manage our growth,  our future  results may be  adversely  affected
because we are unable to manage the increasing complexity and rapid expansion of
our business.

We have achieved rapid organic  growth in our subscriber  base since our service
was launched in September  1996.  For the twelve months ended December 31, 2001,
we generated an average of  approximately  81,000 net  subscriber  additions per
month.  This growth,  as well as the related  development  of our  network,  has
placed and is likely to continue to place  significant  strain on our management
and operational resources and may require us to seek additional financing. As we
continue to grow,  the  successful  operation of our business  will require more
skilled management personnel, as well as more personnel trained in the technical
aspects  of  operating  and  maintaining  our  systems.  If we  fail  to  obtain
appropriate  levels of financing and to hire and train  management and technical
personnel at a pace  consistent  with the growth of our  business,  such failure
could have an adverse effect on our


                                     - 13 -
<PAGE>


financial condition, our operating results, the expansion of our subscriber base
and service offerings, or other aspects of our business.

If we experience shortages of supplies, our business may be adversely affected.

Operation  of our GSM and our UMTS  networks,  including  our  mobile  switching
centers,  base stations and base station controllers,  operation support systems
and cross-connect  systems equipment depends upon obtaining adequate supplies of
transmission,  switching and network  equipment on a timely  basis.  We purchase
such  equipment  from  Alcatel,  Ericsson and Siemens,  all of which are leading
international  telecommunications  systems equipment  suppliers.  Our results of
operations  could be  adversely  affected  if we are  unable to obtain  adequate
supplies of equipment in a timely manner from Alcatel,  Ericsson, Siemens or any
other supplier of equipment or services or if there are significant increases in
the costs of such equipment or services. From time to time, suppliers may extend
lead times, limit supplies to us or increase prices due to capacity  constraints
or other factors. For example, handset suppliers have announced that they intend
to establish  worldwide  allocations of handsets.  We have not  experienced  any
significant delays in the receipt of GSM handsets to date, although we may do so
in the future. We have,  however,  faced delays in the receipt of General Packet
Radio  Service,  or GPRS,  handsets and may also face similar  problems with the
availability  of UMTS handsets and equipment.  In addition,  integrating the new
UMTS equipment of multiple  suppliers may be more difficult and present a higher
risk to us than is faced  by one of our  competitors,  who use  only  one  major
supplier.  This may  result  in  delays  in the  commercial  launch  of our UMTS
services, which may lead to our competitors gaining a competitive advantage. Any
delays in launching our UMTS network could have a material adverse effect on our
business.  See "Item 4.  Information  on the Company - Network and  Facilities -
Suppliers".

Since  there are  actual or  perceived  health  risks  with  wireless  telephone
handsets, the number of our subscribers may be reduced.

In recent years  concerns have been  expressed  about the  potentially  negative
effect of  electromagnetic  emissions  from  handsets  on the health of wireless
telephone  users.  The Commission of the European  Union has been  investigating
these   concerns   since  1995.   The  actual  or  perceived  risk  of  wireless
communication  devices or any litigation relating to that risk, could hurt us by
reducing  our  subscriber  growth  rate,  subscriber  base or average  usage per
subscriber and could have a material adverse effect on our business.

Since Polish  bankruptcy  laws may differ in certain  respects  from  comparable
provisions of U.S. law, our investors may be detrimentally affected.

As a Polish company, any insolvency proceedings by or against a Guarantor of the
Existing  Notes  would  most  likely be based on Polish  bankruptcy  law,  which
differs in several  significant  respects from,  and is in certain  aspects more
favorable to, secured creditors (and less favorable to unsecured  creditors such
as the holders of the Existing  Notes) than  comparable  provisions of U.S. law.
Under  Polish  bankruptcy  law,  the  liability of a Guarantor in respect of the
Existing  Notes would be paid only after certain  debts of a Guarantor  that are
entitled to priority  under Polish law have been  satisfied.  Such  preferential
debts include, among other things, money owed to the State Treasury of Poland in
respect of taxes, social security contributions,  remuneration owed to employees
and claims of secured creditors.  Also, Polish law does not require a bankruptcy
administrator to give effect to intercreditor arrangements such as subordination
agreements  (although  the law does not preclude  creditors  from  attempting to
enforce such rights in separate proceedings outside of the bankruptcy).

Therefore,  the claims of all  unsecured  creditors  may be paid on a pari passu
basis in a bankruptcy proceeding.  Under Polish law, a bankruptcy  administrator
does not have any  right to apply to a court to  rescind  certain  transactions,
such as the making of a guarantee,  if such  transactions  were validly  entered
into prior to a company's  bankruptcy.  Also,  under Polish  insolvency law, the
debtor  may  seek  to  commence  a  conciliation  procedure.  Such  conciliation
procedures  may result in an agreement to  restructure  a debtor's  obligations,
which will be binding on all creditors if approved by creditors holding at least
two-thirds of the aggregate amount of the indebtedness and the bankruptcy court.


                                     - 14 -
<PAGE>


It is not clear whether  Polish courts would have  jurisdiction  over a debtor's
property located outside Poland. Such jurisdiction would not exist in respect of
real estate or other property rights located abroad. Furthermore, courts outside
Poland may not recognize the Polish Bankruptcy Court's jurisdiction.

Under Polish  bankruptcy  law,  any debt payable in a currency  other than Zloty
(such as Euro in the case of the Bank Credit  Facilities,  Euro and U.S. dollars
in respect  of the  Existing  Notes and Euro in  respect  of the notes)  must be
converted  into  Zloty at the  National  Bank of Poland  average  exchange  rate
prevailing  on the date the  bankruptcy  court issues a decision on the debtor's
bankruptcy.  Accordingly, in the event of a bankruptcy of the Guarantor, holders
of the Existing  Notes may be subject to exchange  rate risk between the date of
bankruptcy and receipt of any amounts following a bankruptcy proceeding.

If any of the risks  described  above actually  occur,  our business,  financial
condition or operating  results could be materially  adversely  affected and the
trading price of the notes could decline.

Item 4. Information on the Company

History and Development of the Company

Polska Telefonia Cyfrowa Sp. z o.o., or PTC, which operates under the brand name
of Era, was incorporated in 1995 by Elektrim,  DeTeMobil and MediaOne.  We are a
company  with  limited  liability  organized  under  the  laws  of  Poland.  Our
registered  office is located at Al.  Jerozolimskie  181,  Warsaw,  Poland.  Our
telephone  number is  +48.22.413.6000.  We are governed by the provisions of the
Polish Commercial Law, and are registered in the National Court Register kept by
District Court in Warsaw,  XIX Economic  Department of National Court  Register,
entry No. KS 0000029159.  We are authorized under our Formation Deed, our Polish
law  constitutive  documents,  to carry out  telecommunications  activities,  in
particular mobile telephony, data transmission, data communications,  Internet -
related services, and services connected with fixed-line telephony.  We are also
authorized under our Formation Deed to conduct industrial, trading and financial
operations if they are directly or indirectly  necessary to or supportive of the
performance of our core business. We may establish branches and set up companies
in Poland and abroad.

On February 23, 1996,  the Minister of Post and  Telecommunications  issued us a
license to provide telecommunications  services based on the GSM standard within
900 MHz band,  together  with a permit to install and use a GSM 900 network (the
"GSM 900  License").  This  network was launched six months later in August 1996
and services  were offered in September  1996. On August 11, 1999, we obtained a
license to provide telecommunications  services based on the GSM standard within
the 1800 MHz band (the "GSM 1800 License").  We launched our GSM 1800 network on
March  1,  2000.   On  December   20,  2000  we  obtained  a  Universal   Mobile
Telecommunications System, or UMTS, license (the "UMTS License"), which is valid
through  January 1, 2023. In 2001,  all three holders of the UMTS licenses asked
for the postponement of the launch date to January 1, 2005. The Ministry has not
yet responded.

At the end of  February  2001 we changed  our brand name from Era GSM to Era, to
reflect the acquisition of our UMTS License in December 2000.

In February 2001 we entered into the Bank Credit Facilities  totaling  (euro)650
million  to support  the  growth of our  ongoing  capital  expenditure,  our GSM
business and the  development of UMTS, as well as to refinance the DM672 million
Bank Credit Facility entered into in 1997 (the "1997 Bank Credit Facility"). The
Bank Credit  Facilities were arranged by Deutsche Bank AG London,  Dresdner Bank
Luxembourg  S.A.,  the European  Bank for  Reconstruction  and  Development  and
Deutsche  Bank Polska S.A.  The  (euro)100  Million  Bank  Credit  Facility  was
extended to (euro)150  million through the syndication of the (euro)100  Million
Bank Credit  Facility in September  2001.  The Bank Credit  Facilities now total
(euro)700  million.  The Bank Credit  Facilities  are available in two tranches:
(euro)387.5  million available in PLN and (euro)312.5  million available in Euro
and other major  currencies.  The (euro)550  Million Bank Credit  Facility has a
five year maturity and the (euro)150 Million Bank Credit Facility has a six year
maturity.  Outstanding  advances under these  facilities bear interest at a rate
based on LIBOR, EURIBOR or WIBOR, as


                                     - 15 -
<PAGE>


appropriate,  plus an applicable margin, the level of which is determined by the
ratio of senior debt to annualized EBITDA.

On April 24, 2001, the asset pledge we granted in favor of the Lenders under the
Bank Credit Facilities was registered with the Warsaw district court.  There are
no further requirements,  under the terms of our Bank Credit Facilities, that we
have to comply with  relating to the  registration  or security  interests.  The
changes  in the pledge  agreement  related to the  increase  of the Bank  Credit
Facilities were registered on October 26, 2001.

On May 25, 2001, the Lenders under the Bank Credit Facilities  approved our UMTS
business plan, as required under such facilities. This approval means that there
are no restrictions on the utilization of funds available under these facilities
for UMTS operational and capital expenditures.

On May 2, 2001,  we entered  into a purchase  agreement  with PTC  International
Finance II S.A. and Deutsche Bank AG London and Dresdner Bank AG London  Branch,
pursuant  to  which,  on  May  8,  2001,  we  guaranteed  the  issuance  by  PTC
International   Finance  II  S.A.  of  the  (euro)200  million  10  7/8%  Senior
Subordinated Guaranteed Notes due 2008.

On  May  28,  2001,  OTR  issued  a  regulation   governing  the  settlement  of
international  calls that go through the TPSA, the incumbent telephone operator,
network and are terminated on GSM networks.  The new regulation provides that we
are  entitled to receive a portion of the revenues  derived  from  international
calls,  , on the same  conditions  as  applied to our  domestic  interconnection
arrangements with TPSA. Prior to such date, we were not entitled to any revenues
coming from calls that originated outside Poland and terminated in our network.

On June 27, 2001, the Management  Board of Elektrim entered into a memorandum of
understanding with Vivendi, pursuant to which Elektrim agreed to sell Vivendi 2%
of the outstanding stock of Elektrim Telekomunikacja and 1% of Carcom, which are
two  of  our   shareholders,   thereby  giving  Vivendi  control  over  Elektrim
Telekomunikacja and Carcom,  respectively.  See -"Item 7. Major Shareholders and
Related  Party  Transactions".  In addition,  the  memorandum  of  understanding
provided  that  Elektrim  will  transfer  all of its  fixed  line  and  internet
businesses  to  Elektrim   Telekomunikacja   within  an  18  month  period.  The
transaction  between  Elektrim  and  Vivendi  was signed on  September  4, 2001.
Further,  on March 15, 2002,  Vivendi entered into a memorandum of understanding
pursuant  to  which  Vivendi  agreed  to  sell  its  49%  interest  in  Elektrim
Telekomunikacja to a consortium of investors led by Citigroup  Investments.  The
definitive  agreements  relating to this memorandum of understanding are subject
to  the  satisfaction  of  a  number  of  conditions  precedent,  including  the
settlement  of the  dispute  between  Deutsche  Telekom and  Elektrim  discussed
elsewhere in this Form 20-F. In addition,  in the above referenced memorandum of
understanding,  Vivendi  agreed to enter into a put and call option with respect
to the  remaining 2% of Elektim  Telekomunikacja  that it controls,  pursuant to
which the  consortium of investors may call such shares and Vivendi may put such
shares  to the  consortium.  No  definitive  agreements  have  been  entered  in
connection  with these  transaction.  If the  definitive  agreements are entered
into,  the  conditions  precedent  are  met and the  put/call  arrangements  are
effected,  Vivendi would  completely  withdraw  from its  investment in Elektrim
Telekomunikacja.  See "Item 3. Key  Information  - Risk  Factors - We may not be
able to finance a change of control offer required by our indentures.

On June 28,  2001,  we  completed  the last  five  links of our  nationwide  SDH
backbone  network,  a substantial  portion of which has been  operational  since
January 2001.  Constructed  in  cooperation  with  Ericsson,  the network is the
biggest of its kind in Poland,  with  two-way  transmission  speeds of up to 155
megabits per second.  The network  consists of 18 long distance  links  totaling
3,500  kilometers  in length and  connects  the 12 most  important  metropolitan
centers  including  Warsaw,  Krakow,  Gdansk  and  Szczecin,  where  our  mobile
switching centers are located. At present, the network consists of 128 stations.
Transmissions are sent through 140 radio-line "hops" (point-to-point connections
between two radio  terminals).  We aim to ensure our  network's  reliability  by
introducing a centralized  management system,  which is supported by maintenance
services of the most important nodes in the network.  The network is intended to
reduce our dependence on leasing TPSA lines between Mobile Switching


                                     - 16 -
<PAGE>


Centers  ("MSCs")  and is  accordingly  intended  to  reduce  our cost of sales,
accordingly.  We invested  approximately  (euro)43.4 million in our SDH backbone
network until the end of its completion.

On July 24, 2001, the Government  decided to reorganize the Ministry of Economy,
the  result  of which was to  organizationally  transfer  the  Telecommunication
Division  of the  Ministry  of Post and  Telecommunications  to the  Ministry of
Infrastructure.  The  Ministry  of Post and  Telecommunications  has since  been
abolished.

On  November  30,  2001,  OTR  lowered,  by an average  of 67%,  mobile to fixed
interconnection charges. The interconnection charges were set by the Ministry of
Telecommunication  in 1998, and then continuously and unsuccessfully  negotiated
with TPSA.  In 2001,  we  requested  OTR to regulate the  interconnection  rates
between us and TPSA. The resulting regulation of rates benefits all three mobile
operators.

During  2001,  we  applied to OTR for a change in the fee costs for our GSM 1800
license, which we purchased in September 1999. The price of the license to serve
all of Poland was (euro)100  million.  During the same time our main competitor,
Polkomtel,  purchased  its GSM 1800  license to serve the 10  largest  cities in
Poland for (euro)50 million and during the year 2001 it extended this license to
be able to serve all of Poland for the  nominal  fee of  (euro)2,500.  Centertel
paid significantly less than we did for its GSM 1800 license and had it extended
for the nominal fee of  (euro)2,500.  As a result of this  extension and applied
prices,  we asked the  regulatory  body for equal  treatment by  decreasing  our
licenses fee. They have not yet reached a decision.

In late March 2002,  BRE Bank,  a leading  Polish  bank,  announced  that it was
entering into a joint venture with the Dutch-based joint venture firm Eastbridge
in order to  acquire  the 49% of the  shares of  Elektrim  Telekomunikacja  that
Elektrim  currently owns. This  announcement  further stated that BRE Bank would
look to  consolidate  its stake with the stake  announced to be purchased by the
consortium led by Citigroup Investments (discussed above) with a view to selling
Elektrim  Telekomunikacja  to a third party. No further  announcements have been
made.

The description of principal  capital  expenditures  including  distribution and
method of financing are included in "Item 5. Operating and Financial  Review and
Prospects"

Business Overview

We are the largest GSM wireless  telephony  services provider in Poland with 3.8
million  subscribers,  a 37.8% share of the total Polish  wireless  market and a
43.1% share of the  post-paid  market,  in each case,  as of December  31, 2001.
Among  wireless  service  providers in Poland,  we believe,  based on our market
knowledge  and  experience,  that we lead the  market  in terms of  subscribers,
revenues,  EBITDA,  network quality,  backbone  network and brand awareness.  We
operate  services using both a national GSM 900 and a national GSM 1800 Licenses
and, on December 20, 2000,  we were granted a UMTS  License.  As of December 31,
2001, our GSM network  covered  approximately  95.7% of the  geographic  area of
Poland representing  approximately 99.4% of the total Polish population. We have
completed the roll-out of our SDH microwave  backbone  network,  which  connects
certain key  portions  of our network and is intended to reduce our  reliance on
leased  lines,  provide  better  transmission  quality and reduce our  operating
costs. In addition,  we have  selectively  rolled out a GSM 1800 service,  which
allows us to increase capacity and to offer a seamless nationwide dual-band (GSM
900/1800)  service.  All our products and services are sold under the brand Era,
which,  according to a survey  conducted for us by SMG/KRC research in 2001, was
one of the most recognized brand names in Poland. To distribute our products and
services,  we use a network of 24 dealers  with 870 points of sale and more than
600 Authorized  Business Advisors,  a direct sales force of 105  representatives
and a national network of our own 68 retail outlets.

We have achieved rapid growth in our subscriber base since we launched our first
services in September  1996.  For the year ended December 31, 2001, we generated
an average of approximately 81,000 additional net subscribers per month compared
to approximately  88,000 in 2000. In 2001 our churn rate decreased to an average
of 1.8% per month from an average of 2.0% per month in 2000.


                                     - 17 -
<PAGE>


As of December 31, 2001,  we provided  wireless  services to  approximately  2.4
million   post-paid   subscribers  and   approximately   1.4  million   pre-paid
subscribers.  For the year ended December 31, 2001, we had revenues and adjusted
EBITDA of PLN 4,344.9 million and PLN 1,682.6 million, respectively, compared to
revenues of PLN 3,684.7 million and adjusted EBITDA of PLN 1,152.0 million,  for
the year ended  December  31, 2000,  representing  increases of 17.9% and 46.1%,
respectively, over the previous year.

We provide a broad range of  high-quality  wireless  telephony  services.  These
services include call forwarding, call waiting, voicemail,  account information,
short  messaging  services,   information  services,  wireless  Internet  access
(enabled by WAP and, on a trial  basis,  GPRS  technology).  We believe that our
UMTS License will enable us to offer subscribers a wider range of products as we
introduce broadband wireless services. We offer a range of differentiated tariff
plans aimed at attracting and retaining  subscribers with varying service needs.
In  particular,  our strategic  focus has been on acquiring  and retaining  high
volume users,  converting  selected pre-paid  subscribers to post-paid plans and
minimizing  churn to increase  recurring cash flow from each of our subscribers.
We  also  provide  roaming   capabilities   to  our   subscribers   through  210
international  roaming agreements with GSM operators in 89 countries,  including
all European countries with GSM services. We have benefited from the experience,
expertise  and  financial   and   operating   support  of  DeTeMobil,   Elektrim
Telekomunikacja Sp. z o.o. and MediaOne and of their parent companies,  Deutsche
Telekom AG,  Elektrim and Vivendi  Universal  S.A., and from employees  seconded
from these  companies.  These  secondees have trained and supervised a number of
our local  managers,  who now hold key  positions in our company,  including our
Director General and our Director of Strategy, Marketing & Sales. As of December
31,  2001,  the  number  of  key  seconded  employees  was  five,   representing
approximately 0.1% of our work force.

Business Strategy

Our strategic objective is to increase revenues, profitability and cash flow and
to  maintain  our  position as the leading  provider  of  high-quality  personal
communication  services in the Polish  telecommunications  market. The following
are key elements of our strategy:

Provide Superior Network Quality

We have made and continue to make significant  investments in the quality of the
network to maintain  competitive  nationwide  coverage and superior  in-building
reception to deliver the lowest  percentage of dropped  calls in the market.  By
focusing capital expenditures on providing comprehensive in-building coverage in
major  urban  centers in Poland and  enabling  subscribers  to receive  and make
wireless  connections  anywhere  within  those  areas,  we  attract  and  retain
subscribers who generate high usage.  These subscribers are generally less price
sensitive,  less prone to switch  operators  and  represent a lower credit risk.
Maintaining a high quality  network allows us to price our services at a premium
relative  to some of our  competitors.  The  addition  of the GSM  1800  License
improved the network  capabilities by allowing us to increase  network  capacity
selectively in a capital  efficient manner. We also invested in the construction
of the SDH  microwave  backbone  network to carry  voice and data  traffic.  The
backbone  network is expected to reduce our  reliance on leased lines from TPSA,
particularly  between our main MSC sites,  support  expected  growth in Internet
traffic,  provide better transmission quality and reduce our operating costs. In
addition, our GPRS platform covers our entire GSM network coverage area.

Target Key Market Segments

We believe that providing  differentiated service packages,  including access to
value-added  services, is a significant factor in increasing market share within
key segments of the Polish  telecommunications  market. Currently we offer eight
distinct  post-paid  tariff plans which permit  subscribers to select the mix of
monthly  fees,  airtime  charges and  value-added  services that best suit their
service  requirements and frequency of calls.  For those  subscribers who do not
choose post-paid  plans, we offer pre-paid  services under two tariff plans that
have  expanded  our  penetration  in the  cellular  mass  market and reduced our
exposure to credit risk and the need for handset  subsidies  associated with the
post-paid subscriber acquisition.  Our tariff structure is intended to be simple
and  easily  understood  in order to attract  new  subscribers  and to  increase
subscriber loyalty.


                                     - 18 -
<PAGE>


Provide Outstanding Service

We  believe  that  high-quality  customer  service  plays an  important  role in
distinguishing  us from  our  competitors,  expanding  our  subscriber  base and
sustaining   subscriber   loyalty.   We  employ  over  750  subscriber   service
representatives  in our customer  center located in Warsaw who operate a 24 hour
toll free subscriber service hotline,  including  directory  assistance,  mobile
telephone service guidance,  billing and other information.  We have information
systems that  immediately  activate  services and which  enable  subscribers  to
migrate between different tariffs. In 2000, we were awarded a number of ISO 9002
awards,  including our ISO 9002 status for our customer  care  service,  and our
hotline was chosen as the best one among Polish wireless companies by the Polish
magazine  Computer  World.  Furthermore,  we  also  provide  subscriber  support
services  such as handset  servicing  and  billing  inquiries  at our 68 centers
located in our retail outlets.

Manage Churn and Bad Debts

Our management of subscriber churn has allowed us to maximize  profitability and
cash flow. We calculate churn rate using widely accepted general  principles (by
dividing  the  number of  deactivations  during a given  period  by the  average
subscriber  base for such period).  During 1998, our average  monthly churn rate
was 2.2%.  However,  during 1999,  our monthly churn  increased.  In response we
initiated  a handset  upgrade  program  for our valued  subscribers,  instituted
improved credit information sharing throughout our national distribution network
and launched  the first and only  loyalty plan in the Polish  telecommunications
sector  under which  long-standing  subscribers  benefit from awards such as Era
merchandise,  free  airtime  and  other  rewards  from our  exclusive  partners,
including LOT Polish Airlines, British Airways, Panasonic and Kodak. Our average
monthly churn for the year ended  December 31, 2001  decreased to 1.8% from 2.0%
for the year ended  December  31, 2000,  partially as a result of our  retention
programs.

Through  2001, we reduced bad debt  (calculated  as a percentage of revenues) to
1.6%,  down  from 4% in 2000.  This  was due to the  implementation  of  various
initiatives  over the past few years to prevent bad debt at different  stages of
customer's  life-time  and  to the  development  of  effective  method  for  the
collection of  receivables.  The decrease in bad debt was also  supported by the
increased share of pre-paid subscribers in the subscriber base.

We have also increased  customer credit checks. In October 2001, we introduced a
policy of checking a customer's  payment  history  with other  mobile  operators
prior to  signing  a  contract.  Customers  who  refuse  such  verification  are
requested to pay a deposit of PLN 760. Less than 0.1% of our customers  opted to
pay the deposit.

Our process  consists of an integrated  chain of bad debt management  operations
(e.g. credit limits, invoice payment tracking, sales quality reports) throughout
the customer's life-time backed up by thorough analysis. Credit risk analysis is
also performed prior to launch of new products and promotions,  which can result
in proactive  development of necessary  software  applications  and processes to
limit new risks.

We are also a member of the Alliance for Fair  Business.  Other members  include
banks,  direct credit firms and the other mobile operators.  As a result,  legal
changes  may be  introduced  that will allow to  exchange  customer  credit data
between  creditors  from  various  sectors of economy and in 2003 credit  rating
agencies  may be  established  that will be available  to mobile  operators  and
companies  from other  sectors of economy.  It is expected  that bad debt may be
further reduced due to cooperation with these credit rating agencies.

Maintain Brand Awareness

We started offering services in 1996 under the brand name Era GSM. We decided to
change our brand to Era following our expansion into the UMTS business.  We have
made a  significant  investment  to  position  our  brand  as  one  of the  most
recognized brands in Poland with an aided and unaided brand awareness of 87% and
67%  respectively  (according to brand tracking by SMG/KRC - the market research
company  - in  October  2001).  We  believe  that  the high  level of our  brand
awareness greatly facilitates attracting new subscribers. We have positioned the
brand to stand for high quality,


                                     - 19 -
<PAGE>


responsiveness   and  the  high   standard  of  service   expected  by  business
subscribers.  In  addition,  we believe our pre-paid  service,  which we operate
under the brand  name Tak Tak,  has become  synonymous  with  pre-paid  wireless
services in Poland.

In November  2000, we announced  our new strategy  towards the sales of products
and services,  and decided to create  separate  brands for business (Era Biznes)
and retail services (Era Moja). This change was implemented throughout 2001, and
allowed us to create and sell  services  specially  prepared  and  addressed  to
different market segments.

Capitalize on our Relationship with Major Shareholders

We have  benefited  from the  experience,  expertise and financial and operating
support of DeTeMobil,  Elektrim  Telekomunikacja  Sp. z o.o. and MediaOne and of
their parent companies,  Deutsche  Telekom,  Elektrim and Vivendi Universal S.A.
These  companies  have  significant  experience  in either  managing high growth
telecommunications  ventures, building GSM networks in Europe or in implementing
large scale  infrastructure  projects in Poland.  We have used the resources and
experience  of these  shareholders  through the  secondment  of  employees,  the
provision of consulting services and proprietary  software to design the network
as well as by benefiting from their combined purchasing power.

Services and Products

Services Overview

We offer  subscribers a basic post-paid  service package,  consisting of network
access, call divert and forwarding, short message service, calling line identity
(clip) and voice mail, all pursuant to eight  alternative  tariff plans.  During
2001, we launched several solutions mainly dedicated to the business sector. See
"Item 4. Products - Value Added Services".

The variety in tariff  plans  permit  subscribers  to select the  monthly  fees,
airtime   charges  and  value  added  services  that  best  suit  their  service
requirements and frequency of calls. A potential  subscriber  commences  service
upon payment of the purchase  price of the handset and the  subscriber  identity
module ("SIM") card.

In November  2000, we revised our strategy  towards our customers and introduced
new tariff  plans.  We revised  tariffs for both our  post-paid and our pre-paid
(Tak Tak)  subscribers  and  introduced new tariffs for business  customers.  We
offer  services  that are branded to  businesses.  Era Biznes is aimed at large,
medium or even one person or family firms and companies.  The separate  "private
offer" is presented to all  individual  (or  "private")  users and contains both
post-paid Era Moja and the pre-paid Tak Tak brands. Both Era Biznes and Era Moja
includes  four tariff plans;  Tak Tak includes two tariff plans.  Changes to our
tariff structure included:

     o    bundled  minutes  included  in  monthly  fee  for  all  four  business
          post-paid tariffs and for three out of four private post-paid tariffs;

     o    bundled Short Message Service ("SMSs") included in monthly fee for all
          business and private tariffs (for all post-paid tariffs);

     o    elimination of differences  between prices for connections  within our
          network and connections outside our network (for all tariffs);

     o    out-of-charge voice mail for post-paid tariffs;

     o    elimination  of the  peak/off-peak  differentiation  for all  business
          tariffs; and

     o    consistent "peak hours" definition for all private tariffs  (including
          pre-paid and post-paid): from 8 am to 6 pm from Monday to Friday.

New  subscribers  are no longer  offered old tariffs.  The migration of existing
subscribers  from  the  old  tariffs  to the new  tariffs  is  expected  to be a
prolonged process as old subscribers have a right to remain under the old tariff
plans. Subscribers using old tariffs are currently allowed to migrate for a flat
fee of PLN 30. Some  subscribers  may not migrate.  The  introduction of our new
tariff  plans had as  expected,  significant  adverse  impact on our revenues by
reducing  ARPU.  We  believe,  however,  that  our  new  tariff  plans  and  our
accompanying  marketing strategy have enhanced our competitive position and help
us to defend our  position  as the  leading  supplier  of  wireless  services in
Poland. From launch of the new


                                     - 20 -
<PAGE>


tariffs until December 31, 2001, approximately 41.0% of our subscribers migrated
to one of our new tariff plans.

Business Customer Tariff Plans

At present,  approximately 70% of the existing  businesses  registered in Poland
have at least  one  handset  registered  with  us.  On  November  15,  2000,  we
introduced four new business  tariffs:  Era Biznes 10, Era Biznes 45, Era Biznes
100 and Era Biznes 220. Those tariffs are designed to accommodate all companies:
large, medium, small and one-person enterprises.

The new business tariffs introduced fixed prices per minute (with no differences
between peak and off peak hours) and  cancelled  price  differentiation  between
calls in our network and outside our network.  The billing  procedure changed as
well and  subscribers  are now charged for each commenced 30 second  interval of
each call rather than for the first sixty seconds and every subsequent commenced
thirty second period of each call,  regardless of the number of seconds actually
used.

The new offer for business subscribers includes a system of rebates based on the
number of SIM cards,  longevity of the  subscribers  as a subscriber and monthly
bill.

<TABLE>
<CAPTION>
                                  Included in Subscription Fee
                                 ------------------------------
 Traffic Package   Subscription     Minutes         Messages       Domestic      Roaming        SMS Fee
                        Fee                                        Operator       Calls
----------------- -------------- --------------- -------------- --------------- ----------- --------------
                                   (min/mth)     (message/mth)   (PLN/min)(1)   (PLN/min)    (PLN/message)
                                 --------------- -------------- --------------- ----------- --------------
<S>        <C>           <C>             <C>                <C>         <C>      <C>                 <C>
Era Biznes 10            29.90           10                 5           1.35      Foreign            0.50
                                                                                 Operator
                                                                                 Rate +15%
Era Biznes 45            59.90           45                10           1.10                         0.50
Era Biznes 100           99.90          100                20           0.85                         0.50
Era Biznes 220          199.90          220                40           0.59                         0.50
</TABLE>

(1)  These subscribers pay for each thirty-second  interval (or portion thereof)
     thereafter.

Retail Customer Tariff Plans

We introduced new retail  subscribers  tariffs:  Moja, Moja 10, Moja 45 and Moja
100.  These  tariffs were designed for all  subscribers  that joined our network
after November 15, 2000 and existing  subscribers  may migrate to these tariffs.
The differences  between old and new tariff plans principally  relate to charges
on calls  within our network or outside our  network.  In the new tariff  plans,
there is no  difference  in price between the two, with the peak time set from 8
am to 6 pm.

<TABLE>
<CAPTION>
                                    Included Free in         Domestic Operator
                                    Subscription Fee
                                 ------------------------ -------------------------
Traffic Package    Subscription    Minutes       SMS       Day (1)      Night,      Roaming     SMS Fee
                        Fee                                           Weekend and
                                                                      Holiday(2)
---------------- --------------- ----------- ------------ ---------- ------------ ------------ -----------
                                  (min/mth)   (message/     (PLN/        (PLN/       (PLN/       (PLN/
                                                mth)        min)         min)         min)      message)
                                 ----------- ------------ ---------- ------------ ------------ -----------
<S>                      <C>             <C>         <C>     <C>            <C>    <C>             <C>
Era Moja                 19.90           0           5       1.95           0.85    Foreign        0.50
                                                                                   Operator
                                                                                   Rate +15%
Era Moja 10              29.90          10           5       1.75           0.65                   0.50
Era Moja 45              59.90          45          10       1.35           0.60                   0.50
Era Moja 100             99.90         100          20       1.00           0.60                   0.50
</TABLE>

(1)  Monday - Friday 8:00a.m. - 6:00p.m.

(2)  Monday - Friday

(3)  These  subscribers  pay for the first minute of each call regardless of the
     call's length and then for each thirty-second interval (or portion thereof)
     thereafter.


                                     - 21 -
<PAGE>


Due to the  relatively  low average  household  income in Poland  (less than PLN
2,000 per month), we believe that many of our subscribers, including medium- and
high-volume  users,  prefer  to enroll  in a tariff  plan  with a lower  monthly
service  charge.  We believe that a certain  number of our Era Moja  subscribers
will  migrate  to one of the Moja 10,  Moja 45 or Moja 100 plans as they  become
accustomed to our services.

Part of our  subscribers  continue  to use our  older  tariff  rates,  which are
summarized in the table below.

<TABLE>
<CAPTION>
                                    Airtime Tariff Rates(1)     Airtime Tariff Rates(1)
                                          Outside Era                 Inside Era
                                   --------------------------- -------------------------
Traffic Package        Monthly         Peak        Off-Peak       Peak        Off-Peak       Night
                     Service Fee
-------------------- ------------- ------------- ------------- ------------- ------------ -------------
                         (PLN)       (PLN/min)     (PLN/min)     (PLN/min)     (PLN/min)    (PLN/min)
                     ------------- ------------- ------------- ------------- ------------ -------------
<S>                       <C>           <C>           <C>           <C>           <C>          <C>
Hello                     19.90         2.39          0.89          1.74          0.74         0.24
White                     39.90         1.69          0.89          1.54          0.74         0.24
Plain and Simple          59.90         1.00          1.00          1.00          1.00         0.24
Blue                      89.90         1.09          0.59          0.94          0.44         0.24
Navy Blue                129.90         0.89          0.49          0.74          0.34         0.24
VIP                      199.90         0.55          0.55          0.55          0.55         0.24
</TABLE>

(1)  These  subscribers  pay for the first minute of each call regardless of the
     call's length and then for each thirty-second interval (or portion thereof)
     thereafter.

Pre-paid Services

Since June 1998, we have offered a pre-paid GSM service  package under the brand
name  Era Tak  Tak.  This  pre-paid  service  enables  our  subscribers  to take
advantage of a GSM service without paying a monthly subscription fee or entering
into a contract. Our Tak Tak pre-paid service is designed to appeal to those who
want to limit the amount they spend on their mobile calls. We offer two types of
pre-paid  tariff  services:  "Ja i Ty" or "You and  Me",  which  provides  a 15%
discount to our subscribers for up to two of their favorite destination numbers;
and "Caly Dzien" or "All Day",  which provides our  subscribers  with a flat per
minute price all day and a lower more competitive  price on calls from 6 p.m. to
8 a.m. We believe  that Tak Tak has become  synonymous  with  pre-paid  cellular
service in Poland.

Customers choosing a pre-paid service can purchase either a SIM pack, the prices
of which start at approximately  PLN 99 (which consists of a SIM card,  required
to open a  pre-paid  account,  with a stored  value  of PLN 50) or the  pre-paid
bundle pack (which consists of a handset and a SIM pack) for  approximately  PLN
199 to PLN 499  depending  on the  handset  chosen.  Our  subscribers  can  then
purchase  pre-paid  vouchers of different  denominations  and validity  periods.
Pre-paid  vouchers  are sold in all of our  company  retail  stores  and in over
15,000 other outlets,  including national news stands, gas stations,  ATM's, own
stores and through Era branded dealers. If the pre-paid account is not topped up
with a new voucher within a twelve-month  period,  the pre-paid  account expires
and any  remaining  balance is  forfeited.  As of December 31,  2001,  our total
subscriber base included 1,419,180 Tak Tak subscribers.

<TABLE>
<CAPTION>
                                    Local Operator                               Era WAP
                        ---------------------------------------- -----------------------------------------
Traffic Package               Day (1)          Night, Weekend          Day (1)        Night, Weekend and
                                              and Holiday (2)                            Holiday (2)
----------------------- ----------------- ---------------------- ------------------- ---------------------
                             (PLN/min)           (PLN/min)            (PLN/min)           (PLN/min)
                        ----------------- ---------------------- ------------------- ---------------------
<S>                              <C>                 <C>                  <C>                 <C>
Ja i Ty                          1.99                0.99                 0.48                0.34
Caly Dzien                       1.49                1.49                 0.48                0.34
</TABLE>

(1)  8:00 a.m. - 6:00 p.m. (Monday - Friday)

(2)  6:00 p.m. - 8:00 a.m. (Monday - Friday), Saturday, Sunday and holidays

Value Added Services

During  2001 we  concentrated  heavily on bringing an  innovative  and  complete
portfolio  of products to  customers in both  residential  and  business  market
segments.  Business  customers  could choose from a number of products,  the two
most  successful  of which are: the Virtual  Private  Network  ("VPN") and Fixed
Cellular Terminal ("FCT").


                                     - 22 -
<PAGE>


The VPN with its group of  functionalities  such as a personal  numbering  plan,
cheaper  connections  between company  employees and defined user profiles is an
offer  tailored to business  customers to manage and optimize  internal  company
communication. Additionally, VPN functions provide an alternative for in-company
fixed line network.

The FCT acts as a gateway  from a  business  customer's  fixed  network to their
mobile network and allows for a reduction of fixed to mobile  connections costs.
We also  introduced  GSM Pro, as an alternative  to trunking  systems,  enabling
group  connections  between its users,  while  maintaining the advantages of GSM
services.  The product was awarded by the Chairman of the  Committee for Citizen
Security as a solution to supporting communication during natural disasters.

In  addition  to  these  products,  we  offer  direct  connections  of  customer
telecommunication  equipment to our network, using two products: the PABX Direct
Access and the Business  Infoline.  The PABX Direct Access  solution offers cost
saving voice connections  between large accounts'  in-company fixed networks and
our mobile network. The Business Infoline is a substitution service of toll free
infolines offered by fixed line operators. Users of Business Infoline extend the
possibility of communication with their customers equipped with our mobiles.

We extended  the  portfolio of direct  access  products to the area of non-voice
products  by  introducing  SMSC  Direct  Access.  The  product  allows  for  the
development   of  an  autonomic,   fast  and  flexible   application  to  manage
communication  with  customers  or  employees,  and can be used for  "machine to
machine" customized solutions via SMS. This product is used by banks, monitoring
companies  and high-tech  Internet  based  companies to improve  their  customer
service and reduce costs.

Many successful  non-voice  products for businesses were introduced in 2001. Our
goal is to be a partner  with  business  customers  to deliver  mobile  business
solutions  targeted at increasing  work  efficiency and cost  reduction  through
partnerships with application providers and integrators. Our strategic intent is
to offer  solutions,  not only data  transmission.  An example of the consistent
execution  of  this  strategy  is the  implementation  of the  Fleet  Management
service.  Fleet  Management  is a  comprehensive  offer for business  customers,
fulfilling  their needs to monitor,  track and manage groups of movable  objects
such as cars and vans.  We believe that it is an excellent  offer for  customers
seeking to secure their assets.  Fleet Management's  tracking system is based on
GPS technology,  with GSM based  communication to the control center.  Customers
can choose from three service  options  based on the scale of their  operations,
ranging from simple reports  received from a central control center to a control
center  operated  by  the  customer  itself.  The  service  has  already  proven
successful in quickly locating stolen luxury cars.

For those  customers  wishing to develop  telemetric  applications  using  their
internal  resources,  we introduced a specially designed  Telemetric Tariff. The
Telemetric  Tariff  is  a  specially  priced  offer  with  SMSs  and  Data  Call
transmission  channels.  It is  primarily  used  by  our  customers  for  remote
surveillance applications, for example the daily duties of security companies or
to supervise the operation of remote fixed assets.

In September  2001,  our Company was the first operator in Poland and one of the
first in the world to implement a video  streaming  solution,  which enabled the
user to watch a TV program and video files, such as weather reports,  on demand,
on a set of mobile  equipment  consisting of a GPRS enabled cellular phone and a
PDA  connected to the phone through  wireless  communication  (Bluetooth).  This
solution  was  provided  to a  test  group  of  PTC's  customers  in  the  pilot
partnership  venture  together  with Compaq and TVN24 - the first Polish 24 hour
news TV channel as a content provider.

Targeted at the residential  market is Premium SMS. Premium SMS is used by media
and  content  companies  as a  tool  enabling  them  to  offer  information  and
entertainment  services  like voting,  contests,  personalized  infoservices  or
auctions.  The  SMS-Premium  based services became popular and widely adopted in
the market which is reflected in the number of messages sent by individuals  and
by its multiple applications.


                                     - 23 -
<PAGE>


In  February  2001,  our  customers  were the  first in  Poland  to use a mobile
commerce  solution,  which enables them to perform secure commerce  transactions
using their mobile phones. A customer stores their payment card number only once
in a secure payment profile.  Once a sale  transaction is completed,  their card
number is retrieved and transaction  authorization is performed. The possibility
of fraud is greatly reduced by authorizing  transactions on secure links between
us and the clearing agent.

In 2001, we also introduced WAP browsing and mobile Internet  access,  the first
commercial services based on the GPRS platform. Our customers with GPRS handsets
can use them for more cost effective access to WAP content,  at a price set as a
flat fee per month to encourage  usage of the service.  Mobile  Internet  access
also became a viable  option  based on our network  coverage  and an  affordable
price.  Lack of GPRS handset  availability  was the key factor  preventing those
services from spreading  more widely.  We believe there will be a large increase
in the usage of GPRS-based  services in the current year as affordable  handsets
are now available in the market.

Our Company was the first  cellular  operator in Poland to offer  location-based
information  services on WAP to assist  users in finding a required  location or
other information in the subscriber's proximity. We actively developed other new
products  from the  non-voice  area,  notably  games offered on both WAP and SMS
platforms.  Games successfully launched in 2001 were Intelekt,  Black Jack, Jack
Pot,  Quiz and My  Penguin.  All of them were  adopted in the market  with great
interest.  Quiz is being  developed with many content  versions.  Black Jack and
Intelekt,  based on  universal  concepts  of card  games and IQ tests,  generate
constant  interest  among our users.  My Penguin  achieved the  greatest  market
success.  The game-based on the  TamaGotchi  concept of caring for a virtual pet
was  greatly  accepted  by our gaming  community  and  leverages  on our Tak Tak
pre-paid service mascot - a penguin.

We started offering Directory Assistance, which enables our customers to enquire
about phone numbers of persons they would like to call. Initially the service is
available to our private  customers  only,  with  business  customers  and other
operators' databases planned to be added in 2002. Finally, we opened our network
to pre-paid  roamers  visiting Poland allowing a continuously  growing number of
pre-paid  users all over the world to use their  mobiles  while  roaming  in our
network.

We also  continued  to develop  voice-based  products.  For  example  Voice Mail
functionality  was  enhanced  with new  features:  Call  Return - an easy way of
calling  the person who left a message by pressing a single  button,  Empty Call
Capture - a unique function that sends the user a SMS message with the telephone
number of the person who tried to contact  him but did not leave any message and
Outcall - a  function  in which  Voice  Mail  calls a user to inform him about a
message  at a  convenient  and  predefined  time of the day.  With the  enhanced
functionalities  the new Voice Mail has become more  comfortable,  intuitive and
more user-friendly.

We offer  standard  value added  services in  packages,  which can be  purchased
separately by our  subscribers of the regular plans.  Those value added services
have been grouped into the four categories below:

<TABLE>
<CAPTION>
---------------------------- ---------------------- ------------------- ----------------------
         Dla Wygodnych          Dla Wszechstronnych     Dla Ciekawych     Dla Zaawansowanych
---------------------------- ---------------------- ------------------- ----------------------
<S>                          <C>                    <C>                 <C>
Voice mail                   Call waiting                               Eranet electronic mail
Incoming call identification Call suspension (call
(CLIP) call line             hold)                  Text based          Fax transmission
identification               Conference call        information service
Own number presentation      Call barring           (SMS)               Data transmission
Blockage (CLIR) call line    Detailed bill (for
identification               business tariffs only)
Call forwarding
---------------------------- ---------------------- ------------------- ----------------------
</TABLE>

The Dla  Wygodnych  or  "Convenient"  package is free to all business and retail
subscribers.  The Dla Wszechstronnych or "Comprehensive" package is free for all
business,  Moja 10,  Moja 45 and  Moja 100  subscribers.  The Dla  Ciekawych  or
"Curious" package is free for Era Biznes 100 and Era Biznes


                                     - 24 -
<PAGE>


220 subscribers,  while the rest of our subscribers have to pay PLN 8 per month.
The Dla Zaawansowanych or "Advanced" package costs PLN 20 per month.

As the  market  for GSM and GPRS  services  develops  over  time,  we  intend to
introduce additional value added services.

Handsets and Accessories

We sell handsets and accessories  separately from GSM services.  Subscribers may
also purchase a SIM card either with or without a handset.  We sell a variety of
handsets ranging from the basic to the most advanced models manufactured by some
of the world's leading suppliers,  including Alcatel, Ericsson, Motorola, Nokia,
Panasonic and Siemens. In connection with certain  promotions,  we offer reduced
price  handsets  that can only be used on our own network.  The  accessories  we
offer are priced  competitively  and are designed to enhance the convenience and
functionality of a subscriber's  handset,  including carrying cases,  batteries,
car kits and recharging  equipment.  See "Item 5. Operating and Financial Review
and  Prospects - Financial  Review - Factors  Affecting  Expenditures  - Cost of
Sales".

We do not expect to achieve  positive overall margins on handset sales, as these
are often subsidized in order to attract subscribers. See "Item 4. Marketing and
Distribution - Marketing Activities".  Certain discounted handsets sold during a
promotion are  configured so as to accept only Era SIM cards (a "SIM lock").  We
intend to use SIM locks only to recoup the  discounted  cost of the  handset and
enable  subscribers  to unlock the handset on request in order to permit its use
on other networks once we have  recovered the  discounted  cost. We believe that
the  prominent   position  of  our  major   shareholders   within  the  cellular
telecommunications   market   provides  us  with  a  substantial   benefit  when
negotiating with handset suppliers.

International Roaming

Our digital wireless network  currently uses GSM technology.  GSM is the world's
most widely used digital  wireless  technology,  with more than 1 billion  users
around  the  world  as of  December  31,  2001.  Because  GSM is a  standardized
technology used throughout most of Europe and  internationally,  our subscribers
can make and receive calls  outside  their home calling area in other  countries
that also operate a cellular  telecommunications network on the GSM standard. As
of December 31, 2001, we had entered into 210 international  roaming  agreements
with GSM operators in 89 countries.  The  agreements  cover all of the principal
countries in Europe. In general,  these international roaming agreements provide
that when our  subscribers  use the  services  of a  corresponding  GSM  network
operator in another  country,  we are  responsible  for  payments of charges for
those services used in accordance with the corresponding GSM network  operator's
tariff. We pass these charges through to the relevant subscriber,  together with
an additional  surcharge of 15%. Currently,  we receive relatively small amounts
of revenue from charges for roaming calls.  Although we expect these revenues to
increase  along with the network and  subscriber  base, we do not expect overall
revenues  from  charges for roaming  calls to be material to overall  results of
operations.  See  "Item 5.  Operating  and  Financial  Review  and  Prospects  -
Financial Review - Factors Affecting Revenues".

Billing and Subscriber Management

The integrity and  flexibility of our billing and subscriber  management  system
are important  components of our strategy of providing  efficient and responsive
subscriber service. It also allows us to generate accurate and timely subscriber
information   and  analysis.   DeTeMobil  and  its  affiliates   supervised  the
installation of our billing and subscriber management system.  DeTeMobil and its
affiliates  continue  to  provide us with  operational  training  and  technical
support, while we cooperate on sales and purchases of goods.

Our  subscribers are billed on a monthly basis and may pay their bills either at
our retail stores,  banks or post offices or through direct debit  services.  We
also use data obtained from our billing system to generate a subscriber lifetime
value profile for each of our  subscribers.  This contributes to the development
of our different tariff packages and the measurement of the effectiveness of our
promotional and advertising  campaigns,  which we then use in developing our new
services and marketing strategies.


                                     - 25 -
<PAGE>


As in other emerging-market countries,  Poland does not have a nationwide credit
bureau for individuals,  and it is difficult to verify the  creditworthiness  of
potential  subscribers.  We do, however, have an internal credit risk management
team that conducts credit checks on our new subscribers,  primarily by verifying
addresses and through bank references, and we are in the process of developing a
credit risk profile model.  We have also created a proprietary  credit  database
and use our billing system to generate  subscriber  usage reports on subscribers
that have exceeded  pre-assigned credit limits or have failed to pay their bill.
Based  on  these  reports,  our  credit  and risk  management  team can  contact
subscribers,  and depending on the circumstances,  a subscriber's service may be
deactivated.  We also provide  independent dealers and retail stores with weekly
electronic  subscriber management reports.  Additionally,  our dealer commission
structure  is linked to the life of each  subscriber  acquisition.  Overall,  we
pursue  collections  aggressively  and disconnect  subscribers who pose a credit
risk.

We aim  to  effectively  manage  our  subscriber  churn  in  order  to  maximize
profitability  and cash flows.  We calculate  churn rate using  widely  accepted
general  principles  (by  dividing  the number of  deactivations  during a given
period by the average  subscriber base for such period).  Since the beginning of
1997, our average monthly churn rate has been 2.4%.  However,  during the fourth
quarter of 1998 and the first quarter of 1999, our monthly churn rate increased.
In response,  we  initiated a handset  upgrade  program for valued  subscribers,
instituted   improved  credit   information   sharing  throughout  the  national
distribution  network,  and  launched  the  first  loyalty  plan  in the  Polish
telecommunications   sector.   Under  our  subscriber   loyalty   program,   our
long-standing  subscribers  benefit  from awards such as Era  merchandise,  free
airtime and other rewards from our exclusive partners,  which include LOT Polish
Airlines,  British Airways,  Panasonic and Kodak. As a result of these and other
initiatives, our average monthly churn rate was 1.8% in 2001.

Marketing and Distribution

Our marketing and distribution  efforts are designed to develop brand leadership
for Era,  including Tak Tak, and to enable us to target specific segments of the
Polish  telecommunications  market,  particularly those subscriber profiles with
high subscriber  lifetime  values.  Currently,  we target the  professional  and
business  segments  with  post-paid  products and the mass market with  pre-paid
products.

Marketing Activities

Our marketing  efforts are currently  focused on potential  subscribers  who are
likely to recognize the enhancements in productivity that may result from having
a mobile phone, and others who are unable to otherwise access wireline telephony
because of the relatively long waiting times for telephone  installation  common
in Poland. Our primary target markets for GSM services are  small-to-medium-size
businesses,  professionals and large corporations who generally use tariff plans
consistent with high volume usage and also high-volume private  subscribers.  We
seek to attract  business and private  subscribers  by providing  certain  value
added services,  including call waiting and conference call facilities,  free of
charge.

We have used extensive national advertising campaigns to create awareness and to
promote the benefits of  subscribing to an Era service.  We advertise  primarily
through  television  advertising and also use print media,  billboards and radio
advertising.  The brand name Era GSM was selected after an extensive name search
and  customer  research  program  because it is short and easy to  remember.  In
February  2001,  we changed  our brand name to Era as we are now a holder of the
UMTS License as well as a GSM operator.  We have also developed the product name
Tak Tak to promote  our  pre-paid  services.  In  October  1999,  we  launched a
consumer loyalty program called  "Stokrotka" or "Gratitude," which was the first
major such  program of its kind  offered in the  telecommunications  industry in
Poland.  This campaign is designed to provide our  subscribers  with  incentives
based on  usage,  payment  and  longevity.  Modeled  on  airline  mileage  award
programs,  our subscribers are awarded benefits such as Era merchandise and free
cellular airtime.

We also  believe  that  demand  for GSM  services  in  Poland is  stimulated  by
promotional   campaigns   which  offer  reduced  prices  for  GSM  services  and
accessories.  We have  engaged  in such  campaigns  from time to time,  offering
handsets at reduced prices and reduced  activation fees during specific periods.


                                     - 26 -
<PAGE>


In general,  however,  we avoid  promotional  techniques  such as providing free
airtime or waiving  activation  or monthly  fees,  because we believe that these
types of incentives tend to attract  passive or inactive  subscribers as well as
subscribers who are higher credit risks.  Subscribers who purchase services as a
result of a promotional  campaign may not cancel their  subscriptions  until the
expiration of a minimum period (generally two years), unless the subscriber pays
us an additional amount  approximately  equal to the discount he or she received
on  the  full  cost  of  their  handset.  Other  subscribers  may  cancel  their
subscriptions upon one month's notice to us without charge.

Distribution Channels

Together with the change in our branding strategy,  we also changed our approach
towards our distribution  network,  dividing it into business customers,  retail
customers and pre-paid services distribution  networks. Our largest distribution
channel is the one designed  for retail  customers,  composed of 24  independent
dealers (as of December 31, 2001) that operate a chain of 870 retail outlets. We
also cooperate  with dealers to increase brand  awareness by providing them with
sale materials, event financing, packaging, brochures and promotional stands. In
June  2001  we  launched  Dealers'  Portal,  a tool  which  enables  dealers  to
communicate  with our company  over the Internet as well as to have an access to
our  databases  supporting  them in sales and retention  activities.  Our retail
distribution  channels currently consist of 68 owned retail stores. These stores
are located in the central,  high traffic  areas of Polish  cities and only sell
our cellular  services,  handsets and  ancillary  products.  We believe that our
retail stores are a valuable  promotional vehicle for our services and products,
offering a wider range of customer service and support than those offered by our
dealers at their points of sale. Each of the retail stores has customer  service
staff capable of  immediately  activating a new subscriber as well as responding
to billing and other inquiries from the company's current  subscribers.  We also
provide handset servicing in our retail stores,  including providing subscribers
with  temporary  replacement  handsets  in the event that the broken  handset is
returned to the manufacturer for repair.

To meet the  requirements  of our  business  customers,  we created two separate
sales  channels.  Corporate Major Accounts  ("CMA")  companies are served by our
Business Advisors supported by a dedicated Customer Care Department.  We believe
that our direct sales force constitutes an important resource in our strategy of
increasing the proportion of subscribers using business tariff plans, as well as
attracting  higher  usage  customers.  Our direct  sales force has 105  Business
Advisors  responsible  for the  acquisition  and servicing of our major business
accounts as well as selling new products and  comprehensive  solutions  based on
new  technologies.  Small & Medium  Enterprises  ("SME") companies are served by
Authorized  Business Advisors ("ABAs").  Structurally,  ABAs are attached to the
sales network  created by the dealers,  though they  constitute  an  independent
distribution  channel.  Within this sales  channel we work with 24 dealers,  who
employ more than 600 trained and prepared Authorized Business Advisors.

We  distribute  our  pre-paid  bundle  packs  through our own chain of shops and
through a large  number of POSs.  The Tak Tak  coupons are sold  through  15,000
outlets, including ATMs, kiosks and petrol stations.

Network and Facilities

Network Infrastructure

We own the largest GSM infrastructure in Poland,  which has been expanding since
1996.  Originally  developed  in  co-operation  with  an  international  team of
specialists,  now we rely on our internal engineering employees to grow, operate
and maintain the network. Components, subsystems and interfaces constituting the
network are  supplied by Alcatel,  Ericsson  and Siemens  plus a host of smaller
suppliers.

Our  infrastructure  of  cellular  networks  is based upon the  division  of the
geographical  area  covered  by the  network  into a number  of cells  that have
diameters  ranging from a few hundred meters to up to 30  kilometers.  Each cell
contains one or more  transceivers at a base  transmission  station ("BTS") that
communicate by radio signal with active  cellular  subscribers in the cell. In a
GSM cellular network,  the BTSs installed in each cell are connected to the base
station  controllers  ("BSCs"),  which in turn, are connected to a MSC. MSCs are
connected to other MSCs in the same network and to other fixed and


                                     - 27 -
<PAGE>


cellular networks. MSCs control the routing (and call record) of calls and allow
cellular  telephone  users to move  freely  from cell to cell  while  continuing
calls.  Connections  between BTSs, BSCs and MSCs consist of transmission  lines,
including fiber optic cables, copper cables and microwave links.

As of the end of 2001, our GSM network  comprised the Base Station  Subsystem of
more than  4,700  Base  Stations  and 128 Base  Station  Controllers;  29 Mobile
Switching  Centers and the Operations and Maintenance  Subsystem and the Network
Management Center, both of which are located in Warsaw and enable the Company to
centrally manage and coordinate  network  operations and  maintenance.  From the
company's  Network  Management  Center in Warsaw, we monitor service provided by
our network.

To mitigate  the effects of  potential  switching  failures or failures of other
network  elements,  we have  installed  back-up  equipment and have  constructed
alternative routes between our critical network elements.

As of  December  31,  2001,  our  network  covered  approximately  95.7%  of the
geographic area of Poland  representing  approximately 99.4% of the total Polish
population.

Several  transmission lines for the GSM network  connections  between BTSs, BSCs
and MSCs have been leased from TPSA.  In order to reduce  dependence on TPSA, we
have built out our own SDH microwave  backbone network the roll-out of which was
completed in June 2001. Our SDH microwave  backbone  network  connects the major
centers  served by its GSM networks,  and reduce but does not eliminate its need
for leased  lines from TPSA.  We believe that our network is the biggest of this
kind in Poland,  allowing the Company to achieve two-way transmission speed of 2
x 155 megabits per second. The network consists of 18 long distance links with a
length of 3,500 km connecting 12 cities where our MSCs are located.

During 2001, we also finalized the GPRS roll-out  project  securing  countrywide
GPRS coverage.

Under the terms of our UMTS License,  we must begin commercial service using the
UMTS  frequencies  between  January 1, 2003 and January 1, 2004.  However in the
fourth  quarter  of 2001 all three  holders  of the UMTS  licenses  asked OTR to
postpone  the  launch  date to  January  1, 2005 The  response  has not yet been
received.

To meet this  obligation  and in order to be ready to support  our  strategy  of
providing a high quality network offering the most advanced services,  we intend
to continue testing UMTS network equipment in cooperation with our key suppliers
and later enter into commercial  agreements for the purchase,  installation  and
integration of UMTS start-up networks. In order to offer seamless UMTS, GPRS and
GSM services, we expect to work closely with our key suppliers and integrate the
new UMTS network equipment into our overall network  architecture.  Once the new
equipment is successfully  integrated and new multi-mode GSM  900/1800/GPRS/UMTS
handsets  are  available,  we  expect  to offer  our UMTS  subscribers  seamless
services supporting voice traffic and data services.

Network Quality

Our network has been designed to provide comprehensive  high-density coverage in
major urban centers in Poland.  This is achieved by using cells of approximately
one kilometer in diameter as opposed to cells of  approximately 30 kilometers in
diameter  in rural  areas  enables  subscribers  to  receive  and make  wireless
transmissions anywhere within those urban areas, including inside buildings.  We
believe  that  its  ability  to  provide   high-quality   indoor  reception  and
transmission  in  major  urban  areas  is  an  important  asset  enabling  it to
successfully compete in the Polish cellular  telecommunications  market. We also
believe  that its focus on  high-density  coverage  in urban  areas at the early
stage of our network  development  has been more  economical  than attempting to
increase density of coverage in these locations at a later stage.

Cell Site Planning

Cell site  planning,  which we  originally  carried out  jointly  with our major
suppliers,  is now principally done internally.  Our design for network coverage
is determined with the aid of a specialized software


                                     - 28 -
<PAGE>


package  developed by T-Mobil.  In 2000 we were awarded the ISO 9002 certificate
for our GSM Network Strategic Planning.

Maintenance of the Network

Each of our network supply agreements  provide that the supplier is obligated to
provide  maintenance,  spare parts and  relevant  upgrades  for the software and
hardware  supplied under such  agreements for a period of 15 years following the
date of our  commercial  acceptance  of the relevant  component.  The  suppliers
warrant  equipment  for 24  months  from  the  date of  acceptance  and  provide
maintenance training to our employees.  With respect to software,  each supplier
is required to:

     o    take  action  to remedy  any  defect or  malfunction  in the  software
          provided   within  four  hours  of  the  occurrence  of  a  defect  or
          malfunction, or reimburse us for the services of a third party;

     o    provide a help desk to support us;

     o    release upgrades or updates for its software to us; and

     o    cooperate  with us on the  management  of release  procedures  for its
          software.

With respect to hardware, each supplier is required to:

     o    make replacement parts available to us at market rates;

     o    repair and replace  parts of our network  pursuant to either a monthly
          account with us or compensation on a case by case basis; and

     o    make us aware of and offer to provide us such  enhancements,  upgrades
          and evolutionary improvements to hardware in our network.

Suppliers

Ericsson,  Siemens and Alcatel  designed,  manufactured,  delivered,  installed,
commissioned and prepared our GSM network,  including mobile switching  centers,
base stations and base station controllers, operation support systems and cross-
connect systems  equipment.  These suppliers now provide  maintenance and repair
services  for our  network in  addition  to  continuing  our  expansion  to meet
capacity requirements. We are now conducting tests of the UMTS prototype network
equipment in cooperation with our key suppliers.

We are  currently  testing UMTS network  equipment in  cooperation  with our key
suppliers.  During  2002,  we may  enter  into  commercial  agreements  for  the
purchase,  installation and integration of UMTS startup networks, subject to the
maturity of the technology tested.

The Licenses

GSM 900 License Terms

General

Following a  competitive  tender,  on February 23,  1996,  we received a license
which granted us:

     o    a  concession  to provide  telecommunications  services  according  to
          European  telecommunications  GSM  standards in the 900 MHz  frequency
          band;

     o    a permit to install and use GSM network equipment;

     o    an allocation of 37 channels within the 900 MHz frequency band; and

     o    an  allocation  of telephone  numbers with the prefix 602 and 604 (and
          subsequently 600 and 608 were added).

Fees

We were  required  to pay to the  Polish  government  a fee  equal to the  Zloty
equivalent of  (euro)217,731,831  for our GSM 900 license.  This fee was paid in
six  installments  with the first  installment due upon the grant of the license
and one installment on each March 31 thereafter.  We paid  (euro)101,494,831  of
this fee in 1996,  (euro)1,980,000  on March 31, 1997,  (euro)8,107,000 on March
31, 1998, (euro)15,730,000 on March 31, 1999, (euro)34,320,000 on March 31, 2000
and  (euro)56,100,000 on March 31, 2001. See Note 20 to the Financial Statements
for the year ended December 31, 2001. In addition, we are required to pay to the
Polish State Radiocommunication  Agency an annual fee for each of the permit and
frequency allocation


                                     - 29 -
<PAGE>


in an amount that is  determined  under the ordinance of the Ministry of Finance
and the Ministry of Infrastructure. This amount was set at PLN 2,368,000 for the
first  year of  operation  (following  the  award of our GSM 900  License),  PLN
3,872,000  for the  second  year,  PLN  3,990,000  for the  third  year  and PLN
4,500,000 for each of the following years.

In addition, we are required to pay an initial fee of PLN 500 for the permit and
frequency  allocation  for each base station and PLN 250 for any changes in this
permission.  We are also obligated to pay a fixed annual fee of PLN 160 for each
of the channels used by each base station.

Terms

Our GSM 900  License  was issued  for a term of  fifteen  years and allows us to
apply for an  extension  for an agreed  period one year prior to its  expiration
date.  Our GSM 900  License is not  transferable.  Therefore,  any  transfer  of
business would require a revocation  and  reissuance of our GSM 900 License.  In
addition,  the  approval of the  Ministry of  Communications  is required in the
event that an  acquisition of our shares or any rights to our shares by a single
entity would,  together with any shares or rights currently held by that entity,
result in that entity having rights to an ownership  percentage of our shares in
excess of 10%, 25%, 33% or 50%, respectively.

Under  the  terms  of our  GSM  900  License,  we are not  entitled  to  request
additional  frequency  until five years  after the  commencement  of  commercial
operations  and we must  comply  with the  terms and  conditions  of our GSM 900
License. In November 1997, however, the Ministry of Communications  allocated to
us eight additional channels.

License Conditions

Our GSM  900  License  is  subject  to a  number  of  commercial  and  technical
conditions. While Polish law provides that our GSM 900 License may be revoked or
limited  in the event that we fail to meet any of these  conditions,  we believe
that we are  currently  in material  compliance  with all of our GSM 900 License
conditions.

Our GSM 900 License contains certain coverage and technical criteria,  including
a  requirement  that the  dropped  call rate not exceed 5% during peak hours and
that we  attain  geographical  coverage  of  63.4%,  79.6%,  84.2% and 84.9% and
population  coverage of 73.1%,  90.1%, 94.8% and 95.6% by the end of 1997, 1998,
1999 and 2000,  respectively.  We have met these coverage  requirements for each
year. Our GSM 900 License requires us to provide certain  emergency  connections
free of charge and to provide certain priority  services to Polish  governmental
entities.

Our GSM 900 License generally requires us to comply with certain competition and
anti-monopoly  rules  currently  in force in Poland.  Our GSM 900  License  also
specifically  prohibits  exclusive  arrangements  with "service  providers".  We
believe,  however,  that our dealers are not "service  providers" as the term is
used in our GSM 900 License with reference to airtime providers,  and therefore,
our exclusive  contracts  with our dealers do not  constitute a violation of our
GSM 900 License conditions. See -Item 4. "Information on the Company - Marketing
and Distribution".

In its  original  form,  our GSM 900 License  prohibited  the  establishment  of
transmission  links between elements of our GSM network and required us to lease
transmission  lines from TPSA.  Our GSM 900 License also  prohibited any form of
interconnection  between  our  network  and other  wireless  networks  including
wireless networks outside Poland,  without using TPSA's  transmission  lines. On
January 17, 1997,  however,  pursuant to a complaint from the Polish  Ombudsman,
the Polish  Supreme  Administrative  Court repealed  these  prohibitions  on the
grounds that the Minister of Communications had insufficiently substantiated the
rationale  for  imposing  these  restrictions.  In  response,  the  Minister  of
Communications  issued a  decision  dated  May 13,  l997,  amending  our GSM 900
License to permit us to install and use a transmission infrastructure to connect
elements of our own GSM network. We are still required to use transmission lines
leased  from  TPSA  to  interconnect   each  mobile   switching  center  and  to
interconnect  our network  with that of TPSA's  unless TPSA is unable to provide
such  leased  lines to us within one month  following  the  request.  Also,  the
interconnection  with other mobile telephony networks was permitted only between
mobile switching centers, which meant in practice that we had to


                                     - 30 -
<PAGE>


use leased lines from TPSA to connect with other mobile telephony  networks.  On
April 27, 1998, the Supreme  Administrative Court repealed these restrictions on
the grounds  that the  Minister  of  Communications  did not provide  sufficient
reasons for its  decision  and on the  grounds  that the  restrictions  might be
incompatible  with the  competition  provisions  of the Europe  Agreement  dated
December 16, 1991. Pursuant to this judgment,  we are free to connect components
of our network  and to  interconnect  with other  cellular  providers  in Poland
without using leased lines from TPSA. We are also free to lease lines from other
operators which can provide such service. In addition,  this judgment allowed us
to  build  the  SDH   microwave   backbone   network.   See  Item  4.   "Network
Infrastructure".

We currently lease  transmission lines from TPSA to interconnect the elements of
our GSM network.  Tariffs for the lease of these transmission lines are based on
the distance  between elements of our GSM network and the length and capacity of
the relevant  transmission  line. The Polish Office for Competition and Consumer
Protection  found  these  increases  to be  anti-competitive.  Pursuant  to  the
Interconnect  Decision,  described  below,  we are entitled to a 60% discount on
TPSA's  standard  leased  line  tariffs  and  certain   additional   incremental
discounts.  See  Item  4.  "Interconnect  Agreements".  We may,  in  appropriate
circumstances,  seek to lease  transmission  lines  from third  parties  such as
railway or electricity companies.

GSM 1800 License Terms

General

On August 11, 1999, we received a license granting us:

     o    a  concession  to provide  telecommunications  services  according  to
          European   telecommunications   GSM/DCS  standards  in  the  1800  MHz
          frequency band;

     o    a permit to install and use GSM/DCS network equipment;

     o    an allocation of 48 channels within the 1800 MHz frequency band; and

     o    an allocation of telephone numbers with the prefix 606.

This license permitted us to use these new 1800 MHz frequencies  beginning March
1, 2000. We started  installing  the necessary  GSM/DCS  equipment at the end of
1999 and have  continued to install such  equipment;  we commenced  offering GSM
1800 services in selected areas on March 1, 2000.

Fees

We are  required  to pay to the  Polish  government  a fee  equal  to the  Zloty
equivalent of  (euro)100,293,000  for our GSM/DCS concession which is payable in
four  installments.   We  paid   (euro)50,146,500   of  this  fee  in  1999  and
(euro)16,715,500 on August 31, 2000 and  (euro)16,715,500 on August 31, 2001 and
we are required to pay  (euro)16,715,500  on August 31, 2002. See Note 20 to the
Financial Statements as at and for the year ended December 31, 2001.

In  addition,  we are  required  to pay to the Polish  State  Radiocommunication
Agency an annual  fee for each of the  permit  and  frequency  allocation  in an
amount that is determined under the ordinance of the Ministry of Finance and the
Ministry of  Infrastructure.  This amount has been set at PLN  3,072,000 for the
first  year of license  operations,  PLN  3,648,000  for the  second  year,  PLN
4,224,000 for the third year and PLN 4,800,000 for each of the following years.

Terms

Our GSM 1800 License was issued for a term of fifteen years and provides that we
may make an  application  to extend the term for an agreed period one year prior
to its expiration date. Our GSM 1800 License is not transferable. Therefore, any
transfer of business  would require a revocation  and reissuance of our GSM 1800
License. In addition, the approval of the Ministry of Communications is required
in the event that an  acquisition  of our shares or rights to acquire our shares
by a single entity would,  together with any shares or rights  currently held by
that entity,  result in that entity having rights to an ownership  percentage of
our shares in excess of any of 10%, 25%, 33% or 50%.

License Conditions

Our GSM  1800  License  is  subject  to a number  of  commercial  and  technical
conditions.  While Polish law provides  that our GSM 1800 License may be revoked
or limited in the event that we fail to meet


                                     - 31 -
<PAGE>


any of these conditions, we believe that we are currently in material compliance
with all of our GSM 1800 License conditions. Similar to our GSM 900 License, our
GSM 1800 License requires that we meet certain coverage and technical  criteria,
including a  requirement  that the  dropped  call rate not exceed 5% during peak
hours and that we attain  geographical  coverage  combined  with the 900 MHz and
1800 MHz frequencies of 90% by June 2004. We have already exceeded this level of
coverage.

Our GSM 1800 License requires us to provide certain  emergency  connections free
of charge  and to  provide  certain  priority  services  to Polish  governmental
entities.

Our GSM 1800 License  generally  requires us to comply with certain  competition
and anti-monopoly  rules currently in force in Poland. Our GSM 1800 License also
specifically prohibits exclusive  arrangements with other service providers.  We
believe,  however,  that our dealers are not "service  providers" as the term is
used in our GSM 1800 License with reference to airtime providers, and therefore,
exclusive  contracts with our dealers will not constitute a violation of our GSM
1800  License  conditions.  We are free to  connect  components  of our GSM 1800
network and to  interconnect  with other  cellular  providers in Poland  without
using  leased  lines  from  TPSA.  We are also free to lease  lines  from  other
operators  which  can  provide  such  services.  However,  our GSM 1800  License
requires  us to use TPSA leased  lines to connect  TPSA toll  switches  with our
MSCs.

Generally,  tariffs for the lease of these  transmission  lines are based on the
distance  between the elements of our GSM network and the length and capacity of
the relevant  transmission line. The current TPSA interconnect  agreement covers
the leasing of transmission lines from TPSA for the GSM 1800 network, as the GSM
1800 MHz License  allows us to extend our network  capacity  rather than build a
new network.

During 2001,  we applied to OTR for change in the licenses fee costs for our GSM
1800 Licenses, which we purchased in September 1999. The price of the license to
serve all the territory of Poland was (euro)100  million.  In this same time our
Main competitor,  Polkomtel, purchased its GSM 1800 licenses to serve 10 biggest
cities in Poland for the amount of (euro)50  million and during the year 2001 it
extended this license to be able to serve the whole  territory of Poland for the
nominal fee of (euro)2,500.  Also Centertel paid  significantly less for its GSM
1800  licenses  and had it extended  for the nominal  fee of  (euro)2,500.  As a
result of this extension and applied  prices,  we asked the regulatory  body for
equal treatment  through  decreasing our licenses fee. The decision is still not
obtained.

UMTS License

General

During the second half of 2000, the Polish Ministry of Telecommunications  ran a
tender to offer five UMTS  concessions  for the Polish market.  Operators  would
have been able to start offering  services from January 1, 2002 and the licenses
were to be  awarded on the  minimum  fee of  (euro)750  million,  an  additional
payment  to be  proposed  by the  bidder  and  the  assessment  of the  bidder's
credibility, financial standing and plans for offering UMTS services.

During the course of the tender  process,  as a result of negative  reactions on
the part of prospective bidders, the Ministry of Telecommunications  revised its
requirements several times but was ultimately successful in receiving only three
bids on December 2, 2000,  one from each of the  incumbent  cellular  operators,
including PTC. The Ministry of  Telecommunications  decided to cancel the tender
and instead issued concessions to the incumbents on substantially modified terms
(see below) by way of an administrative decision.

After the UMTS bidding process was cancelled in the beginning of December, 2000,
we requested that the Ministry of Telecommunication  grant UMTS Licenses without
a bidding  process.  On December 20, 2000, the Ministry granted UMTS Licenses to
the three existing operators. The license grants us:

     o    a concession to provide  telecommunication  services according to UMTS
          telecommunication standards;

     o    a permit to install and use a UMTS network; and


                                     - 32 -
<PAGE>


     o    an allocation of two 14.8 MHz frequency blocks and one 5 MHz frequency
          block in the 2 GHz frequency band.  These blocks are currently used by
          the Polish Armed  Forces.  The terms of our UMTS License  provide that
          these blocks will be available from January 1, 2003.

Fees

We are  required  to pay to the  Polish  government  a fee  equal  to the  Zloty
equivalent of (euro)650  million for the UMTS license.  The fee is payable in 22
installments  with the first  installment in the amount of (euro)10 million paid
in 2000 and further  installments  totaling  (euro)250 million paid in 2001. The
remaining  amount of (euro)390  million is payable  according  to the  following
schedule:

     o    (euro)15 million yearly payable each September 30 from 2005 to 2013;

     o    (euro)28  million  yearly payable each September 30 from 2014 to 2021;
          and

     o    (euro)31 million on September 30, 2022.

Terms

The UMTS License  expires on January 1, 2023 and provides that we can extend the
term for an agreed upon period one year prior to its  expiration  date. Our UMTS
License is not  transferable.  Therefore,  any  transfer of our  business  would
require a revocation and reissuance of the license.

License Conditions

The UMTS License is subject to a number of commercial and technical  conditions.
While  Polish law  provides  that the  license  may be revoked or limited in the
event  that we fail to meet  any of these  conditions,  we  believe  that we are
currently in material compliance with all of the conditions.

The UMTS  License  requires us to attain 20%  population  coverage by the end of
2004 and 40%  population  coverage by the end of 2007.  We were also required to
start offering UMTS services not earlier than January 1, 2003 and not later than
January 1, 2004. In 2001,  all three holders of the UMTS licenses  asked for the
postponement  of the launch date to January 1, 2005.  The  response  has not yet
been received.

The Polish Armed Forces,  which currently use the 14.8 MHz and 5 MHz in the 2GHz
frequency  band, are obliged to vacate such  frequencies and make them available
to us. We lease a limited range of frequencies from the OTR in order to test our
UMTS network equipment.

Competition

We are one of three wireless  communications  providers in Poland  providing GSM
mobile  telecommunications  services in both the 900 MHz and 1800 MHz  frequency
band, and each of the three  providers has also been granted a UMTS License.  We
believe  that the  existing  level of  competition  is likely to increase in all
areas  of  the  Polish  telecommunications  market  over  the  next  few  years,
particularly  in  light  of  the  liberalization  of  the  Polish  domestic  and
anticipated  liberalization of the international long distance markets in coming
years.  Increased  competition,  in the form of both new  entrants  and existing
operators  that  widen the scope of their  telecommunication  activities,  could
force us and our  competitors  to take  measures  that  could  raise  subscriber
acquisition  costs or  reduce  our  share of net new  subscriber  additions.  In
addition,  the OTR may  seek to  impose  regulations  that  require  us to allow
competitors  roaming or site-sharing  rights on our network or otherwise use its
powers to materially modify the competitive environment.

We face  competition  primarily  from  Polkomtel (a joint  venture  between Tele
Danmark A.S.,  Vodafone AirTouch and Polish  companies),  and Centertel (a joint
venture between TPSA and France Telecom Mobiles International) and from wireline
telephone  services.  Polkomtel was awarded its GSM 900 License in February 1996
and currently  provides  services  under the trade name Plus GSM.  Polkomtel was
also awarded its GSM 1800  License in  September  1999,  and is  completing  the
process of building out its GSM 900 and GSM 1800 networks.

Centertel  provides analog and GSM 1800/900 digital wireless  telecommunications
services in Poland. Centertel launched its analog service in June 1992 and as of
December 31, 2000, TPSA reported that


                                     - 33 -
<PAGE>


Centertel  had  approximately  42,000  analog  subscribers.  Centertel's  analog
network  covers  approximately  93% of the territory and 98% of the  population.
Centertel  announced that it intends to invest only in the  maintenance  and any
necessary  technical  upgrades of its analog network.  In March 1998,  Centertel
launched its GSM 1800 service.  Their network is being  constructed to cover the
area designated by the terms of Centertel's GSM 1800 license, which includes ten
of Poland's  largest  metropolitan  areas and four  arterial  transport  routes.
Centertel  was  awarded a GSM 900  license  in July 1999,  launched  its GSM 900
services in March 2000.

We  also  compete  with   wireline   telecommunications   providers  in  Poland,
principally  TPSA,  insofar as low wireline  penetration  rates and long waiting
times for telephone  installation  have  encouraged  consumers who are otherwise
unable  to  access  wireline  telephony  to  acquire  mobile  telecommunications
services.  TPSA currently owns approximately 90% of Poland's existing fixed-line
telecommunications  infrastructure  and is the only entity within Poland that is
authorized to provide international  telecommunications services.  Consequently,
wireless telecommunications operators are required to enter into interconnection
agreements  with TPSA in order to complete  calls made from or to receive  calls
made to their networks. See -Item 4. "Interconnect Agreements".

We believe that  competition with UMTS services will be as intensive as with GSM
services  while the possible  introduction  of a new entrant may put  additional
downward pressure on prices and margins.  We expect UMTS competition to focus on
coverage,  range,  quality and ease-of-use of enhanced  data-based services made
possible by the  transmission  speeds  afforded by UMTS and, in some cases,  the
slower  GPRS  standard.  We expect  that  operators  will also  compete  to form
relationships  with  content  providers,  commercial  businesses  and  financial
institutions  wishing  to  engage  in  mobile  commerce,   applications  service
providers, advertisers and content integrators. We believe that this will likely
be a  relatively  new area for  intense  competitive  activity  and we expect to
develop our core  competencies by leveraging the experience  already obtained in
developing WAP enabled internet  services and SMS-based  services to develop new
solutions  for GPRS and later for UMTS.  We have formed a new division - Product
Development  and  Management  Services - from  existing  product  marketing  and
product development resources to drive our efforts in this area.

Both we and our competitors have shareholders that hold significant market share
in the  provision  of  mobile  telecommunications  services  across  Europe  and
worldwide.  We  believe  that  each  of  these  shareholders,  all of  whom  are
transnational or multinational operators, DeTeMobil and the parent of one of our
shareholders,  Vivendi Universal S.A., in our case, Orange and France Telecom in
the case of Centertel  and Vodafone  AirTouch in the case of  Polkomtel,  aim to
leverage their buying power and brands across their  subsidiaries and, as far as
possible,  across their affiliates during the coming few years. These strategies
may lead to  significant  additional  operating  expenses to  re-brand  existing
networks  and  create  multinational   brands,  while  costs  may  be  saved  by
consolidating  the number of network  suppliers and reducing capital  investment
costs, use of common service  provisioning  platforms and consolidating  general
and administrative  functions.  We believe that certain competitive  advantages,
particularly in the business  segment,  may be available to those operators with
significant  geographical reach that choose to offer  standardized  cross-border
tariffs,  eliminating the roaming premium charges  typically seen in the current
market.

At present, none of the transnational or multinational  carriers mentioned above
has a majority interest in any of the three Polish mobile operators  although we
believe that France Telecom may have effective  management control of Centertel.
We believe that our ability and that of our competitors to develop UMTS services
in a cost  effective  manner and the ability of each  operator  to compete  with
others will be significantly  affected by the actions of these and other foreign
operators to increase or decrease their level of influence in the Polish market.

Interconnect Agreements

Like other wireless  operators,  our wireless network  requires  interconnection
with a fixed-line network to enable subscribers to initiate and receive calls to
and from  persons  using  fixed-line  networks or other  cellular  networks.  We
therefore  require a  switched  access  arrangement  with  TPSA,  Polkomtel  and
Centertel.  The  terms  of  these  arrangements,  particularly  with  TPSA,  are
important to financial results.


                                     - 34 -
<PAGE>


TPSA is the only entity in Poland currently  permitted to provide  international
telecommunications  services  and is Poland's  largest  provider  of  fixed-line
telecommunications  services.  Prior to May 22, 1997, we operated with TPSA on a
bill and keep system for domestic calls on the basis of an agreement. On May 22,
1997,  the  Ministry  of  Communications  issued a decision  (the  "Interconnect
Decision")  establishing a system of interconnect  payments whereby we would pay
TPSA for calls  terminating  in TPSA's  network  and TPSA would pay us for calls
terminating in our network. In addition,  the Interconnect  Decision reduced the
proportion of our tariff payable to TPSA for  international  calls to 67%. While
we subsequently  settled  interconnection  charges with TPSA on the basis of the
Interconnect  Decision  for all  periods  since the  Interconnect  Decision  was
issued,  TPSA  thereafter  appealed  the  Interconnect  Decision  to the Supreme
Administrative Court. While this appeal has not been withdrawn,  we nevertheless
entered into an Agreement on the Terms and Conditions of Cooperation  and Mutual
Interconnection,  dated December 9, 1998 (the "Framework Agreement"), with TPSA,
pursuant to which TPSA paid us a net amount of PLN 6.2 million for  interconnect
and  international  charges  covering  the  period  from  the  beginning  of our
commercial  activity  in  September  1996  to  May  21,  1997.  In  addition  to
acknowledging the Interconnect  Decision,  the Framework Agreement established a
cooperative  environment  between TPSA and us with respect to  communications in
case of  network  problems  and  future  negotiations  in the  event  there  are
significant  market changes.  On December 9, 1999, the TPSA Framework  Agreement
was amended to provide for a settlement  process and calculation in the event we
cancelled   the  use  of  leased   lines.   On  October  24,  2000  the  Supreme
Administrative  Court rejected TPSA's appeal of the Interconnect  Decision.  Our
role in this process was limited to that of an interested  party.  This decision
opened  a way to  further  negotiations  with  TPSA.  We  have  already  started
renegotiating  the  interconnect,  transit and  international  settlements terms
according to instructions  issued by the Minister of  Communications on June 30,
2000.

On May 28,  2001,  OTR issued a ruling that TPSA was  required to share  revenue
coming from  international  calls  terminated  in the GSM networks  with the GSM
operators. This was the first interconnection decision issued by OTR pursuant to
which it acknowledges the increasing importance of mobile telephone operators in
the Polish Telecommunications market.

On  November  30,  2001,  OTR  lowered,  by an average  of 67%,  mobile to fixed
interconnection charges. The interconnection charges were set by the Ministry of
Telecommunication  in 1998, and then continuously  negotiated with TPSA, without
success. In 2001, we requested OTR to regulate the interconnection rates between
us and TPSA.  The  resulting  regulation  of rates  benefits  all  three  mobile
operators.  This will allow the establishment of direct interconnection  between
the two companies during 2002.

We also entered into an  interconnect  agreement  with Polkomtel on December 17,
1997, that provides  Polkomtel  subscribers direct access to our network and our
subscribers  direct  access to the  Polkomtel's  network on a symmetric  billing
basis  whereby  we pay  each  other  an  agreed  upon  charge  for the  time our
respective subscribers use each other's network.

In  addition,  in 1999 we  entered  into an  agreement  with  Netia  Telekom,  a
fixed-line service provider, and in 2000 we entered into interconnect agreements
with Telefonia  Lokalna,  El-Net and Petrotel,  which are additional  fixed-line
service  providers.  In September  2001,  we entered into an agreement  with PTK
Centertel, a third wireless operator.

Organizational Structure

On June 17, 1997, PTC  International  Finance B.V. was incorporated as a finance
company under the laws of The Netherlands for the purpose of issuing the 10 3/4%
Notes.  PTC  International  Finance B.V.'s issued and outstanding  share capital
consists of 40 fully-paid shares with a par value of 1,000 Netherlands  Guilders
each, issued by PTC International Finance B.V. PTC International Finance B.V. is
our wholly-owned subsidiary and has no subsidiaries of its own.

On November 5, 1999, PTC  International  Finance II S.A. was incorporated  under
the laws of  Luxembourg  and on November 16,  1999,  PTC  International  Finance
(Holding) B.V. was incorporated


                                     - 35 -
<PAGE>


under the laws of The  Netherlands,  both in  connection  with  issuance  of the
11 1/4% Notes. PTC International Finance (Holding) B.V.'s issued and outstanding
share  capital  consists  of 40  fully-paid  shares  with a par  value  of 1,000
Netherlands  Guilders each, issued by PTC  International  Finance (Holding) B.V.
PTC  International  Finance  II S.A.'s  issued  and  outstanding  share  capital
consists of 125 fully-paid  shares with a par value of 41,000,  all of which are
beneficially owned by PTC International Finance (Holding) B.V. PTC International
Finance II S.A. has no subsidiaries.

Property, Plants and Equipment

Our principal properties consist of  telecommunications  network  infrastructure
and related buildings  throughout Poland. The majority of base station sites are
leased for a minimum  period of five to ten years.  As of December 31, 2001,  we
had  entered  into lease  agreements  for 4,310 base  station  sites.  We have a
financial  lease for our main office  space in Warsaw and  operating  leases for
office space in Katowice,  Poznan,  Gdansk and Krakow. We also lease each of our
retail stores.

Item 5. Operating and Financial Review and Prospects

Operating Results

The  following  section  should  be  read  in  conjunction  with  "Item  3.  Key
Information  Selected Financial Data", "Item 8. Financial  Information" and with
our Financial  Statements  (including the Notes thereto) presented  elsewhere in
this Form 20-F. The Financial Statements,  and the related financial information
set forth and discussed in this section,  have been prepared in accordance  with
International  Accounting Standards,  which differ in certain respects from U.S.
GAAP.  For a  description  of the  material  differences  between  International
Accounting  Standards and U.S. GAAP, see Note 32 to the Financial  Statements as
of and for the year ended  December 31, 2001.  The financial  data  presented in
accordance with International  Accounting Standards included and discussed below
as of and for the years ended December 31, 2001,  2000 and 1999 has been derived
from  the  Financial  Statements,   audited  by  Arthur  Andersen  Sp.  z  o.o.,
independent auditors.

Operating Review

PTC was formed in December 1995, and was awarded a 15-year non-exclusive GSM 900
License in February 1996 by the Polish Ministry of  Communications.  Thereafter,
we commenced  construction  of our GSM network and, in September  1996,  started
offering  services to our  subscribers  under the brand name Era GSM. Since that
time, we have experienced rapid growth.

In  August  1999,  we  were  granted  a GSM  1800  License,  also  on a  15-year
non-exclusive  basis. Our GSM 1800 License enabled us to  substantially  enhance
our call volume  capacity,  particularly  in major  urban  areas.  We  commenced
services under our GSM 1800 License on March 1, 2000.

In December  2000,  we were granted a UMTS License,  on a 20-year  non-exclusive
basis.  Our UMTS License will allow us to provide  high-speed  data and Internet
services over our mobile network.  We expect to begin offering these services by
2005.


                                     - 36 -
<PAGE>


The following table sets forth key business indicators:

<TABLE>
<CAPTION>
                                                   As of or for the years ended December 31,
                                                   -----------------------------------------
                                                        2001         2000          1999
                                                     ---------    ----------     ---------
<S>                                                    <C>         <C>             <C>
Customers:
Net customer additions ..........................      972,672     1,051,505       940,735
Total Customers .................................    3,775,652     2,802,980     1,751,475
of which:
  Post-paid customers ...........................    2,356,472    2,032, 726     1,386,320
  Pre-paid customers ............................    1,419,180       770,254       365,155
Growth of total customers from prior year end (%)         34.7          60.0         124.0
Churn  (%) ......................................         21.3          23.7          28.4
Traffic:
Average monthly minutes of use ..................          157           159           180
Average monthly number of SMSs ..................         13.0           7.1           2.9
Average monthly revenue per customer (PLN) ......          104           127           160
  Change from prior year (%) ....................          (18)          (21)          (28)
Coverage of GSM cellular network in Poland:
  Geographical area covered (%) .................         95.7          93.6          84.4
  Population Covered (%) ........................         99.4          98.6          95.0
</TABLE>

Critical Accounting Policies

We believe  that the  policies  identified  below are  critical to our  business
operations  and  understanding  of our  results  of  operations.  For a detailed
discussion of these and other  significant  accounting  policies please refer to
the Note 4 of our IAS Financial Statements included elsewhere in this Form 20-F.

Use of Estimates

Preparation of our Financial  Statements  requires  Management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of contingent  assets and liabilities as at the date of the Financial
Statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from these estimates.

Revenue Recognition - multi -element contracts

In the first  quarter of 2001,  we  adopted a new  accounting  policy  regarding
multi-element sale transactions and applied it retrospectively.

The change in the revenue  recognition  policy was initiated by Staff Accounting
Bulletin No. 101 "Revenue Recognition in Financial  Statements" ("SAB 101") that
was issued by the Securities  and Exchange  Commission  staff.  SAB 101 reflects
basic  principles  of  revenue   recognition  in  existing   generally  accepted
accounting  principles  in the United  States.  Based on the above  bulletin and
further  interpretations,  we set criteria for  recognition of  multiple-element
transactions and their presentation in the IAS Financial Statements.

The  multiple-element  transactions  with  post-paid  clients are  classified as
separable or non-separable  contracts  whereas the pre-paid services are treated
as  separable   transactions.   The  initial  revenue  from  a  multiple-element
arrangement that is non-separable (handset price and activation fee) is deferred
over the average  expected  life of the  customer.  The direct cost of a product
sold in this  contract is also  deferred in line with the  revenue.  The initial
excess of cost over revenue is immediately expensed.  The revenue from separable
multiple-element  transactions  and  costs  related  to these  transactions  are
recognized in the statement of operations as incurred.

The  accounting  treatment  of revenues  and  relevant  costs for  multi-element
arrangements  is summarized in Note 4.1.b to the Financial  Statements  included
elsewhere in this Form 20-F.

Total  sales price of handsets  sold  together  with  prepaid  service  cards is
allocated on a pro-rata  basis based on the relative fair value of the elements.
Any significant change in assumptions of our revenue


                                     - 37 -
<PAGE>


recognition  model  (i.e.  average  expected  life of the  customer)  may have a
material impact on our statement of operations.

Accounting for financial assets and liabilities under IAS 39

Recognition and measurement. In accordance with IAS 39, all financial assets and
financial  liabilities are recognized on our balance sheet.  All these financial
assets and liabilities are initially  measured at cost,  which is the fair value
of the  consideration  given or  received  to  acquire  the  financial  asset or
liability (plus certain  hedging gains and losses).  All "regular way" purchases
of financial assets are accounted for at the trade date.
Measurement  categorization  of financial assets and liabilities is described in
the Note 4.1.a to the Financial Statements included elsewhere in this Form 20-F.

The fair value of derivatives  embedded in our finance lease contracts and trade
contracts is estimated using a model based on discounting  estimated future cash
flows at market  interest  rates.  The fair  value of  options  embedded  in the
Existing Notes is calculated with the use of binominal model. The model is based
on the backward induction methodology using the replication rule, stating that a
portfolio of base instruments at their present value can replace an option.

Derecognition.  We no longer  recognize  a  financial  asset or a  portion  of a
financial asset if we lose control of the  contractual  rights that comprise the
financial  asset or a  portion  of a  financial  asset.  We  remove a  financial
liability (or a part of a financial  liability) from our balance sheet when, and
only when, it is  extinguished  - that is when the  obligation  specified in the
contract is discharged, cancelled, or expires.

Our financial instruments.  According to IAS 39 we recognized all our derivative
financial  instruments  including:  options  embedded  in  our  Existing  Notes,
derivatives embedded in our finance lease contracts,  forward contracts embedded
in trade contracts,  cross currency  interest swaps and Non Deliverable  Forward
contracts.

Hedge Accounting. We use cross currency interest rate swap transactions to hedge
our exposure against foreign currency fluctuations on fixed interest liabilities
related to the Existing Notes.  These contracts are designated as hedges against
exposure to changes in future cash flows arising from the foreign  exchange risk
on the  future  coupon  payments.  The cross  currency  swaps are  valued on the
balance  sheet at their fair value based on the quoted market  prices.  They are
presented   in   long-term   financial   assets/(liabilities)   and   short-term
assets/(liabilities) depending on the maturity of the related coupon.

Changes in the fair value of cross currency swaps that are highly  effective are
recognized  in  shareholders'  equity,  net of tax effect.  Amounts  deferred in
shareholders'  equity  are  transferred  to  the  statement  of  operations  and
classified as financial  income or expense in the periods when the hedged coupon
payments accrue in the statement of operations.

We expect the hedging instruments to continue to be highly effective until their
exercise  date,  as we will  continue  with the  hedging  activities  to protect
ourselves against foreign currency fluctuations.

Pricing models and their underlying  assumptions impact the amount and timing of
unrealized  gains  and  losses  recognized  as other  financial  expense  in our
statements of operations.  Changes in the foreign  currency  exchange spot rates
and  interest  rates may  impact  our  estimates  of fair  value in the  future,
potentially affecting our net income.

Impairment of assets

We  periodically  review the  carrying  value of our  network  fixed  assets and
intangible fixed assets (including  Licenses) for continued  appropriates.  This
review is based upon  forecasted  future cash flows.  While we believe  that our
estimates of future cash flows are reasonable,  different  assumptions regarding
such cash flows could materially affect our evaluations.


                                     - 38 -
<PAGE>


The Licenses

Our  intangible  fixed assets include three Licenses (GSM 900, GSM 1800 and UMTS
Licenses),  which we acquired from the Polish State. These Licenses are measured
at cost less  accumulated  depreciation.  As the payments  are  deferred  beyond
normal  credit  terms the cost of  license  is the cash  price  equivalent.  The
difference  between  this amount and total  payments is  recognized  as interest
expense over the period of credit unless it is  capitalized on the license value
during  its  development  period.  The cost of the GSM  1800  and UMTS  Licenses
includes also interests and foreign exchange differences resulting from payments
or valuation of liabilities related to financing the license  acquisitions.  The
Licenses are amortized using the straight-line  method over the periods of their
validity,  i.e. GSM 900 license - over 14.5 years (173 months); GSM 1800 License
- over 14.5 years (174 months) and UMTS license will be amortized  over 20 years
(240  months)  from  the  date of the  operational  start-up  of the  underlying
services.

Deferred taxes

Deferred tax  assets/(liabilities) are recognized for all deductible differences
to the extent that it is probable that taxable profit will be available  against
which deductible temporary differences can be utilized.

We use certain estimates and assumptions when calculating the deferred taxes. In
case of changes  in the  Polish tax  regulations  or  conditions  affecting  our
assumptions we may be required to change the calculation  which could materially
impact our financial position and statement of operations.

While calculating  deferred taxes we make some assumptions to identify temporary
differences for which realizations is not probable (valuation allowance).  As at
December 31, 2001, the assumptions  related mainly to the tax  deductibility  of
the bad debt provision.  In case of change of conditions  affecting  assumptions
(for example due to the change in the tax  regulations),  the quota of valuation
allowance.

Capitalization of borrowings costs

Our policy is to  capitalize  financing  costs,  including  interest and foreign
exchange gains and losses into assets under construction.

For tangible fixed assets under construction, we capitalize interest and foreign
exchange gains or losses  incurred and directly  attributable to the acquisition
and  construction  of the qualifying  assets that would have been avoided if the
expenditure on the qualifying  assets had not been made. The financing costs are
capitalized only during the construction of the qualifying assets.

We capitalize  financing  costs  attributable to the acquisition of our GSM 900,
GSM  1800  and  UMTS  Licenses,  including  interest  on the  related  long-term
obligation  and foreign  exchange  losses because these licenses are an integral
part of the network.

Financial Review

Factors Affecting Revenues

Overview

We are the  largest  GSM  wireless  telephony  services  provider in Poland with
approximately  3.8  million  subscribers,  a 37.8%  share  of the  total  Polish
wireless market and a 43.1% share of the post-paid  market,  in each case, as of
December 31, 2001. Among wireless service  providers in Poland,  we believe that
we lead the  market in terms of the  number of  subscribers,  revenues,  EBITDA,
network quality, backbone network and brand awareness. We have national GSM 900,
GSM 1800 and UMTS Licenses granted by the Polish government.  As of December 31,
2001, our GSM network  covered  approximately  95.7% of the  geographic  area of
Poland,  representing  approximately  99.4% of the total Polish  population.  In
addition,  we have selectively  rolled out GSM 1800 services,  which allow us to
increase  capacity and to offer a seamless  nationwide  dual-band  (GSM900/1800)
service. To distribute our products and services, we use a network of 24 dealers
with 870 points of sale and more than 600 Authorized Business Advisors, a direct
sales force of 105 Business Advisors and a national network of our own 68 retail
outlets.


                                     - 39 -
<PAGE>


Our revenues are in Zloty,  while much of our cost of financing  and some of our
cost of  sales  is  payable  in Euro or U.S.  dollars.  The  fluctuation  of the
exchange rate have an impact on our net profit line.

The main  source of our  revenue is airtime  tariffs,  consisting  primarily  of
monthly  service fees,  and charges for calls that originate or terminate in our
network,  including  international  calls  that  originate  outside  Poland  and
terminate in our network.  Other  significant  revenue  sources  include service
activation  fees  and  revenues  from the sale of  telephones  and  accessories.
Airtime tariffs include  revenues from incoming and outgoing calls, a relatively
small  amount of  charges  for  "roaming"  calls and  revenue  from the usage of
prepaid airtime cards.  Airtime charges are paid by the initiators of calls, and
when our  subscribers  travel  outside  Poland,  they are also  charged  for the
international  and roaming charges on their incoming calls. We anticipate  that,
as our  network  and  subscriber  base grow and our  business  matures in coming
years, airtime revenues,  data services,  GPRS access fees, SMS fees and monthly
service fees will account for an increasing  proportion  of our total  revenues,
while the  proportion  of total  revenues  derived  from sales of  handsets  and
accessories, as well as new subscriber activation fees, will decrease.

Our  revenues  depend on the  number of  subscribers,  call  volume  and  tariff
pricing.  Our total  number of  subscribers  is  affected  by the  number of new
subscriber  activations and by our rate of churn.  Continued subscriber and call
volume  growth  will  depend  on a number  of  factors,  including  pricing  and
promotions (including handset replacement programs), as well as general economic
and market  conditions,  the level of competition  for obtaining new subscribers
and the capacity and coverage of our network.  We expect that average minutes of
use and revenue per subscriber will fall as the cellular  telephone  penetration
level in Poland increases.  We believe that this trend has been accentuated over
the last twelve-month period by the increase in our pre-paid subscriber base.

Contingent  upon the  availability  of  network  infrastructure,  equipment  and
handsets, we expect to widely offer UMTS services by 2005. Further,  competition
in the market may increase because the Polish  Government  announced that it may
run a tender for a fourth mobile operator during in the future.

The  higher  data  transmission  rates  of GPRS  and  UMTS in the air  interface
relative to GSM enables  network  operators to offer a broader range of services
than is possible using GSM. We expect that these new services will appeal to the
mass  market  over time but we can  provide no  assurance  that this will be the
case. In addition,  the success of these new services would substantially depend
on the  availability of user-friendly  handsets from handsets  producers and our
ability to identify and enter into  agreements with content  providers,  content
aggregators,  applications  service  providers and mobile  commerce  partners to
deliver such services to our subscribers.  We believe that, if we are successful
in these  efforts,  we may be able to  reverse  the  downward  trend in  average
revenue per user by replacing  falling  average voice revenues with revenues for
use of data services,  commissions  received from mobile  commerce  partners and
charges for advertising.

Subscriber Growth

New subscriber  activations  are driven by the success of marketing  efforts and
unmet demand for telecommunications services in Poland resulting from the growth
of the Polish economy and low wireline penetration rates.

During 2001, we attracted 1.7 million new gross subscribers,  approximately 5.0%
more  than in 2000.  We  increased  our total  net  subscriber  base by 34.7% to
3,775,652  subscribers as of December 31, 2001, from 2,802,980 subscribers as of
December  31,  2000.  As of December  31,  2001,  our  subscribers  consisted of
approximately 62.4% post-paid  subscribers and 37.6% pre-paid  subscribers.  The
proportion of gross additions selecting post-paid tariffs has declined gradually
during 2001 from approximately 67% in 2000 to 54% in 2001. We believe this trend
is driven by the economic  slowdown and changing  pattern of  preferences of our
customers resulting in an increasing portion of pre-paid additions.


                                     - 40 -
<PAGE>


During 2000,  we attracted 1.6 million new  subscribers  and increased our total
net  subscriber  base by 60% to 2,802,980  subscribers  as of December 31, 2000,
from  1,751,475   subscribers  as  of  December  31,  1999.  These  2.8  million
subscribers  consisted of  approximately  72.5% post-paid  subscribers and 27.5%
prepaid subscribers.

During 1999,  we attracted 1.3 million new  subscribers  and increased our total
net  subscriber  base by 124% to 1,751,475  subscribers as of December 31, 1999,
from 780,740 subscribers as of December 31, 1998. These 1.75 million subscribers
consisted  of  approximately  79.2%  post-paid  subscribers  and 20.8%  pre-paid
subscribers.

During 2001 the overall Polish wireless market grew by 48% to  approximately  10
million  subscribers,  representing  an approximate  26% penetration of Poland's
total population.

As of December 31, 2001, our subscriber base represented  approximately 37.8% of
the total  Polish  wireless  market  and 43.1% of the Polish  post-paid  market,
making us the leader among wireless services providers in Poland.

Churn Rate

"Churn"  refers to  disconnected  subscriptions,  either  voluntary  (due to our
subscribers switching to competing networks or terminating their use of cellular
communications services) or involuntary (due to nonpayment of bills or suspected
fraudulent   use).  We  calculate  churn  rate  using  widely  accepted  general
principles (by dividing the number of deactivations during a given period by the
average  subscriber  base for such  period).  Prior to December  2000,  pre-paid
subscribers  were  treated  as having  churned if they had not  recharged  their
pre-paid  coupons within a six month period.  Since then,  pre-paid  subscribers
have been treated as having  churned if they have not recharged  their  pre-paid
coupons  within a twelve  month  period  in line  with the  pre-existing  stated
policies of our competitors.

We seek to  minimize  voluntary  customer  churn  by  providing  a high  quality
network,  loyalty  programs  and  extensive  subscriber  service at  competitive
prices.  In order to better enable us to recover  subscriber  acquisition  costs
from churn, we require our subscribers who purchase services during  promotional
campaigns to pay a fee,  equal to the discount on the full cost of their handset
or  activation  fee,  if they change  tariff  plans or cancel  their  subscriber
contract prior to the expiration of a minimum period  (generally two years).  We
have also launched a loyalty  program  similar to airline mileage award programs
which is based on minutes  of  airtime  used by  subscribers.  Nevertheless,  we
believe that our success in subscriber  retention or cost recovery measures will
depend to a large  extent  upon  competitive  factors  beyond  our  control.  In
particular, we believe that the tariff structure and minimum subscription period
requirements  implemented  by our  principal  competitors  will be a significant
factor in our subscriber retention.

The average  monthly churn rate in 2001, was 1.8% compared to 2.0% as an average
in 2000 and  2.5%  for  1999.  The  average  monthly  churn  rate for  post-paid
subscribers  in 2001  slightly  increased  to 2.2%  compared to 2.0% in 2000 and
decreased  compared  to 2.3% in 1999.  The  increase  in  churn  rate in 2001 is
primarily due to the fact that in the second  quarter of 1999 we introduced  our
low user Halo tariff which was highly  successful in increasing  our  subscriber
base, a  substantial  portion of whom signed  standard two year  contracts  with
expiration dates during 2001. After the expiration of such contracts,  customers
had the option of leaving our network without the payment of additional fees. In
order to minimize churn rate in this group of customers,  we ran several loyalty
and  retention  programs but we  nonetheless  recorded a slight  increase in the
churn rate for post-paid subscribers,  which we believe was substantially caused
by a portion of former  Halo  subscribers  selecting  promotional  offers of our
competitors over our retention offers or switching to pre-paid plans.

The churn rate for pre-paid customers  decreased  significantly to 0.9% in 2001,
compared to 2.0% in 2000 and 3.2% in 1999.  This was primarily due to the change
in the disconnection  policy which took place in November 2000, and extended the
coupon   validity   to  twelve   months,   which   resulted   in  a  six  months
disconnection-free  period.  Our  disconnections of pre-paid  customers began to
increase  during the second  quarter of 2001, as the  disconnection-free  period
ended at the end of May 2001.


                                     - 41 -
<PAGE>


The most  significant  cause of our  increase in churn in 1999 was our policy to
terminate  subscribers  for  non-payment  of  bills  in  accordance  with  their
contractual  obligations.  As  is  the  case  in a  number  of  emerging  market
countries, Poland does not have a nationwide credit bureau for individuals,  and
it  is  difficult  to  verify  the   creditworthiness  of  potential  individual
subscribers.   While  every  new  subscriber  must  satisfy   certain   standard
documentation requirements,  we monitor the usage of our subscribers that exceed
preassigned  credit  limits  or  fail  to  pay  their  bill  to  better  measure
creditworthiness after activation.

Subscriber Mix

Our  revenues  are  affected  by the mix  between  our  post-paid  and  pre-paid
subscribers.  Post-paid  subscribers  generally  have  higher  lifetime  average
subscriber  values  than  pre-paid  subscribers,  as they  tend to make a higher
number of calls.  The monthly  revenue  generated by  post-paid  customers is on
average 3.5 times higher than the revenue  coming from  pre-paid  customer.  The
other  strength of the post-paid  market lies in the business  segment with more
sophisticated needs and even higher lifetime subscriber value.

Those  advantages of having  post-paid  subscribers come at a higher cost to the
operator, as they require high network capacity and drive additional expenses of
billing,  customer service and bad debts.  Pre-paid  subscribers also have their
advantages,  the most  important ones being:  acquisition  costs are only 21% of
post-paid cost of acquisition,  they generate  cheap-to-supply off peak traffic,
generate  high unit  profit  margins  and no bad debts.  The main  draw-back  of
pre-paid customers is the weaker customer relationship and low traffic volumes.

Our subscriber  base currently  consists of 37.6% of pre-paid  subscribers.  The
company  expects  the number of its  pre-paid  subscribers  to  increase  in the
future,  which may result in a continued decline in Average Revenue Per User Per
Month (ARPU) in respect of voice  services.  In November  2000, we refocused our
marketing  efforts to tailor them to the  different  elements of its  subscriber
mix: post-paid business, post-paid private and pre-paid.

With the further  popularization of GPRS-based  services and the introduction of
UMTS  services  we expect to be able to extend  our  presence  in the  market of
"machine to machine" or  telematic  services.  These  services  are tailored for
business subscribers to enable their fixed assets or products to be connected to
its network for the purpose of  transmitting  and receiving  data that increases
operating efficiency or improves product functionality.

Tariff Policy

We made no significant  changes to our tariffs during 2001. However, we launched
a set of new  tariffs on  November  15,  2000 to better  suit the market  needs.
Tariff  pricing,  consisting  of the rates we charge  subscribers  for  airtime,
monthly  service  and  service   activation,   is  significantly   dependent  on
competitive factors. We offer eight post-paid tariff structures and two pre-paid
tariff structures, with different airtime and monthly access charges catering to
the usage patterns of different subscriber market segments.  Airtime tariffs for
domestic calls vary  depending on the time of day a call is made,  while tariffs
for international calls vary according to the destination of the call. We charge
separately for certain bundles of the value-added services offered, such as call
waiting, short message service and data and facsimile transmission. We regularly
run promotions in which our price for service activation,  handsets or both have
been reduced for the time of  promotion  period.  However,  our price level will
depend on the level of competition in the Polish GSM telecommunications services
market,  the general level of Polish price  inflation,  other changes in factors
affecting  underlying costs, and increased  competition from other technologies,
including both cellular and other mobile telecommunications  systems, as well as
the  availability  within Poland of wireline  telephones and any  limitations on
price  increases  imposed by regulators.  Tariffs for inbound traffic are set by
interconnect agreements with TPSA, Polkomtel, Centertel, El-Net, Netia and other
fixed-line operators.

Minutes of Use

The average number of Minutes of Use ("MoUs") per month in 2001 was 157 compared
to 159 in 2000 and 180 in 1999.  The  average  number  of MoUs per month was 196
minutes for post-paid subscribers


                                     - 42 -
<PAGE>


and 77 minutes for pre-paid subscribers compared to 180 and 92 in 2000. There is
no similar breakdown in 1999 as we started preparing these breakdowns in 2000.

We  stimulate  usage by bundling a number of free  minutes into the monthly fee,
which as a result has led to a  significant  increase in the number of MoUs used
by post-paid  customers.  The decrease in the pre-paid  usage is a result of the
strong  increase  of the number of  pre-paid  customer  base in 2001.  Those two
factors  impacted the blended number of MoUs and allowed the company to maintain
this indicator on a similar level as in the previous year.

The decrease in minutes of use in 2000 was the result of increasing  penetration
and the increasing number of low-end subscriptions joining our network.

Short Message Services

The average  number of SMS was 13 SMSs per subscriber per month in 2001 compared
to 8 in 2000 and 3 in 1999.  The average  monthly number of SMSs was 14 SMSs per
post-paid  subscriber and 12 SMSs per pre-paid  subscriber  compared to 8 and 5,
respectively in 2000.  There is no similar  breakdown in 1999 as we only started
preparing these breakdowns in 2000.

The increase in 2001 was primarily due to increased awareness about SMS services
among  our  subscribers  and  the  success  of  our  marketing  and  promotional
campaigns.

The  increase  in the year ended  December  31,  2000 was  primarily  due to the
introduction  of SMS  services  to  our  pre-paid  subscribers,  as  well  as to
increased knowledge about our SMS services among our subscribers and the success
of our marketing and promotional campaigns.

We believe that the number of SMSs will increase during 2002, thereby increasing
the portion of ARPU coming from data transmission.

Average Revenue Per User

For the year ended  December  31, 2001 our overall  ARPU was PLN 104, a decrease
from  PLN 127 in  2000.  The  ARPU  for  post-paid  customers  and for  pre-paid
customers was PLN 136 and PLN 38 respectively, as compared to PLN 153 and PLN 44
the year before.  There is no similar  breakdown  for previous  years as we only
started  preparing these  breakdowns in 2000. These decreases were the result of
lower  revenues  per new user among PTC's  postpaid  subscribers  following  the
introduction of promotional  airtime rates and the  implementation of new tariff
plans in November  2000,  combined  with an  increasing  proportion  of pre-paid
subscribers  in its  total  subscriber  base.  However,  we  observed  increased
stabilization in the average revenue per user over the last four quarters.

Factors Affecting Expenditures

The principal  components of our  operating  expenditures  are cost of sales and
operating expenses,  the latter consisting of selling and distribution costs and
administration and other operating costs.

Cost of Sales

Our cost of sales includes:

     o    costs of equipment sold (principally  handsets and related accessories
          that we sell to dealers and subscribers);

     o    amortization  and depreciation  charges  associated with licenses fees
          and fixed assets;

     o    other external services and network maintenance fees;

     o    payments for the  provision by third  parties,  principally  TPSA,  of
          leased lines between other  operators'  networks and our network,  and
          also between elements of our network;

     o    commission  payments to the dealers  and sales force  associated  with
          subscriber acquisition; and

     o    payments to other  operators,  principally  TPSA, for delivering calls
          that terminate outside our network.

We anticipate  that, as our network and  subscriber  base grows and the business
matures in coming years,  the relative  proportions of these expenses will shift
away from the cost of merchandise sales


                                     - 43 -
<PAGE>


and fixed asset amortization and depreciation  charges,  toward aggregate leased
line and interconnection fees, which vary with call volumes.

Prior to the issuance in May 1997 of the Interconnect  Decision, for details see
"Item 4. Information on the Company - Interconnection  Agreements",  we incurred
no  interconnect  fees  since  the  operator  of the  network  in which the call
initiated  was  entitled to retain all of the amount  charged for the call.  The
Interconnect  Decision  established a system of interconnect charges in which we
pay TPSA for  calls  terminating  in  TPSA's  network  and TPSA  pays for  calls
terminating  in our  network.  Since the  reciprocal  charge  system has been in
place, the cost of fees payable by us have been more than offset by increases in
revenue from interconnect fees for incoming calls. In addition, as a result of a
new Framework  Agreement with TPSA, we are entitled to a 60% discount on certain
of TPSA's standard leased line tariffs, with additional incremental discounts of
between  5% and 15% for  long-term  arrangements  lasting  between  one and five
years. Nevertheless, the interconnect fees paid to TPSA and the leasing of lines
from  TPSA each make up a  significant  portion  of our  expenses.  However,  On
November  30,  2001,  the OTR  lowered,  by an  average  of 67%  mobile to fixed
interconnection charges. The interconnection charges were set by the Ministry of
Telecommunication  in 1998, and then continuously  negotiated with TPSA, however
with no success. In 2001, we requested OTR to regulate the interconnection rates
between us and TPSA.  The decision is the result of our efforts and benefits all
three mobile operators.

To  reduce  dependence  on TPSA,  we have  taken  two  actions.  First,  we have
contracted with Ericsson to construct an SDH microwave backbone network in order
to reduce  the use of leased  lines  for GSM 900 and GSM 1800  operations.  This
backbone has been  operational from January 2001, which we believe will continue
to decrease the leased line expenses and our reliance on TPSA lines.  We believe
that the backbone  network will reduce,  but not eliminate,  our need for leased
lines and related  fees,  as our  backbone  network  will not offer the complete
geographic  coverage  of  Poland  that TPSA  lines do,  but  rather  will  cover
connections  between  areas of major  population  density and high call  volume.
Second, we have entered into  interconnection  agreements with Netia Telekom and
El-Net and other alternative fixed-line providers,  and we are actively pursuing
agreements  with other  fixed-line  providers to establish  interconnect  points
throughout Poland.

Our GSM 900 License  restricted us only to the use of lines leased from TPSA for
our GSM 900 operations. Our GMS 1800 License contained no such restrictions.  We
successfully  petitioned to amend the terms of such licenses to enable us to use
other  leased  lines.  Accordingly,  we are able to  connect  components  of our
network and to interconnect  with other cellular  telephony  providers in Poland
without the use of leased lines from TPSA.  However, we continue to interconnect
solely with TPSA to provide international connections.

In connection  with the  development of our UMTS services,  we will be incurring
substantial  start-up  costs.  Moreover,  following  the  introduction  of  GPRS
services in 2001 and expected  introduction of UMTS services by the end of 2004,
we expect to begin to incur  significant  additional costs of sales that we will
incur in our efforts to increase  average revenue per user through the provision
of new  enhanced  data-based  services.  These new cost  streams are expected to
include,  but may  not be  limited  to,  royalties  and  fees  paid  to  content
providers,  payments to  applications  service  providers  (which may or may not
include  revenue  sharing  arrangements),  increased  costs of in-house  product
development and product marketing,  increased depreciation for the enabling GPRS
and UMTS  network  infrastructure  and,  from  commercial  launch,  amortization
charges for the UMTS License.

Operating Expenses

Our operating expenses consist of:

     o    selling and  distribution  costs (other than fixed  commissions to the
          dealers and sales force which acquire subscribers that are included in
          cost  of  sales),  including  advertising  costs  and  provisions  for
          doubtful debtors; and

     o    administration and other operating costs,  including external services
          and operations and staffing costs  associated  with  headquarters  and
          regional offices.


                                     - 44 -
<PAGE>


Results of Operations for the Years Ended December 31, 2001, 2000  and 1999

Net Sales

Total net sales increased by approximately 17.9% to PLN 4,344.9 million from PLN
3,684.7  million in 2000 which in turn  reflected  an increase of  approximately
46.5%  from PLN  2,515.6  million  in 1999.  Total net sales  consist of service
revenues or fees and sales of telephones and accessories.

Service Revenues and Fees.  Service revenues and fees increased by 19.2 % to PLN
4,123.6  million  in 2001  from  PLN  3,460.6  million  in  2000,  which in turn
reflected  an  increase  of 45.7%  from PLN  2,374.8  million  in 1999.  Service
revenues and fees represented 94.9% of total net sales in 2001 compared to 93.9%
in 2000 and 94.4% in 1999.

The  increase in 2001  compared to 2000 was due  primarily to an increase in the
number of  subscribers by  approximately  34.7% from  approximately  2.8 million
subscribers  in 2000 to  approximately  3.8  million  subscribers  in 2001.  The
increase in 2000 compared to 1999 was primarily due to a similar increase in the
number of  subscribers  of  approximately  60% from  approximately  1.8  million
subscribers  in 1999 to 2.8 million  subscribers  in 2000.  We believe that this
substantial  increases  in our  subscriber  base in the  above  periods  was due
primarily to the success of our marketing efforts in attracting new customers in
a dynamic market.

This increase was partially offset by:

     o    a decline  in the  average  rate per  minute of use as a result of our
          introduction of bundles of cheaper  minutes and new tariff plans,  our
          attraction  of a higher  percentage  of pre-paid  subscribers  and, in
          order to stimulate data usage among our subscribers,  the inclusion of
          a limited free SMS service in our monthly fee;

     o    increased proportion of pre-paid customers in the subscriber base;

     o    a shift in the mix of out-bound calls to in-bound  calls,  the revenue
          from which is less than the revenue from out-bound calls; and

     o    a slight decrease in the average monthly number of MoUs.

Sales of  Telephones  and  Accessories.  Revenues  on sales  of  telephones  and
accessories decreased by 1.3% to PLN 221.3 million in 2001 compared to PLN 224.1
million in 2000,  which in turn  reflected  an  increase of 59.3% from PLN 140.7
million in 1999.  Revenues on sales of telephones  and  accessories  represented
5.1% of total net sales in 2001 compared to 6.1% in 2000 and 5.6% in 1999.

As a general matter, we do not intend to achieve positive overall margins on the
sale of telephones and accessories  because we believe that a substantial amount
of future sales and margins will come from airtime  revenues and monthly service
fees rather than  activation fees and the sale of handsets and  accessories.  In
addition, we believe that discounts on the sale of handsets and accessories will
continue to have a decreasing impact upon our results of operations.

The decrease in sales of telephones and accessories in 2001 compared to 2000 was
due  primarily to a decrease in the average  retail  price of handsets  sold and
higher average  subsidies offered to our customers in respect of these handsets.
These decreases took place  notwithstanding  increased handset sales as a result
of an increase in gross additions of new subscribers in 2001 and 2000,  together
with intensified  retention programs and commencement of handset replacement for
our high-end  users.  The decreases in sales of telephones and  accessories  was
partially  offset  by  changes  in  the  mix of new  subscribers  reflecting  an
increasing  portion  of  pre-paid  subscribers,  whose  handsets  are  generally
subsidized less heavily and have higher retail prices.

Cost of Sales

Total cost of sales  increased  by 19.3% to PLN 2,727.4 in 2001 from PLN 2,286.4
million in 2000,  which in turn  reflected an increase of 44.1% from PLN 1,586.3
million. Total cost of sales consists of cost of services sold and cost of sales
of telephones and accessories.


                                     - 45 -
<PAGE>


Cost of Services Sold. Costs of services sold increased by  approximately  28.5%
to PLN 1,778.7 from PLN 1,383.9  million in 2000,  which in turn  constituted an
increase of approximately 46.5% from PLN 944.4 million in 1999.

The increase in cost of services sold in 2001 compared to 2000 was due primarily
to:

     o    a 66.1% increase in depreciation and amortization charges to PLN 790.8
          million  in 2001 from PLN  476.0  million  in 2000.  The  increase  in
          depreciation  and  amortization  was mainly due to the impairment of a
          certain part of our network  scheduled for sale. We are  rationalizing
          our core network in preparation for overlaying a UMTS solution;

     o    a 6.7% increase in other external services (mainly network maintenance
          fees) to PLN 870.0  million  in 2001 from PLN 815.2  million  in 2000,
          and;

     o    an increase in wages and salaries of network  support staff,  which we
          include in cost of sales.

The increase was  partially  offset by the decline in the leased line  expenses,
following the introduction of SDH network backbone.

The increase in cost of sales in 2000  compared to 1999 was primarily due to the
same reasons  described  above for the increase in cost of services sold in 2001
compared to 2000.

Cost of Sales of Telephones  and  Accessories.  Cost of sales of telephones  and
accessories increased by PLN 46.3 million, or 5.1%, to PLN 948.8 million in 2001
from PLN 902.5  million in 2000.  This  increase was due  primarily to increased
sales of handsets resulting from increased gross additions.

Cost of sales of telephones and accessories  increased by PLN 260.6 million,  or
40.6%,  to PLN  902.5  million  in 2000  from PLN 641.9  million  in 1999.  This
increase  was due  primarily  to  increased  sales of  handsets  resulting  from
increased gross additions.

Gross Margin

Gross margin was 37.2% in 2001, 37.9% in 2000 and 36.9% in 1999. The decrease in
the gross margin in 2001 compared to 2000 was primarily due to the faster growth
in the cost of sales,  driven mainly by the 66.1% increase in  depreciation  and
amortization.  Such  substantial  increase in depreciation  and amortization was
mainly due to the  impairment  of a certain  part of our network  scheduled  for
sale. We are rationalizing our core network in preparation for overlaying a UMTS
solution.

The increase in gross margin in 2000  compared to 1999 was  primarily due to the
substantial  increase  in gross  subscriber  additions  during  this  period and
resulting  economies of scale  realized in the  operation of our network and the
delivery of services to our subscribers.

Operating Expenses

Operating expenses increased by 2.5% to PLN 785.4 in 2001 from PLN 766.0 million
in 2000 which in turn  reflected an increase of 25.1% from PLN 612.6  million in
1999.   Operating  expenses  consist  of  selling  and  distribution  costs  and
administration and other operating expenses.  Operating expenses as a percentage
of  revenues  decreased  to 18.1%  in 2001  from  20.8%  in 2000,  which in turn
represented a decrease from 24.4% in 1999.

Selling and Distribution Costs. As a percentage of total net sales,  selling and
distribution  costs  were  13.5%,  15.6%  and  18.1%  in 2001,  2000  and  1999,
respectively. In absolute terms selling and distribution costs increased by 1.6%
to PLN 585.5 million from PLN 576.3 million in 2000 which in turn represented an
increase of 26.7% from PLN 454.8 million in 1999. Selling and distribution costs
are primarily driven by our efforts to acquire new subscribers, partially offset
by successes in managing bad debt.  Through an  aggressive  bad debt  management
policy and the increased  proportion of prepaid users in the subscriber  mix, we
have managed to  significantly  reduce our bad debt  expense as a percentage  of
revenues to 1.6%. In  comparison,  in 2000,  bad debt expense was 4.0%. Bad debt
management includes the monitoring of shops, dealers and sales people as well as
all subscribers.


                                     - 46 -
<PAGE>


The  decrease in selling and  distribution  costs as a  percentage  of total net
sales in 2001, 2000 and 1999 was primarily due to the decreasing number of gross
additions as a proportion of our total  subscriber base. The increase in selling
and  distribution  costs in absolute terms in 2001 and 2000 compared to 1999 was
primarily due to increases in  advertising  costs  related to marketing  efforts
associated with the introduction of revised business strategy,  as well as to an
increase in our sales  force  resulting  in related  increases  in salaries  and
wages.

Administration  and Other  Operating  Costs. As a percentage of total net sales,
administration and other operating costs were approximately  4.6%, 5.2% and 6.3%
in 2001, 2000 and 1999, respectively.

Administration and other operating costs increased by approximately 5.4% in 2001
to PLN 200.0  million in 2001 from to PLN 189.7  million in 2000,  which in turn
represented an increase of 20.2% from PLN 157.8 million in 1999.

The decreases in  administration  costs,  as a percentage of total net sales, in
2001  compared  to 2000  and in 2000  compared  to 1999  were  primarily  due to
increases in the  subscriber  base in these periods and  resulting  economies of
scale  realized in the  operation of our network and the delivery of services to
our  subscribers.  The  increase in  administration  and other costs in absolute
terms in 2001 compared to 2000 and in 2000 compared to 1999 was primarily due to
increases in wages and salaries and in social security expenses.

Operating Profit

Due to the above  factors,  operating  profit was PLN 832.0  million,  PLN 632.3
million  and PLN  316.7  million  in 2001,  2000  and  1999,  respectively,  and
operating   margin  was  19.1%,   17.2%  and  12.6%  in  2001,  2000  and  1999,
respectively.

Financial Expenses

Foreign exchange gains,  interest expense and other financial losses resulted in
a net financial  expense of PLN 377.9 million in the fiscal year ended  December
31,  2001  compared  to the net  financial  expense of PLN 489.5  million in the
previous  year and PLN 398.3 million in 1999.  Financial  expenses net primarily
arise from interest expenses on our Bank Credit Facilities,  the Existing Notes,
capital lease  obligations for our head office,  and from foreign exchange gains
and  losses,  both  realized  and  unrealized  on foreign  currency  denominated
liabilities  and  changes  in the fair  value of  forward  contracts  and  other
derivative instruments not designated as hedging instruments.

For the twelve  months ended  December 31,  2001,  net interest  expense was PLN
469.5  million,  compared to PLN 501.6  million in 2000 and PLN 247.5 million in
1999.  The  decrease  in net  interest  expenses  in 2001 was  mainly due to the
decline in Zloty and Euro  interest  rates as well as  stronger  Zloty  exchange
rates reducing the Zloty  equivalent of foreign  currency  interest  payments on
foreign currency denominated debt. The increase in net interest expenses in 2000
was the  result of the first  full year  impact of  interest  due on the 11 1/4%
Notes we issued in late 1999.  Net  interest  expense as a  percentage  of total
revenue was 10.8%, 13.6% and 9.8% in 2001, 2000 and 1999, respectively.

We expect that interest  expenses will continue to have a significant  impact on
net results due to our highly leveraged structure of financing.

The majority of our debt is denominated  in foreign  currency.  Accordingly,  in
Zloty terms, our financial  expenses fluctuate as a result of changes in foreign
exchange rates.  During 2001, the Zloty appreciated  against the U.S. dollar and
Euro  by 3.8%  and  8.6%  respectively  and  finished  the  year at the  rate of
approximately U.S.$1 = PLN 3.9863 and (euro)1 = PLN 3.5219 on December 31, 2001.

The  appreciation  of the local currency  against both the Euro and U.S.  dollar
during the year resulted in a net foreign  exchange  gain of PLN 153.9  million,
compared to a net foreign  exchange  gain of PLN 79.9 million for the year ended
December 31, 2000 and a net foreign exchange loss of PLN 150.7 million in 1999.


                                     - 47 -
<PAGE>


Net  foreign  exchange  gain  includes a gain of PLN 37.2  million  relating  to
realized  transactions  and the remaining  amount relates to the  revaluation of
accounts payable and receivable, denominated in foreign currencies.

We  anticipate  that foreign  exchange  losses or gains will  continue to have a
significant impact on our results.

In the first  quarter of 2001, we  implemented  new  accounting  standard IAS 39
"Financial  instruments:  Recognition and Measurement" which provides principles
for recognizing and measuring  information  about financial assets and financial
liabilities.  As a result of the above  standard,  among others,  changes in the
fair value of  derivatives  embedded in our Existing  Notes,  finance  lease and
other  contracts  are  recognized as other  financial  income or expenses in the
statement of operations.

During the year 2001, we  recognized  other  financial  expenses net of PLN 62.3
million resulting mainly from losses on changes in the fair value of a series of
forward contracts and derivatives  embedded in our finance lease and other trade
contracts offset by a gain on fair valuation of options embedded in the Existing
Notes. In the year 2000, we incurred other financial  expenses net in the amount
of  PLN  67.9  million  relating  to a  change  in the  fair  value  of  forward
transactions.

Other  financial  expenses  net for the  year  2001  include  a loss of PLN 85.3
million  that  relates  to the  realization  of the above  mentioned  derivative
transactions.  In the year 2000,  we  realized a loss of PLN 22.0  million  from
forward  contracts  settlements.  There is no similar  breakdown  for 1999 as we
started to hedge our foreign  exchange  currency  exposure in 2000. For detailed
information see Note 24 of the Financial  Statements  included elsewhere in this
Form 20-F.

We are managing our foreign  exchange and interest rate risks in accordance with
our hedging  policy,  implemented in early 2000. The hedging policy is monitored
and updated continuously.

In 2001, we started to hedge our long-term cash flow exposure related to foreign
currency  financing  with the use of cross currency  interest rate swaps.  As of
December 31, 2001,  the fair value of cross  currency  interest  swaps hedging a
part of future  interest  payments on the Existing Notes amounted to a liability
of PLN 130.2 million.  In accordance with IAS 39 we applied hedge  accounting to
these  transactions and we recognized the fair value change in the amount of PLN
97.0 million (net of deferred  tax effect) as other  reserve  capital in equity.
Additionally,  PLN 5.9 million was transferred  from equity to the statements of
operations (as other  financial  expenses) to match with hedged  interests as it
affects the statement of operations.

Taxation Charge

The profit before taxation amounted to PLN 454.1 million in 2001 compared to PLN
142.7  million in 2000 and loss before  taxation of PLN 81.6 million in 1999. In
2001, we had a tax charge of PLN 26.9 million compared to tax charge of PLN 33.4
million in 2000 and PLN 40.9 million in 1999.  For the numerical  reconciliation
between tax charge and the product of  accounting  profit or loss  multiplied by
the applicable  statutory tax rates, see Note 11 to the Financial Statements for
the years ended December 31, 2001, 2000 and 1999.

In accordance  with current  interpretations  of the Polish tax law, the cost of
our GSM 900, GSM 1800 and UMTS Licenses are recorded for current tax purposes on
a cash basis, which are the most significant component of the net total deferred
tax  liability of PLN 52.1 million as of December 31, 2001  compared to PLN 60.5
million as of December 31, 2000 and PLN 27.3 million as of December 31, 1999.

Inflation

Inflation  has not had a  significant  effect  on our  operations  or  financial
condition  during the twelve  months ended  December 31, 2001.  Since  launching
services in 1996,  we have not  increased our tariffs as a result of the rate of
inflation,  while  many of our  costs,  partially  labor  costs,  are  inflation
sensitive.


                                     - 48 -
<PAGE>


Liquidity and Capital Resources

We expect to have substantial liquidity and capital resources requirements as we
continue to develop and expand our wireless  business.  We expect our  principal
requirements to consist of the following:

     o    capital   expenditures  for  existing  and  new  network   operations,
          including significant UMTS network build-out costs;

     o    payment  of  license  payables,  including  significant  UMTS  License
          payables;

     o    debt service requirements relating to existing debt; and

     o    UMTS start-up expenses.

Historically,  our liquidity requirements have arisen primarily from the need to
fund capital  expenditures for the expansion of our business and for our working
capital  requirements.  We expect to  continue to incur  substantial  additional
capital expenditures in order to expand and improve the quality of our network.

Sources of Financing

Primary sources of financing  available to us consist of the  following:

     o    cash flow from operating activities;

     o    financing from banks;

     o    financing from the issuance of Senior Subordinated Guaranteed Notes;

     o    vendor financing; and

     o    certain qualifying technical equipment, or QTE, leases.

In February 2001, we entered into:

     o    a (euro)550 Million Bank Credit Facility; and

     o    a  (euro)100  Million  Bank  Credit  Facility,  which was  amended  on
          September  24, 2001 to increase the  Facility to (euro)150  million in
          September 2001.

On February 20, 2001, we entered into the Bank Credit  Facilities  with Deutsche
Bank AG Luxemburg,  as a lead arranger,  and certain other lenders,  pursuant to
which  the  lenders  agreed  to  provide  us with  facilities,  both in  foreign
currencies and Zloty, in the aggregate  principal  amount of (euro)650  million.
The  purpose of these  facilities  was to repay the DM672  million  senior  loan
entered into in 1997 and to finance  certain  capital  expenditures  and working
capital  requirements,  including the payment of up to two-thirds of the initial
installments  of the UMTS license.  In September  2001,  during the  syndication
process for (euro)100 million, we decided to increase the Bank Credit Facilities
to total (euro)700 million.

On May 2, 2001 we  entered  into a  purchase  agreement  with PTC  International
Finance II S.A. and Deutsche Bank AG London and Dresdner Bank AG London  Branch,
pursuant to which on May 8, 2001 we guaranteed the issuance by PTC International
Finance II S.A. of the  (euro)200,000,000  10?% Senior  Subordinated  Guaranteed
Notes due 2008.

As of December 31,  2001,  the undrawn  amount under the Bank Credit  Facilities
totaled (euro)335 million (which represents  approximately 48% of the total Bank
Credit Facilities).

We expect to  continue  to rely upon these  sources  of  liquidity  and  capital
resources  in the  future.  Under our  current  business  plan,  we expect  that
borrowings  under  the Bank  Credit  Facilities  and under  our  various  senior
subordinated  notes,  together  with future  potential  vendor  financing,  will
provide  us with the  financing  we require  to fund our  operations.  We cannot
assure you,  however,  that we will not need  additional  financing or that such
additional   financing  will  be  available  on  satisfactory  and  commercially
acceptable terms or at all.

The  need  for  additional  financing,  as well  as our  revenues,  the  capital
expenditures  required to further  build out our GSM and UMTS  networks  and the
expenses  involved  in our  operations  will  depend  on a number  of  elements,
including:

     o    our ability to meet build-out schedules;

     o    growth  in  our  market   penetration,   our  market   share  and  the
          effectiveness of our competitors in such markets;

     o    cost of new network equipment and maintenance of our networks;


                                     - 49 -
<PAGE>


     o    regulatory changes;

     o    currency exchange rate fluctuations;

     o    the availability and terms of vendor financing;

     o    changes in technology; and

     o    the availability of UMTS infrastructure and handsets.

As our capital  expenditure  and operating  expenses are linked  directly to our
subscriber  growth, our actual capital  expenditure  requirements and other cash
operating needs may also increase if we add more new subscribers  than expected.
If our capital  expenditure  requirements and other cash operating needs were to
increase, we may also need other additional financing. We cannot assure you that
any additional  financing  would be available on satisfactory  and  commercially
acceptable terms or at all.

We may from time to time seek to retire certain  outstanding  debt  obligations,
which will require the approval of the senior lenders.

For further  discussion of our treasury  policies and objectives and our hedging
activities,  see "Item 11. Quantitative and Qualitative  Disclosure About Market
Risk - Quantitative Information About Market Risk"

Cash Flow from Operating Activities

Net cash  generated from  operating  activities was PLN 1,162.4  million in 2001
compared to PLN 684.9  million in 2000 and PLN 350.0  million in 1999.  Non-cash
provisions  and net  non-operating  items for the same  periods were PLN 1,313.4
million,  PLN  1,100.6  million  and  PLN  833.0  million,  respectively.  These
principally  reflect  depreciation,   amortization,  charge  to  provisions  and
write-offs for doubtful debtors,  foreign exchange losses/gains,  changes in the
fair value of financial instruments and interest expense resulting from business
growth and expanded financial activities. In addition, net cash used for working
capital  items was PLN 168.2  million in 2001,  compared to PLN 138.8 million in
2000 and PLN 279.9 million in 1999. The improving  trend in operating cash flows
reflects  the  increased  profitability  and  margining  of our  business as our
subscriber base grows and we are able to leverage economies of scale.

Cash Flow used in Investing Activities

Net cash used in investing  activities was PLN 2,275.2  million in 2001 compared
to PLN  1,555.1  million in 2000 and PLN  1,835.6  million in 1999.  Payments to
suppliers of tangible fixed assets,  which consist  primarily of network capital
equipment  used in the ongoing  build-out of our GSM  network,  were PLN 1,128.1
million in 2001,  PLN 1,434.9  million in and PLN 985.3  million in 1999.  These
amounts  differ  from the amount of gross  additions  to tangible  fixed  assets
because  of the  impact  of  deferred  payment  terms on  certain  purchases  of
equipment,   and  due  to  interest  and  foreign   exchange  gains  and  losses
capitalization.

Capital Expenditure for Tangible Assets

The  mobile  communications  industry  is highly  capital  intensive,  requiring
significant  capital to construct mobile  telecommunications  networks.  Capital
expenditures,  reflecting  additions to tangible  assets,  for the twelve months
ended December 31, 2001 totaled approximately PLN 921.5 million, 30.9% less than
in the previous year. The growth in subscribers numbers has necessitated capital
expenditures  on the network  infrastructure  as well as on coverage and quality
rollout activity.

Capital  expenditures  during 2000,  reflecting  additions  to tangible  assets,
totaled  approximately  PLN 1,333.9  million,  representing an increase of 16.3%
from PLN 1,146.9 million in the previous year.

Capital expenditures for Intangible Assets

In 2001, we paid (euro)250 million, (euro)56.1 million and (euro)16.7 million in
installments for our UMTS, GSM 900 and GSM 1800 Licenses, respectively. In 2000,
we paid  installments  for the GSM 900 and 1800  Licenses  and we also  paid the
first installment for the UMTS License.  These amounts equaled the equivalent of
(euro)34.3 million for the GSM 900 License, the equivalent of (euro)16.7 million
for the GSM 1800 License and (euro)10 million for the UMTS License.


                                     - 50 -
<PAGE>


Cash Flow from and used in Financing Activities

Net cash from financing  activities was PLN 1,120.2 million in 2001, compared to
net  cash  used of PLN  195.5  million  in  2000  and net  cash  from  financing
activities of PLN 2,604.0 million in 1999. The 2001 amount  reflects  additional
net proceeds from the Bank Credit Facilities  partially utilized in 2001 and the
proceeds from the 10?% senior subordinated  guaranteed notes issued in May 2001,
offset  by the  repayment  of 1997  Bank  Credit  Facility.  The  amount in 2000
resulted  primarily from the partial repayment of the 1997 Bank Credit Facility.
The 1999 amount reflects the net proceeds from 1997 Bank Credit Facilities,  the
proceeds from 11 1/4% Senior  Subordinated  Guaranteed  Notes issued in November
1999 and proceeds from shareholders' loans.

Capital expenditures future commitments

As a result of the UMTS network build-out,  we expect that capital  expenditures
for our wireless network will continue to represent a significant portion of our
total capital expenditures over at least the next few years and possibly longer,
as we continue to expand  network  capacity  and quality in order to improve our
GSM services and launch UMTS services.

We expect our capital expenditure for 2002 to stay on the similar level to those
realized in 2001. We expect our capital  expenditures to total approximately PLN
6 billion to PLN 7 billion between 2002 and 2005, of which  approximately 50% is
expected to relate directly to our UMTS network build-out costs.

We are required to pay the  equivalent  of  (euro)16.7  million for the GSM 1800
License in 2002 and (euro)390  million for the UMTS License over the period from
2005 to 2022.

Contractual obligations and commitments

The following table aggregates our contractual  obligations and commitments with
definitive  payment  terms which will  require  significant  cash outlays in the
future. The commitment amounts are as of December 31, 2001.

<TABLE>
<CAPTION>
                                            Year ending December 31,
                                 -----------------------------------------------
                                   2002     2003      2004      2005      2006    Thereafter     Total
                                 -------   -------   -------   -------   -------  ----------   ---------
<S>                              <C>       <C>       <C>       <C>       <C>       <C>         <C>
(euro)550 Million Bank Credit
Facility(1) (PLN) ............   186,482   136,312   309,254   592,097   178,456          --   1,402,601
(euro)150 Million Bank Credit
Facility(1) (PLN) ............    71,950    61,390    61,390    61,390   352,487     103,896     712,503
GSM 1800 License(2) ((euro)) .    58,870        --        --        --        --          --      58,870
UMTS License(2) ((euro)) .....        --        --        --    52,829    52,829   1,267,884   1,373,542
10? Notes(1) ((euro)) ........    76,602    76,602    76,602    76,602    76,602     838,433   1,221,443
11 1/4Notes(1) ((euro)) ......   118,864   118,864   118,864   118,864   118,864   1,413,162   2,007,482
10 3/4Notes(1) (U.S.$) .......        --   108,504   108,504   108,504   108,504   1,117,848   1,551,864
11 1/4Notes(1) (U.S. $) ......    67,268    67,268    67,268    67,268    67,268     799,749   1,136,089
Headquarters Lease(3) (U.S.$)     31,208    32,144    33,109    34,102    35,125     299,760     465,448
Capital equipment commitments(4)
(mainly in PLN) ..............   393,841        --        --        --        --          --     393,841
</TABLE>

(1)  Includes future cash interest payments

(2)  Nominal fees

(3)  Include index swaps embedded in the lease contract

(4)  Authorized and contracted

U.S. GAAP Reconciliation

The Financial Statements have been prepared in accordance with the International
Accounting  Standards,  which differ in certain respects from generally accepted
accounting  principles  in the United  States as explained in the Note 32 to our
Financial Statements included elsewhere in this Form 20-F.

A brief extract of the most significant differences between the standards:


                                     - 51 -
<PAGE>


Capitalization of borrowing costs

In accordance  with IAS 23 "Borrowing  Costs",  we capitalize  financing  costs,
including  interest  and foreign  exchange  gains or losses,  into assets  under
construction.

For tangible fixed assets under construction, we capitalize interest and foreign
exchange gains or losses  incurred and directly  attributable to the acquisition
and  construction  of the qualifying  assets that would have been avoided if the
expenditure on the qualifying  assets had not been made. The financing costs are
capitalized only during the period of construction of the qualifying  assets. We
capitalized  financing costs attributable to the acquisition of its GSM 900, GSM
1800 and UMTS licenses,  including interest on the related long-term  obligation
and foreign  exchange  losses  because these  licenses are integral parts of the
network.

Under  Statement  of  Financial   Accounting   Standards  52  "Foreign  Currency
Translation",  however,  foreign  exchange  differences  relating  to  financing
obligations should be included in our statement of operations. Consequently, the
amounts of foreign exchange differences capitalized in accordance with IAS 23 in
our Financial Statements are expensed under U.S. GAAP.

The depreciation and amortization  expense and accumulated amount in the balance
sheet are also affected by the accounting difference.

Development and start-up cost

We  have  adopted  IAS  38  "Intangible   Assets"  in  1999  giving  its  effect
retrospectively.  This has resulted in writing-off  of development  and start-up
cost when they arose in 1996. For U.S. GAAP purposes we have written off in 1999
start-up costs following the issuance the SOP 98-5 in the United States.

Revenue recognition (SAB 101)

We applied under IAS certain principles of SAB 101  retrospectively.  Under U.S.
GAAP a calendar  year  company is  required to adopt the new rules in the fourth
quarter  of 2000.  We should  calculate  the  effect of SAB 101 as at January 1,
2000,  make the  cumulative  entry as at that date,  and restate  all  quarterly
information previously reported during 2000.

Under U.S. GAAP, the  application of SAB 101 results in the different  treatment
of the separable  multiple-element  transactions.  Revenues and costs related to
those  transactions are recognized in the income  statement as incurred,  except
for up-front  non-refundable  fees (activation fees) and direct costs related to
these fees.  These  activation  fees and  related  costs are  deferred  over the
average expected life of the customer.  Under IAS up-front  non-refundable  fees
are recognized immediately.

SFAS 133

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and  Hedging  Activities.  In June 1999,  the FASB  issued  Statement  No.  137,
Accounting for Derivative  Instruments and Hedging  Activities - Deferral of the
Effective  Date of FASB  Statement  No.  133.  In June  2000,  the  FASB  issued
Statement 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of FASB Statement No. 133.

Statement  133, as  amended,  establishes  accounting  and  reporting  standards
requiring  that  every  derivative   instrument  (including  certain  derivative
instruments  embedded in other  contracts)  be recorded in the balance  sheet as
either an asset or liability  measured at its fair value. The Statement requires
that changes in the derivative  instrument's fair value be recognized  currently
in  earnings  unless  specific  hedge  accounting   criteria  are  met.  Special
accounting  for  qualifying  hedges allows a derivative  instrument's  gains and
losses to offset related results on the hedged item in the income statement,  to
the extent  effective,  and  requires  that a company  must  formally  document,
designate,  and assess the  effectiveness  of  transactions  that receive  hedge
accounting.

We  adopted  Statement  133 on  January  1, 2001 and  applied  it to all  hybrid
instruments.

Long-term Notes issued by us have embedded  derivatives  (CALL  options).  These
options should be separated from host contract and accounted for as a derivative
under IAS 39, while they should not be


                                     - 52 -
<PAGE>


separated under SFAS 133. Therefore, the fair value of the bifurcated options is
not recognized for U.S. GAAP purposes.

The  transition  rules of IAS 39 specifies  that any  adjustment of the previous
carrying  amount was  recognized  as an  adjustment  of the  balance of retained
earnings at the beginning of the year 2001.  The  accounting  change  principles
under U.S. GAAP advise to include the cumulative effect in the net income of the
period of the  change.  However,  for  qualifying  cash flow  hedge  instruments
portion (or the entirety) of the  cumulative  effect should be classified in the
other comprehensive income (hedge reserve), a component of shareholders' equity.

Transaction costs

IAS 39 requires  transaction costs to be included in the initial  measurement of
financial  assets  and  liabilities.  Under  U.S.  GAAP  these  costs  should be
presented as deferred costs. Presentation of deferred taxation Under IAS we may,
if certain criteria are met, net deferred tax liabilities and assets and present
a net balance in the balance  sheet.  Under U.S.  GAAP  current and  non-current
portions, by tax jurisdiction, of the above should be disclosed separately.

New Accounting Pronouncements

IAS

Currently,  we do not plan to implement any of the newly released  International
Accounting Standards.

U.S. GAAP

We implemented the Statements No. 141, Business Combinations,  No. 142, Goodwill
and Other Intangible Assets and No. 144, Accounting for impairment of Long Lived
Assets on  January  1, 2002 and we plan to  implement  the  Statement  No.  143,
Accounting  for  Assets  Retirement  Obligations  from  January  1,  2003 as the
Statement  is  effective  for the fiscal  year  beginning  after June 15,  2002.
However,  we do not anticipate that adoption of these new Statements will have a
material impact on its results of operations, its financial position or its cash
flows.

Changes in Our Accounting Policies

In 2001, we introduced two changes to our accounting policy. On January 1, 2001,
we adopted IAS 39 "Financial  instruments:  Recognition and  Measurement"  which
establishes  principles for  recognizing,  measuring and disclosing  information
about financial assets and financial liabilities.  Moreover, we also changed our
revenue  recognition policy under IAS to be consistent with SEC Staff Accounting
Bulletin  No. 101  "Revenue  Recognition  in  Financial  Statements"  previously
applied   under  U.S.   GAAP.   Based  on  the  above   bulletin   and   further
interpretations, we established criteria for the recognition of multiple-element
transactions  (handset,  activation  and  telecommunication  services) and their
presentation in our IAS financial statements.  For the numerical  reconciliation
of the cumulative effect of changes in the accounting principles under U.S. GAAP
please refer to "Item 8. Financial Information"

For further details please see Note 4.1.a and 4.1.b to the Financial  Statements
included elsewhere in this Form 20-F.

Research and Development Programs

We currently do not run any research and development programs.

Trend Information

In our market, the number of subscriber connections is greater during the second
half of the calendar  year than during the first half.  This is primarily due to
increased sales during our anniversary promotions in September and the Christmas
season.   Therefore,   our  fees  revenues  and  revenues  from  telephones  and
accessories,  and the aggregate cost of sales of telephone and  accessories  and
dealer  commissions,  have been  greater  during the second half of the calendar
year than  during the first  half.  It is  difficult,  however,  to predict  the
seasonality of subscriber connections in the future.


                                     - 53 -
<PAGE>


Item 6. Directors, Senior Management and Employees

Directors and Senior Management

Supervisory Board

The Supervisory Board is currently  comprised of nine members,  four of whom are
appointed  by Elektrim  Telekomunikacja  Sp. z o.o.  and four are  appointed  by
DeTeMobil.  The remaining member is elected at the  Shareholders'  Meeting.  The
Supervisory  Board actively  monitors our business,  appoints the members of the
Management Board and establishes rules of procedure for the Management Board. In
addition,  our  Shareholders'  Agreement  provides that the Supervisory Board is
responsible for approving certain important decisions of the Management Board.

Certain actions by our Supervisory  Board require the unanimous  approval of all
board  members  appointed  by  the  Operating   Parties.   See  "Item  7.  Major
Shareholders  and Related Party  Transactions - Related  Parties  Transactions -
Shareholders'  Agreement" and "Item 10. Additional  Information - Memorandum and
Articles of Association".

Set forth below are the names of the current members of our  Supervisory  Board,
information as to how or by whom they were appointed, and the year in which each
such  member was first  appointed,  followed by a short  biography  of each such
member.

<TABLE>
<CAPTION>
                Name                                Appointed By                 Member of Supervisory
                                                                                      Board Since
------------------------------------ ------------------------------------------ ------------------------
<S>                                   <C>                                                <C>
Dariusz Oleszczuk (Chairman).......   Elektrim Telekomunikacja Sp. z o.o.                2000
Michael Gunther (Deputy Chairman)..   MediaOne International B.V.                        1997
Fridbert Gerlach...................   MediaOne International B.V.                        2000
Philippe Houdouin..................   Elektrim Telekomunikacja Sp. z o.o.                2002
Gerd Kareth........................   T-Mobile International                             2001
Michael Lawrence...................   T-Mobile International                             2002
Michael Picot......................   Elektrim Telekomunikacja Sp. z o.o.                2002
Dariusz Jacek Krawiec..............   Elektrim Telekomunikacja Sp. z o.o.                2002
Jacek Trela........................   Operating Parties                                  2001
</TABLE>

Dariusz  Oleszczuk is a Partner at the law firm Salans Hertzfeld & Heilbronn and
Managing  Partner of its Warsaw  office.  He practices in the  following  areas:
telecommunications,  IT and media, corporate law, mergers and acquisitions.  Mr.
Oleszczuk  graduated  from Warsaw  University  (Master of Law,  magna cum laude,
1979),  was  qualified  as a Judge in 1982 and  admitted  as a legal  adviser in
Poland in 1983. He is currently an Arbitrator of the Court of Arbitration at the
Polish Chamber of Commerce.

Michael  Gunther is a member of Management  Board of T-Mobile  International  AG
responsible  for joint  ventures.  Previously,  Mr.  Gunther served as the Chief
Financial  Officer of T-Mobile  International AG and Chief Financial  Officer of
the  Business  Customer  Division of Deutsche  Telecom AG and  Deutsche  Telekom
Systems GmbH.  Mr.  Gunther holds a degree in Business  Administration  from the
University  of  Hamburg.  Additionally,  Mr.  Gunther  is also a  member  of the
Supervisory Boards of One 2 One Personal  Communications Limited (UK), Max Mobil
Telekommunikation Service GmbH (Austria) and RadioMobil a.s. (Czech Republic).

Fridbert Gerlach joined Deutsche  Telekom AG in 1999 as Vice President  Regional
Build-up and Integration in the Region Central,  Eastern Europe and Middle East.
He has held the  position  as Senior  Executive  Vice  President  of the  Region
Central and Eastern Europe,  Middle East,  since June 2001. After his graduation
in  telecommunications  at Aachen University in 1983, he stayed there to work as
an electrical  engineer until 1987 and, during that time,  completed his studies
in  business  administration.  From  1987 to 1997,  he held  several  management
positions  within the  international  division of Alcatel  SEL AG in  Stuttgart,
Germany.  Before  joining  Deutsche  Telekom in 1999,  he worked as director for
international joint ventures at T-Mobil.


                                     - 54 -
<PAGE>


Philippe Houdouin is Executive Vice President for the Central and Eastern Europe
activities of Vivendi  Telecom  International,  and has held this position since
2000. Mr.  Houdouin was Chief  Financial  Officer at VTI from 1998 to 2000. From
1991 to 1997, he was Director of Bridgepoint Capital SA (formerly Natwest Equity
Partners) one of the leading European private equity funds, in charge of LBO/LBI
transactions.   He  started  his  career  in  1988  as  a  consultant  with  SRI
International  (ex Stanford  Research  Institute)  specializing in strategic and
business  consulting  (automotive,  computer and multimedia  sectors).  Philippe
Houdouin  graduated  from the Ecole  Navale  and from  Ecole des  Hautes  Etudes
Commerciales.

Gerd Kareth is an  Executive  Director  of the  Division  International  Support
Technik of T-Mobile International. He began his professional career in 1972 as a
Head of Section 3, Telecommunication  Office Munich. From 1976 to 1981, he acted
as  a  Head  of  various  sections  at  the  Telecommunications  Directorate  in
Nuernberg.   In  1981  he  started  his  employment  with  the  Telecommuncation
Engineering  Center in  Darmstadt,  where he was actively  involved in Satellite
Communications.  In  1991,  he  joined  Detecon  as Head of  Division  Planning,
Implementation,  Acceptance,  Operation and Maintenance  for GSM network.  Since
July 1993, he has worked for DeTeMobil.  Mr. Kareth began as Executive  Director
in the Networks Strategy,  Planning and Implementation  sector and was nominated
to the position of  Executive  Director of the  Division  International  Support
Technik in July 2001.

Michael Lawrence is Director for  International  Joint-Ventures  for T-Mobile in
Germany.  Previously,  he developed and headed T-Mobile  alliance to bid for the
UMTS license in France.  In 1998/99 he was General Manager for the start-up of a
Deutsche Telekom Joint-Venture in Beijing, China and was responsible for selling
these GSM networks to China Unicom. Before that he was responsible for operative
controlling for Mannesmann AG and was an M&A consultant for Deutsche Bank Morgan
Grenfell.  Mr. Lawrence studied  mechanical  engineering and received his PhD at
RWTH Aachen.

Michel  Picot is Senior  Executive  Vice  President  for the Central and Eastern
Europe activities of Vivendi Telecom International.  Before joining VTI in 1995,
Mr. Picot was Senior Vice  President  Finance at Eunetcom.  From 1991 to 1993 he
was  Managing  Director  of ECS  Germany,  belonging  to the ECS Group  (Societe
Generale),  the  largest  computer  leasor in Europe  and one of the  biggest PC
dealers.  From 1986 to 1991 Mr.  Picot  served as  General  Manager  of the High
Technology  branch (PC and large computer leasing and  distribution) of the SCOA
Group (a Paribas  subsidiary)  after being General Manager of the  international
commodities trading area and holding the position of Deputy Managing Director in
charge of trading and industrial activities in Nigeria. Mr. Picot graduated from
Ecole des Hautes  Etudes  Commerciales  where he  obtained a Master of  Business
Administration diploma.

Dariusz Jacek Krawiec is Chairman of the Management Board of Elektrim.  He holds
a Masters  degree in the Economy and Foreign  Trade  Organisation  from Akademia
Ekonomiczna  in Poznan.  From 1993 to 1997 he worked for Price  Waterhouse Sp. z
o.o. in the Corporate Finance Division.  In 1997 he joined Nomura  International
plc in London,  responsible  for the Polish market.  In 1998 he was nominated to
the  position of  President  of the  Management  Board on  Impexmetal  S.A.  and
appointed to the board of Elektrim S.A. in 2002. Mr. Krawiec is also a President
of the Supervisory  Board of Huta Aluminium  "Konin" S.A. and Elektrim Volt S.A.
and he is a member of the  Supervisory  Bard of Elektrim  Telekomunikacja  Sp. z
o.o. and Elektrim Megadex S.A.

Jacek  Trela is Dean of the  Warsaw  Bar  Council  and  member of the Polish Bar
Council. He graduated from the Warsaw University, Law Faculty.


                                     - 55 -
<PAGE>


Management Board and Executive Officers

Set forth below are the names of the current members of our Management Board and
Executive  Officers,  their  current  position  and the year in which  each such
member was first appointed, followed by a short biography of each such member.

<TABLE>
<CAPTION>
                Name                                  Position                    Member of Management
                                                                                      Board Since
------------------------------------ ------------------------------------------ -------------------------
<S>                                   <C>                                                 <C>
Boguslaw Kulakowski................   Director General                                    1999
Martin Schneider...................   Director of Strategy, Marketing & Sales             2002
Wilhelm Stueckemann................   Director of Network Operations                      1996
Jonathan Eastick...................   Director of Finance                                 2001
Ryszard Pospieszynski..............   Director of Administration                          1996
Wojciech Ploski(5).................   Director  of  Strategy,   Marketing  and            2000
                                      Sales
</TABLE>

Boguslaw  Kulakowski is our Director General and was appointed to the Management
Board by Elektrim in September 1999. Mr. Kulakowski was formerly our Director of
Customer Care, and most recently,  our Chief  Strategist.  Before joining us, he
worked as  Marketing  Director  for SAP Polska and a  Marketing  Consultant  for
Coca-Cola New York. Mr.  Kulakowski is a 1990 graduate of Maria Curie Sklodowska
University (Poland), from which he holds a Master's degree in Law. He also holds
a Master's degree in Business  Administration  from State University of New York
(USA) and a Master's  degree in Business  Telecommunications  from the Technical
University of Delft (The Netherlands).

Martin  Schneider  has been  Director  of  Strategy,  Marketing  and  Sales  and
Management  Board Member since February 13, 2002. Mr.  Schneider  joined us from
T-Mobile  International,  a subsidiary of Deutsche Telekom,  where he has been a
Senior Director of International  Joint Venture Management since 2000. He joined
T-Mobile  Deutschland as Head of Corporate  Strategy in 1993, and then worked as
Head  of  Product  Marketing,   Residential  Customers  and  Head  of  Marketing
Management in T-D1,  Residential and Business Customers.  Prior to his tenure at
T-Mobile  International,  Mr.  Schneider  worked  for  Procter & Gamble in their
marketing  division  and then in  Blendax  (part of  Procter & Gamble  Group) in
International Brand Management.

Wilhelm  Stueckemann is our Director of Network  Operations and was appointed to
our Management Board by DeTeMobil in 1996. Mr. Stueckemann has held a variety of
positions with  DeTeMobil,  mainly in the  development of GSM businesses and the
establishment of a team of engineers responsible for the D-1 network in Germany.
Mr. Stueckemann studied electrical engineering in Bielefeld, Germany.

Jonathan Eastick joined us on March 1, 2001 as our Director of Finance. Prior to
joining us, Mr. Eastick had worked since 1998 at Lucent Technologies Poland S.A.
as Chief  Financial  Officer.  He also held additional  responsibilities  as CFO
Sales Controller for UMTS commercial  offers in Lucent's  European,  Middle East
and African  operations.  Prior to his tenure at Lucent,  Mr. Eastick shaped his
career in finance during a five-year  assignment  with Arthur Andersen in London
and Warsaw. From 1995 to 1998 he was Manager of Strategic and Financial Planning
at Poland's first cellular operator,  PTK Centertel Sp. z o.o. He holds a degree
from the London School of Economics and is a UK Qualified Chartered Accountant.

Ryszard  Pospieszynski  is our Director of  Administration  and was appointed by
Elektrim to the Management Board in 1996.  Previously,  Mr. Pospieszynski served
as Chairman of FATA Ltd., and the General Director of PHZ Film Polski.  He holds
a Masters  degree in  economics  from the  University  of  Gadansk  (1976) and a
Masters degree in business  telecommunications  from the Technical University of
Delft (The Netherlands) (2001).


(5)  In January  2002, we  terminated  our contract with Wojciech  Ploski on his
     request.


                                     - 56 -
<PAGE>


Compensation

For the year ended  December  31,  2001,  we paid an  aggregate  of PLN  7,876.9
thousand  to the  members of our  Supervisory  Board and our  Management  Board,
including  compensation  for  salary,  bonuses  and  social  pension  plans.  In
addition,  some  of the  members  of  the  Management  Board  were  paid  by the
respective shareholders which have seconded them.

There are no pension or similar benefit plans for the members of our Supervisory
and Management Boards.

Board Practice

Members of the  Supervisory  Board are appointed for a period that begins at the
end of the  ordinary  Shareholders'  Meeting  at which a  resolution  is adopted
appointing them and serve until the following ordinary  Shareholders' Meeting at
which a resolution is adopted  discharging them,  although their appointment may
also be extended.  The  Shareholders'  Agreement  permits any Operating Party to
replace a member of the  Supervisory  Board it  appointed  at any  Shareholders'
Meeting.

Management  Board Members sign three year  contracts  with us,  beginning at the
time of  their  nomination.  The  payment  that we are  obliged  to pay upon the
termination of each contract cannot exceed 15 months of remuneration.

Executive  Officers sign contracts with us for an unspecified  time period.  The
payment that we are obliged to pay upon the  termination of each contract cannot
exceed 15 months of remuneration.  Currently,  all of our Executive Officers are
members of our Management Board.

Employees

As of December  31,  2001,  we had 3,609  employees,  including  2,174 in sales,
marketing and strategy, 873 in network operations, 83 in product development and
management and 479 in finance,  administration  and general director  divisions.
Five of our  employees are secondees  from  DeTeMobil.  All of our employees are
located in Poland,  mainly at our  headquarters  in Warsaw but also in  regional
offices and shops around the country.

All of our employees,  other than our seconded employees,  enter into an initial
three-month employment contract.  After completion of this initial contract, our
employees  enter into an  employment  contract  of  indefinite  term  subject to
termination upon a stated notice period.

To our knowledge,  our employees have not entered into any collective bargaining
agreements.  We do not have any  history  of strikes  or work  stoppages  and no
material  labor related  claims are pending.  We believe that relations with our
employees are good.

We do not  currently  have a  pension  plan  or  stock  option  plans,  but  the
introduction of a pension plan is under consideration.

Share Ownership

None of our Supervisory Board Members or Management Board Members has any shares
or options for shares. We do not currently have a stock option plan.

Item 7. Major Shareholders and Related Party Transactions

Major Shareholders

The  following  table sets forth  information  regarding  the  ownership  of our
471,000 ordinary shares outstanding.


                                     - 57 -
<PAGE>


<TABLE>
<CAPTION>
                                                           Number of Shares        Percentage of Shares
Name of Beneficial Owner                                  Beneficially Owned        Beneficially Owned
-------------------------------------------------------- ----------------------- --------------------------
<S>                                                             <C>                      <C>
Elektrim Telekomunikacja Sp. z o.o(1).................          226,079                  47.9998%

DeTeMobil Deutsche Telekom MobilNet GmBH..............          105,975                    22.5%

MediaOne International B.V.(2)........................          105,975                    22.5%

Polpager Sp. zo.o.....................................          18,840                     4.0%

Elektrim Autoinvest S.A.(3)...........................           5,181                     1.1%

Carcom WARSZAWA Sp. zo.o(4)...........................           8,949                     1.9%

Elektrim S.A..........................................             1                      0.0002%
</TABLE>

---------------
(1)  Elektrim  S.A.  owns  49% and  Vivendi  S.A.  (a  French  telecommunication
     company) owns 51% of the outstanding shares in Elektrim Telekomunikacja Sp.
     z o.o.

(2)  On  March  23,  2000,   DeTeMobil   acquired  100%  ownership  in  MediaOne
     International B.V.

(3)  Elektrim Autoinvest S.A., is owned by Carcom WARSZAWA and Vivendi.

(4)  Elektrim S.A. owns 49% and Vivendi S.A. owns 51% of the outstanding capital
     of Carcom WARSZAWA Sp. z o.o.

In August 1999,  Elektrim  announced that it had acquired an additional 15.8% of
our  shares  including  the  acquisition  of  shares  from  our  smaller  Polish
shareholders,  for a purchase price of U.S.$679.4 million. Prior to August 1999,
Elektrim owned 34.1% of the shares.  Deutsche  Telekom is disputing the legality
of Elektrim's  acquisition of a portion of these acquired  shares  (representing
approximately 3% of our total 471,000 outstanding shares),  claiming that it had
a right of first  refusal  to  purchase  these  shares  under our  Shareholders'
Agreement.  On December 9, 1999,  Elektrim  registered  with the Warsaw Regional
Court the transfer of 47.9998% of our shares to Elektrim  Telekomunikacja  Sp. z
o.o. retaining one share of direct ownership.  Notwithstanding the foregoing, at
the request of Elektrim,  our Management  Board filed these changes in our share
registry book and agreed to file an updated list of shareholders with the Warsaw
Regional  Court as required under Polish law. Two of our five  Management  Board
members objected,  however, to Elektrim's request and did not sign the change in
our share registry book. The updated list of shareholders,  together with formal
statements  from the two dissenting  Board  members,  were filed with the Warsaw
Regional Court.  Deutsche  Telekom sought an injunction from the Warsaw Regional
Court to disallow the change in our share  registry book and the updated list of
shareholders.  This was  rejected by the Court on February  16,  2000.  Deutsche
Telekom has announced that it would appeal this decision.  Deutsche Telekom also
announced  in October  1999 the  commencement  of an  arbitration  claim (at the
International  Arbitration Court in Vienna) against Elektrim and certain smaller
shareholders.  This claim was suspended in December 2000  following the entry by
Deutsche  Telekom  into a letter of intent  with  Elektrim  for the  purchase by
Deutsche  Telekom  of a  51%  stake  in  six  Elektrim  companies  that  provide
fixed-line and data transmission services. However, this claim was renewed after
this letter of intent expired and  negotiations  with Elektrim ended.  The court
hearings  began in the  fourth  quarter  of 2001 and are  expected  to  continue
through the first half of 2002.

Moreover,  Elektrim received a second offer from Vivendi.  On June 27, 2001, the
Management  Board of Elektrim  entered into a memorandum of  understanding  with
Vivendi, pursuant to which Elektrim agreed to sell Vivendi 2% of the outstanding
stock  of  Elektrim  Telekomunikacja  and 1% of  Carcom,  which  are  two of our
shareholders,  thereby giving Vivendi control over Elektrim  Telekomunikacja and
Carcom,  respectively.  See  "Item  7.  Major  Shareholders  and  Related  Party
Transactions".  In addition,  the  memorandum  of  understanding  provided  that
Elektrim  will sell all of its fixed line and  Internet  businesses  to Elektrim
Telekomunikacja.  Vivendi also agreed to implement an initial public offering of
the shares of Elektrim  Telekomunikacja  within an 18 month period. The contract
between Elektrim and Vivendi was signed on September 4, 2001.

Further,  on March 15, 2002,  Vivendi entered into a memorandum of understanding
pursuant  to  which  Vivendi  agreed  to  sell  its  49%  interest  in  Elektrim
Telekomunikacja to a consortium of investors led by Citigroup  Investments.  The
definitive  agreements  relating to this memorandum of understanding are subject
to  the  satisfaction  of  a  number  of  conditions  precedent,  including  the
settlement of the dispute


                                     - 58 -
<PAGE>


between Deutsche Telekom and Elektrim discussed above. In addition, in the above
referenced  memorandum of understanding,  Vivendi agreed to enter into a put and
call option with respect to the remaining 2% of Elektim  Telekomunikacja that it
controls, pursuant to which the consortium of investors may call such shares and
Vivendi may put such shares to the  consortium.  No definitive  agreements  have
been entered in connection with these transaction.  If the definitive agreements
are entered into, the conditions precedent are met and the put/call arrangements
are effected,  Vivendi would completely withdraw from its investment in Elektrim
Telekomunikacja.  See "Item 3. Key  Information  - Risk  Factors - We may not be
able to finance a change of control offer required by our indentures."

The Shareholders' Agreement provides, among other things, that certain decisions
of the  Management  Board may not be taken  without  the prior  approval  of the
Supervisory  Board. This prior approval by the Supervisory Board cannot be given
unless all members of the Supervisory  Board who were appointed by the Operating
Parties  vote  or  consent  to  approve  such  actions.  These  actions  include
amendments to our business plan and annual budgets, acquisitions or dispositions
of assets above certain values, incurring additional indebtedness (other than in
the  ordinary  course of  business or below  certain  limits) and the entry into
long-term contracts (with certain exceptions).  The Shareholders' Agreement also
requires  that at  least  one  member  of each of the  Operating  Parties  be in
attendance at all Shareholders'  Meetings.  At the time of Elektrim's  announced
acquisition of minority shares,  the Operating Parties were DeTeMobil,  Elektrim
and MediaOne,  with  DeTeMobil and MediaOne each  appointing  two members to the
Supervisory Board and Elektrim appointing four members to the Supervisory Board.
As a consequence of the share transfer mentioned above,  Elektrim's two original
seats on the Board belong to Elektrim  Telekomunikacja Sp. z o.o. and MediaOne's
two seats on the Board  belong to  Deutsche  Telekom.  Of the three  Supervisory
Board Members  formerly  appointed by our smaller Polish  shareholders  prior to
Elektrim's  acquisition  of our  shares  from those  shareholders,  two of these
members will now be appointed by Elektrim  Telekomunikacja Sp. z o.o., which may
also be entitled to appoint the third  member as well.  As of the filing of this
Form  20-F,  our  Operating   Parties  are  DeTeMobil,   MediaOne  and  Elektrim
Telekomunikacja  Sp. z o.o. See "Item 7. Major  Shareholders  and Related  Party
Transactions  -  Related  Party  Transactions  -  Shareholders'  Agreement".  In
addition, for a discussion of certain matters relating to the relationship among
the shareholders of one of our shareholders, Elektrim Telekomunikacja Sp. z o.o.
see "Item 3. Key Information - Risk Factors".

In late March 2002,  BRE Bank,  a leading  Polish  bank,  announced  that it was
entering into a joint venture with the Dutch-based joint venture firm Eastbridge
in order to  acquire  the 49% of the  shares of  Elektrim  Telekomunikacja  that
Elektrim  currently owns. This  announcement  further stated that BRE Bank would
look to  consolidate  its stake with the stake  announced to be purchased by the
consortium led by Citigroup Investments (discussed above) with a view to selling
Elektrim  Telekomunikacja  to a third party. No further  announcements have been
made.

Related Party Transactions

Agreements with Deutsche Telekom AG

Agreement on signaling for the international roaming services

On November 22, 2001,  we entered into an agreement  with  Deutsche  Telekom AG.
This agreement covers the termination of our international signaling traffic for
roaming by Deutsche  Telekom AG via its  international  SCCP in Frankfurt on the
Main and  Duesseldorf.  The  contract  will stay in force  for one year.  If the
agreement is not  terminated in writing,  three months before the expiry of this
one year period it will automatically be extended for undefined period of time.

Payments

We incurred the cost of PLN 22.1 million in aggregate for all DeTeMobil services
rendered, including roaming settlements in 2001.


                                     - 59 -
<PAGE>


Agreements with Elektrim Volt S.A.

Civil works framework agreement

On  October  1,  2001,  we signed a  contract  with  Elektrim  - Volt S.A.  This
agreement  covers the building and realizing the  investment in the area of Base
Stations  required by our GSM network.  This is a continuation  of  co-operation
with this company.

Item 8. Financial Information

Financial Statement and Other Financial Information

The following  information should be read in conjunction with "Item 5. Operating
and Financial Review and Prospects" and the Financial Statements  (including the
Notes thereto) presented  elsewhere in this Form 20-F. The Financial  Statements
have been prepared in accordance with International Accounting Standards,  which
differ  in  certain  respects  from  U.S.  GAAP.  See  Note 32 to the  Financial
Statements as of and for the year ended December 31, 2001.  The financial  data,
presented in accordance with International Accounting Standards,  included below
as of and for the years ended December 31, 2001,  2000 and 1999 has been derived
from the Financial Statements,  which have been audited by Arthur Andersen Sp. z
o.o., independent auditors. The financial data presented in accordance with U.S.
GAAP included  below as of and for the years ended  December 31, 2001,  2000 and
1999 has been derived from our Financial Statements.

<TABLE>
<CAPTION>
Statement of Operations Data                                     Year ended December 31,
---------------------------------------------- -------------------------------------------------------
                                                         2001                 2000             1999
                                               ------------------------------------------- -----------
                                                  PLN           US$(1)        PLN              PLN
                                               ----------     ---------    ----------       ----------
                                                                           (restated)(4)   (restated)(4)
                                                (in thousands, except subscriber and churn rate data)
<S>                                             <C>           <C>           <C>              <C>
International Accounting Standards
Net Sales:
Service revenues and fees ..................    4,123,555     1,034,432     3,460,579        2,374,827
Sales of telephones and accessories ........      221,341        55,525       224,144          140,729
Total net sales ............................    4,344,896     1,089,957     3,684,723        2,515,556
                                               ----------     ---------    ----------       ----------

Cost of Sales:
Cost of services sold ......................   (1,778,687)     (446,200)   (1,383,893)        (944,420)
Cost of sales of telephones and accessories      (948,750)     (238,003)     (902,533)        (641,926)
Total cost of sales ........................   (2,727,437)     (684,203)   (2,286,426)      (1,586,346)
                                               ----------     ---------    ----------       ----------

Gross margin ...............................    1,617,459       405,754     1,398,297          929,210
Operating expenses:
Selling and distribution costs .............     (585,463)     (146,869)     (576,318)        (454,807)
Administration and other operating costs ...     (199,966)      (50,163)     (189,698)        (157,752)
Total operating expenses ...................     (785,429)     (197,032)     (766,016)        (612,559)
                                               ----------     ---------    ----------       ----------
Operating profit ...........................      832,030       208,722       632,281          316,651
Interest and other financial expenses, net .     (377,930)      (94,807)     (489,540)        (398,263)
Profit/(loss) before taxation ..............      454,100       113,915       142,741          (81,612)
Taxation charge ............................      (26,879)       (6,743)      (33,354)         (40,891)
Net income/(loss) ..........................      427,221       107,172       109,387         (122,503)
                                               ==========     =========    ==========       ==========

U.S. GAAP
Revenues ...................................    4,345,206     1,090,035     3,518,959(5)     2,592,061
Cost of sales ..............................   (2,707,206)     (679,128)   (2,113,063)      (1,656,459)
Operating expenses .........................     (785,429)     (197,032)     (766,016)        (622,027)
Interest and other financial expenses, net .     (320,504)      (80,401)     (485,364)        (416,487)
Taxation ...................................      (33,045)       (8,290)      (32,909)         (37,953)
Net income/(loss) before cumulative effect
on accounting changes and extraordinary item      499,022       125,184       121,607         (140,865)

Cumulative effect on the adoption of SFAS
133, net of tax ............................       (4,926)       (1,236)           --               --

Extraordinary loss from 1997 Bank Credit
Facility financing costs write-off, net of
tax ........................................       (7,288)       (1,828)           --               --

Net income/(loss) after cumulative effect
on accounting changes and extraordinary item      486,808       122,120       121,607         (140,865)

Other Financial and Operating Data
(unaudited)
Adjusted EBITDA (IAS)(2) ...................    1,682,602       422,096     1,151,986          598,348
Adjusted EBITDA (U.S. GAAP)(2) .............    1,683,752       422,385     1,150,397          588,880
Net cash from operating activities .........    1,162,400       291,599       684,916          350,012
Net cash used in investing activities ......   (2,275,227)     (570,762)   (1,555,075)      (1,835,611)
Net cash from/(used in) financing activities    1,120,235       281,021      (195,474)       2,603,992
Subscribers at end of period ...............    3,775,652           N/A     2,802,980        1,751,475
Monthly churn rate(3)  (%) .................          1.8           N/A           2.0              2.5
</TABLE>


                                     - 60 -
<PAGE>


<TABLE>
<CAPTION>
Balance Sheet Data                                 Year ended December 31,
-------------------------------------   ---------------------------------------------
                                           2001                    2000        1999
                                        ---------------------   ---------   ---------
                                           PLN        US$(1)       PLN         PLN
                                        ---------   ---------   ---------   ---------
                                                              (restated)(4) (restated)(4)
                                                       (in thousands)
<S>                                     <C>         <C>         <C>         <C>
International Accounting Standards
Long-term assets and deferred taxes .   6,372,128   1,598,507   6,127,889   4,175,316
Total assets ........................   7,217,453   1,810,564   7,039,989   6,117,518
Long-term liabilities, deferred tax
liabilities and provisions ..........   5,350,528   1,342,229   4,171,058   4,773,052
Total liabilities ...................   6,221,708   1,560,772   6,353,042   5,949,712

Shareholders' equity ................     995,745     249,792     686,947     167,806

U.S. GAAP
Long-term assets ....................   6,414,619   1,609,166   6,099,364   3,969,987
Total assets ........................   7,470,922   1,874,149   7,011,464   5,939,661

Shareholders' equity after cumulative
changes in accounting principles ....     999,557     250,748     609,704      78,343
</TABLE>

-------------
(1)  Solely  for  the  convenience  of  the  reader,  Zloty  amounts  have  been
     translated  into U.S.  dollars at the rate of PLN 3.9863 per  US$1.00,  the
     Fixing Rate  announced by the National Bank of Poland on December 31, 2001.
     The translated amounts should not be construed as representations  that the
     Zloty has been,  could have been, or could in the future be converted  into
     U.S. dollars at this or any other rate of exchange.

(2)  Adjusted EBITDA represents operating  profit/(loss) before depreciation and
     amortization.  Adjusted  EBITDA  is  included  as  supplemental  disclosure
     because it is generally accepted as providing useful information  regarding
     a company's ability to service and incur debt.  Adjusted EBITDA should not,
     however,  be considered in isolation as a substitute  for net income,  cash
     flow provided from  operating  activities or other income or cash flow data
     or as a measure of a company's profitability or liquidity.

(3)  The churn rate is  calculated  as the average of the monthly churn rates in
     the relevant  period.  The monthly  churn rate is  calculated  as the total
     number of voluntary and involuntary  deactivations  and suspensions  during
     the  relevant  month  expressed as a  percentage  of the average  number of
     subscribers for the month (calculated as the average of the month end total
     number of subscribers and the total number of subscribers at the end of the
     previous month).

(4)  The above restatements relate only to the IAS Financial Statements

(5)  During  2000,  we  adopted  the  revenue  recognition  principles  of Staff
     Accounting  Bulletin No. 101 "Revenue  Recognition" or "SAB 101", issued by
     the Securities and Exchange Commission.  Accordingly, in 2000 we instituted
     accounting procedures that are consistent with SAB 101. For the years ended
     prior to December  31, 1998 our  internal  accounting  procedures  were not
     recognized  in a manner that allowed us to gather data required by SAB 101.
     The cumulative net effect of the  introduction of SAB 101 on our net assets
     as of January 1, 2000 resulted in a decrease of PLN 0.3 million.

Legal Proceedings

Personal Data Protection

An investigation of our sales practices by the General Inspector of the Personal
Data  Protection's  (GIODO)  office was conducted in the fourth quarter of 1999.
Although the post-control protocol report


                                     - 61 -
<PAGE>


neither outlined a legal situation or suggested  changes,  it did reveal that we
require  our  subscribers  to provide  more  identification  than what the GIODO
office generally  believes is necessary.  In our opinion,  such documentation is
necessary to verify the identity of our  subscribers  who enter into an extended
agreement for telecommunications  services, and also, to assist us in minimizing
the risk of subscriber  fraud.  Together with other telecom operators in Poland,
we submitted a proposal to the Ministry of  Communications  regarding changes to
the existing law. The Ministry of Communications has not taken a position on the
matter,  nor has it responded to the proposal.  On July 14, 2000, GIODO issued a
decision  in which it stated that all the  transgressions  of the  existing  law
should be removed. On July 28, 2000, we appealed this decision by asserting that
the GIODO's objections are groundless and filed a motion for further examination
of the case.  After the case was heard by the  appellate  court on September 21,
2000,  the decision from July 14, 2000 was upheld.  We appealed that decision to
the  Supreme  Administrative  Court on October 19,  2000.  The case has not been
resolved yet.  However,  if GIODO succeeds,  we believe its decision will create
additional  burdens on our credit  background  checks on subscribers,  which may
therefore  result in increased  credit risks.  On December 11, 2001, The Supreme
Administrative  Court  issued a decision in which it is stated that the decision
from July 14, 2000 is valid.

Dividend Policy

Our  statutory  financial  statements  are  prepared in  accordance  with Polish
accounting  regulations.  Dividends may only be distributed  from the net profit
reported in the Polish annual statutory financial statements.  As at the date of
signing this report there was not  Shareholders'  decision  regarding net income
distribution.

Dividend distribution is restricted mainly by the Existing Notes agreements that
require  us to have Debt to  Adjusted  Consolidated  Net Worth  ratio at a level
below 2.0:1.0.

Item 9. The Offer and Listing

Markets

Our 10 3/4%  Notes,  10 7/8%  Notes  and our 11 1/4%  Notes  are  traded  in the
over-the-counter  market and there is no active public  trading  market for such
securities.

There is no established trading market for our equity securities.

Item 10. Additional Information

Memorandum and Articles of Association

Objects and Purposes

Under Polish law, the  memorandum  and articles of  association of a company are
incorporated in a document known as the Formation Deed.

We were formed on December 20, 1995,  as a limited  liability  company under the
name "Polska Telefonia Cyfrowa Spolka z ograniczona  odpowiedzialnoscia"  for an
unlimited duration  (Repertory A 20883/95).  Our Formation Deed was last amended
on February 12, 2002.  Article 5 of the  Formation  Deed  describes our business
purposes:

     o    to  conduct  activities  in the  field of  telecommunications,  and in
          particular in the field of mobile  telephony,  data  transmission  and
          data communications, as well as all other telecommunications services,
          including Internet and Internet-related  services and fixed telephony;
          and

     o    to conduct industrial,  commercial and financial  activities which are
          directly or indirectly indispensable or useful to pursue our purposes,
          and in particular we may set up branch  offices and form  companies in
          Poland or abroad.


                                     - 62 -
<PAGE>


Share Rights and Restrictions

Our share capital  amounts to PLN 471,000,000 and was divided into 471,000 equal
and indivisible  shares, each with a nominal value of PLN 1,000. The Supervisory
Board may require our shareholders to make additional capital payments.

Our Formation Deed sets forth the conditions for the sale,  transfer,  pledge or
other disposal of our shares, including:

     o    the requirement of Supervisory Board approval;

     o    the  circumstances   under  which  shares  may  be  transferred  to  a
          shareholder  holding more than 20% without  Supervisory Board consent,
          i.e. as a result of a previously approved share pledge;

     o    a five-year waiting  requirement,  effective from the date the GSM 900
          License and related permit were obtained, which restricts shareholders
          holding no more than 5% from transferring their shares; and

     o    the rights of first refusal.

Directors

The  Supervisory  Board  currently  consists  of at  least  nine  members.  Each
shareholder  holding  more than 20% is  entitled  to  appoint  and  dismiss  two
members.  Each  shareholder  holding  more than 40% is  entitled  to appoint and
dismiss four members. The other member is elected at our Shareholders'  Meeting.
In addition,  the  shareholders  may revoke the appointment of any member of the
Supervisory  Board at any  Shareholders'  Meeting,  without  giving any  reasons
therefore,  with a simple  majority of all votes.  The Formation Deed sets forth
additional  criteria  for the  appointment  of the  members.  Supervisory  Board
resolutions  are valid  provided at least one member  appointed  by an Operating
Party  participates  in the meeting.  A simple  majority is sufficient to pass a
resolution,  unless the Supervisory  Board Internal Rules of Procedure  provides
otherwise.

The Supervisory Board's responsibilities include the following:

     o    to actively supervise our business;

     o    to approve the business plans and annual budgets;

     o    to  appoint  and  recall  members  of  the  Management  Board,  and to
          determine their compensation;

     o    to consent to transactions and actions that require  Supervisory Board
          approval under the Management Board Internal Rules of Procedure;

     o    to review  the  annual  report,  balance  sheet,  and other  financial
          reports;

     o    to appoint auditors; and

     o    to decide  any other  matters  delegated  to it under the  Supervisory
          Board  Internal  Rules  of  Procedure  or  assigned  to it  under  the
          Formation Deed, unless these matters were exclusively  assigned to the
          Shareholders' Meeting.

Pursuant to the  Formation  Deed,  the  Supervisory  Board has the sole right of
supervision of our company.  The Management  Board is appointed and dismissed by
the Supervisory  Board and is governed by the Management Board Internal Rules of
Procedure,  as adopted  by the  Supervisory  Board.  We are  represented  by two
members of the  Management  Board acting  jointly as set forth in the  Formation
Deed. The function and  responsibility  of the Management Board is to manage all
aspects of our company,  except for those matters  reserved for the  Supervisory
Board or the Shareholders' Meeting.

Shareholders' Meeting

The ordinary  Shareholders'  Meeting  shall be held  annually  before the end of
June. An  extraordinary  Shareholders'  Meeting may be called on the Supervisory
Board's request or upon the written request of shareholders  holding 10% or more
of the  share  capital.  Each  share  represents  one vote and any  resolutions,
including  amendments to the Formation Deed,  require the approval of 70% of the
share capital,  and the approval of all Operating  Parties.  At a  Shareholders'
Meeting,  the  shareholders  may also pass a resolution on the redemption of the
shares  subject to the  conditions set forth in the Formation Deed or as defined
by law.


                                     - 63 -
<PAGE>


Our shareholders have the following responsibilities:

     o    to review and approve the Management and Supervisory  Boards' reports,
          as well as year-end balance sheets and financial statements;

     o    to exonerate  members of the Management and Supervisory  Boards and to
          determine the remuneration of the Supervisory Board members;

     o    to decide on the filing of claims against  shareholders  or members of
          the Management or Supervisory Boards;

     o    to resolve to retain or distribute any profits or to cover any losses;

     o    to resolve to increase or decrease the share capital;

     o    to amend the Formation Deed;

     o    to decide on the sale or lease of the enterprise or on the granting of
          the right of use thereof (under Polish law);

     o    to dissolve and liquidate our company; and

     o    to decide on any matters  within the  competence  of the  shareholders
          under the Formation Deed or under Polish law.

It should  also be noted that the sale or  purchase  of real  property  does not
require the approval of the Shareholders' Meeting.

Covenant not to Compete

Unless expressly  approved by the Supervisory Board, which approval shall not be
unreasonably  withheld, our shareholders will not compete directly or indirectly
with us, or support  competing  activities  of third  parties in  providing  GSM
services  in Poland  other than in the  ordinary  course of  business.  Upon the
transfer of its shares by or the withdrawal of any shareholder, the covenant not
to compete will continue to apply for five years after the effective date of the
transfer or the withdrawal.

Confidentiality

Each  shareholder is bound to keep in strict  confidence all the  technological,
financial  and  commercial  information  it  received  and  must  undertake  all
indispensable  measures to protect such  information,  unless the information is
not considered to be  confidential or its disclosure is required under Polish or
other laws.  The same  restrictions  apply to us and any  information we receive
about the shareholders.

Miscellaneous Matters

The fiscal year coincides with the calendar year. In the event of a liquidation,
the shareholders will appoint one or more liquidators. In the event of a dispute
which cannot be resolved  through  negotiations,  the Formation Deed permits the
use of arbitration.

Material Contracts

Bank Credit Facilities

In February 2001, we entered into:

     o    a (euro)550 million Bank Credit Facility (the "(euro)550  Million Bank
          Credit  Facility ") with  Deutsche  Bank  Luxembourg  S.A.,  as Agent,
          Deutsche Bank AG London,  Dresdner Bank Luxembourg  S.A., The European
          Bank for Reconstruction and Development and Deutsche Bank Polska S.A.,
          as lead arrangers,  Deutsche Bank Polska S.A., as security agent,  and
          the lenders party thereto (the "(euro)550 Million Lenders "); and

     o    a (euro)100 million Bank Credit Facility,  as amended on September 24,
          2001 for the amount of (euro) 150 Million (the "(euro)150 Million Bank
          Credit Facility" and,  together with the (euro)550 Million Bank Credit
          Facility,  the "Bank Credit Facilities") with Deutsche Bank Luxembourg
          S.A., as Agent, Deutsche Bank AG London, Dresdner Bank Luxembourg S.A.
          and Deutsche Bank Polska S.A., as lead arrangers, Deutsche Bank Polska
          S.A., as security agent, and the lenders party thereto (the "(euro)150
          Million Lenders" and together with the (euro)550 Million Lenders,  the
          "Lenders").


                                     - 64 -
<PAGE>


Pursuant to the (euro)550  Million Bank Credit Facility,  the (euro)550  Million
Lenders  agreed  to make  advances  to us on a  revolving  credit  basis  in the
aggregate  principal  amount of not more than (euro)550  million.  The (euro)550
Million Bank Credit Facility is comprised of two tranches:

     o    an offshore tranche consisting of commitments totaling, at the date of
          agreement,   (euro)292,500,000  under  which  amounts  shall  be  made
          available in Euro, U.S. dollars, Deutschmarks, Swiss Francs, Sterling,
          Japanese Yen or Zloty; and

     o    a Zloty tranche consisting of commitments totaling, at the date of the
          agreement,  the Zloty  equivalent  of  (euro)257,500,000  under  which
          amounts shall be made available only in Zloty.

Pursuant to the (euro)150  Million Bank Credit Facility,  the (euro)150  Million
Lenders agreed to make loans to us on a revolving  credit basis in the aggregate
principal amount of not more than (euro)150 million.  The (euro)150 Million Bank
Credit Facility is comprised of two tranches:

     o    an offshore tranche consisting of commitments totaling, at the date of
          agreement,   (euro)20,000,000   under  which  amounts  shall  be  made
          available in Euro, U.S. dollars, Deutschmarks, Swiss Francs, Sterling,
          Japanese Yen or Zloty; and

     o    a Zloty tranche consisting of commitments totaling, at the date of the
          agreement  the Zloty  equivalent  of (euro)  130,000,000  under  which
          amounts shall be made available only in Zloty.

Our ability to borrow  funds under the Bank Credit  Facilities  depends upon the
satisfaction  of a number of conditions  including  continuing  compliance  with
customary  covenants  and the  accuracy  of certain of our  representations  and
warranties at the time of each borrowing.  The principal amount of the (euro)550
Million  Bank Credit  Facility is required to be repaid in full by February  20,
2006, and the principal amount of the (euro)150 Bank Credit Facility is required
to be repaid in full by March 31, 2007, and the Lenders' commitments  thereunder
reduced pro-rata according to the following schedules:

--------------------------------------------------------------------
                         Reduction Amount for (euro)550 Million Bank
                                     Credit Facility
  Installment Date
  September 30, 2004                    27,500,000
  December 31, 2004                     82,500,000
  March 31, 2005                       110,000,000
  June 30, 2005                        110,000,000
  September 30, 2005                   110,000,000
  February 20, 2006                    110,000,000
                                      ---------------
                                       550,000,000
                                      ===============
--------------------------------------------------------------------

--------------------------------------------------------------------
                         Reduction Amount for (euro)150 Million Bank
                                     Credit Facility
  Installment Date
  September 30, 2005                     7,500,000
  February 20, 2006                     22,500,000
  March 31, 2006                        30,000,000
  June 30, 2006                         30,000,000
  September 30, 2006                    30,000,000
  March 31, 2007                        30,000,000
                                      ---------------
                                       150,000,000
                                      ===============
--------------------------------------------------------------------

All borrowings under the (euro)550 Million Bank Credit Facility bear interest at
a rate per annum equal to, depending on the currency borrowed,  the London, Euro
or Warsaw  Interbank  Offered Rate,  commonly  referred to as LIBOR,  EURIBOR or
WIBOR, plus in each case a margin based on our ratio of senior


                                     - 65 -
<PAGE>


debt to EBITDA and any additional  cost  resulting from any lender's  compliance
with any mandatory  liquidity,  reserve assets or cash margin requirements of an
applicable financial regulatory authority imputed to such lender.

All borrowings under the (euro)150 Million Bank Credit Facility bear interest at
a rate per annum equal to, depending on the currency  borrowed,  the London Euro
or Warsaw  Interbank  Offered Rate,  commonly  referred to as LIBOR,  EURIBOR or
WIBOR,  plus in each case a margin  based on our ratio of senior  debt to EBITDA
and any  additional  cost  resulting  from  any  lender's  compliance  with  any
mandatory liquidity, reserve assets or cash margin requirements of an applicable
financial regulatory authority imputed to such lender.

Under the Bank Credit  Facilities,  we were required to submit our UMTS business
plan to the  Lenders for their  approval.  The Lenders  have  approved  our UMTS
business plan and consequently there are no limits on our capital expenditure on
the UMTS network.

The Bank Credit Facilities contain  affirmative  covenants which include,  among
others, maintenance of:

     o    ratios of senior debt to EBITDA;

     o    ratios of EBITDA to interest expense on senior debt; and

     o    ratios of EBITDA to total debt.

The covenants under the Bank Credit  Facilities  allow us and our  subsidiaries,
under certain circumstances,  to declare or pay dividends or make other payments
or  distributions  to  shareholders  and to service  subordinated  indebtedness,
including our Notes, provided we meet certain financial covenants and so long as
certain  events,  such as a payment block, a default or an event of default have
not occurred and are  continuing.  The Bank Credit  Facilities also provides for
various events of default, including:

     o    a failure to make payments of interest and principal,  breaches of our
          covenants,  agreements,  representations and warranties under the Bank
          Credit Facilities;

     o    a default under any other indebtedness  having an aggregate  principal
          amount of (euro)10 million;

     o    the existence of a material  unsatisfied judgment or order not subject
          to appeal;

     o    the occurrence of certain events relating to bankruptcy or insolvency,
          or our making material  changes in the nature of our business  without
          the Lenders' prior consent;

     o    changes in ownership of the Guarantor, that result in Deutsche Telekom
          AG or its  subsidiaries,  or Elektrim and/or Elektrim  Telekomunikacja
          Sp. z o.o. owning less than 25.01% of the outstanding share capital of
          the Guarantor;

     o    any  governmental  action  that,  in  the  reasonable  opinion  of the
          majority  of  the  Lenders,  has a  material  adverse  effect  on  our
          condition or our ability to perform our obligations;

     o    our failure to comply with any of the material  provisions  of, or our
          obligations, under the 10 3/4% Notes and the 11 1/4% Notes;

     o    any event occurs which is likely to have a material  adverse effect on
          our ability to repay the Bank Credit  Facilities  or on our  business,
          financial condition, operations or performance;

     o    the  termination,  revocation  or  suspension  of any  license for the
          operation of a telecommunications business; and

     o    the  reduction  or  diminution  of  any  of the  rights  of our  major
          shareholders under the Shareholders'  Agreement,  or the cancellation,
          suspension or termination of the  Shareholders'  Agreement without its
          replacement by an agreement  having  substantially  the same terms and
          conditions,  or any other  event or series  of events  occurs  that is
          likely to have a material adverse effect.


                                     - 66 -
<PAGE>


Taxation

Poland

The  following  general  summary is based upon the income tax laws of Poland and
interpretations thereof by the Polish Ministry of Finance as in effect as of the
date hereof and is subject to any change that may come into effect hereafter.

Payments of Principal, Interest and Redemption Premium under the Existing Notes

All payments of interest,  principal and  redemption  premium under the Existing
Notes by the Issuer may be made free of  withholding  taxes withheld or assessed
by Poland or any political subdivision or taxing authority thereof or therein. A
holder of a note who derives  income  from a note or who  realizes a gain on the
disposal or redemption of a note will be subject to Polish taxation on income or
capital  gains if the holder is, or is deemed to be,  resident in Poland for the
purposes of the relevant provisions in the tax laws of Poland.

Payments of Principal,  Interest and  Redemption  Premium under our Guarantee to
Holders  of the  Existing  Notes.  Generally,  a Polish  withholding  tax of 20%
applies to  payments  of  interest  and the  initial  issue  discount  under the
guarantee  in respect of the Existing  Notes,  in each case paid by us under the
guarantee to non-residents of Poland.  Withholding tax may, however,  be reduced
by an  appropriate  double  taxation  treaty to which  Poland is a party and the
"interest"  article  of  which  provides  for  full or  partial  exemption  from
withholding  on  interest  payments.  However,  in  order  to  benefit  from  an
appropriate double taxation treaty, the holder of an Existing Note is obliged to
provide us with a certificate of fiscal  residence issued by the appropriate tax
authorities  in the  country  of its  residence.  Treaties  providing  for  full
exemption from withholding on interest  payments are currently in effect between
Poland and (i) the United States and (ii) the United Kingdom, among others.

The difference  between the issue price and the redemption price of the Existing
Notes in the case of early  redemption  may be  treated  as income  obtained  in
Poland and will be taxed pursuant to the tax rate applicable in the year of such
redemption.

Tax on Civil Law Transactions. Consequences of our Assumption of the Obligations
of PTC  International  Finance II S.A. under the Existing  Notes.  Polish tax on
civil law  transactions  at a rate of 1% applies to any sale of property  rights
that are exercised in Poland, or if they are exercised abroad, but the purchaser
of the property rights resides in Poland and the law transaction was executed in
Poland.  Accordingly,  in the  event  that  we  assume  the  obligations  of PTC
International  Finance II S.A. on the  Existing  Notes,  Polish tax on civil law
transactions  may apply to sales or  dispositions  of the Existing  Notes or any
right therein by holders of Existing Notes. Since the Existing Notes, after such
assumption,  will confer rights that will be enforceable  in Poland,  it will be
arguable that sales of the Existing  Notes between  foreign  holders may also be
subject to tax on civil law  transactions.  The  applicability  of Polish tax on
civil law transactions to such sales is not free from doubt.

Documents on Display

All the  documents  mentioned in this 20-F report may be found at the offices of
Polska Telefonia  Cyfrowa,  Al.  Jerozolimskie  181, 02-222 Warsaw,  Poland. The
contact person is Malgorzata Zelezinska (+48.22.413.3275).

We are subject to the filing  requirements  of the U.S.  Securities and Exchange
Act of  1934  and  file  periodic  reports  with  the  Securities  and  Exchange
Commission,  commonly  referred  to as the  "SEC".  You may  read  and  copy all
documents that we have filed with SEC at the SEC's Public  Reference Room at 450
Fifth  Street  N.W.,  Washington,  DC  20549.  You  may  also  call  the  SEC at
1-800-SEC-0330 for further  information about Public Reference Room. Some of our
SEC filings are available on the SEC's Internet site at www.sec.gov.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

The Federal  Reserve  Bank of New York does not  certify for customs  purposes a
noon buying rate for Zloty.  For the convenience of the reader,  Item 11 of this
Form 20-F (if not otherwise stated) contains translations of:


                                     - 67 -
<PAGE>


     o    certain U.S. dollar amounts into Zlotys at the rate of U.S.$1.00 = PLN
          3.9863,  the  exchange  rate  quoted for  accounting  purposes  by the
          National  Bank of Poland,  the Polish  central  bank,  on December 31,
          2001; and

     o    certain  Euro  amounts  into  Zlotys at the rate of  (euro)1.00  = PLN
          3.5219,  the  exchange  rate  quoted for  accounting  purposes  by the
          National  Bank of Poland,  the Polish  central  bank,  on December 31,
          2001.

These translations  should not be construed as  representations  that such Zloty
amounts  actually  represent such U.S. dollar amounts or could be, or could have
been, converted into U.S. dollars at the rates indicated or at any other rate.

Qualitative Information About Market Risk

General Risk Management Procedures

The general goal of our Treasury  Department is to obtain cost efficient funding
for us and to identify,  measure and, if necessary,  hedge  financial  risk. The
Hedging Policy provides  principles for our overall  financial risk  management.
The Hedging  Policy sets a framework  within which  hedging  activity  should be
conducted. However, it allows some discretion in the precise hedging strategy to
be adopted, to allow the Treasury Department to react to market conditions. Each
year the  Treasury  Department  prepares  a Hedging  Strategy  according  to the
Hedging Policy,  which is later submitted to the Management  Board and Operating
Parties.  The  ultimate  responsibility  for  agreeing the details of the annual
hedging strategy rests with the Management Board and Operating  Parties based on
the recommendations of the Risk Management Committee, consisting of the Director
of  Finance,   the  Treasurer,   the   Controller  and  the  Tax  Manager.   The
responsibility  for the  execution of foreign  exchange and interest  rate hedge
transactions, within the agreed strategy and in conformity with the Policy rests
with the treasury  function of our company.  On the other hand,  the  Management
Board  and the  Operating  Parties  must  approve  all  actions  taken  to hedge
translation risk.

Primary Market Risk Exposures

The Company is subject to market risk  associated  with  fluctuations of foreign
exchange rates and interest rates.

Foreign Exchange Risk

Foreign  currency risk  management is aimed both at minimizing the volatility of
our cash flows in Zloty terms (arising from fluctuations in the exchange rate of
the Zloty against other  currencies)  and at  minimizing  the adverse  effect of
movements  in exchange  rates on the  earnings and value of the company in Zloty
terms. The foreign exchange rate exposure may be either transaction  exposure or
translation exposure.

Transaction Exposure.  Foreign exchange transaction exposure occurs when we have
cash inflows or outflows in currencies other than Zloty. Our Treasury Department
manages the transaction exposure based on forecasts of cash flows denominated in
foreign currencies.  These forecasts distinguish between forecasts of cash flows
where  there is  significant  certainty  as to both the amount and timing of the
cash flow  ("Committed  Exposures")  and those where  there is some  uncertainty
about the  amount  and/or  timing of the cash  flow  ("Uncommitted  Exposures").
Hedging  activities  are  undertaken on the basis of a rolling 12 month forecast
provided by the Treasury  Department and our business units. We normally seek to
cover  Committed  Exposures  in the  range of such  figures  to be agreed by the
Management Board and Operating  Shareholders on at least annual basis, providing
hedging can be obtained.

Translation  Exposure.  Foreign exchange translation exposure occurs when profit
and loss or balance  sheet  items are  denominated  in foreign  currencies.  The
movement of the Zloty  against these  currencies  between  reporting  dates will
result in a movement in the Zloty value of these items. The Management Board and
Operating Parties must approve any action taken to hedge translation exposure.

We do not speculate in foreign  currency.  Speculation  is defined as any action
taken to  increase an exposure  beyond  that which  exists due to an  underlying
commercial activity, in the expectation of making a foreign currency gain.


                                     - 68 -
<PAGE>


The foreign  exchange risk management  transactions  may be undertaken using the
following instruments:

     o    forward and Non Deliverable Forward transactions;

     o    currency swaps;

     o    cross-currency interest rate swaps; or

     o    FX options.

Interest Rate Risk

We are exposed to interest  rate risk  related to  interest  payables  and, to a
smaller extent, to interest receivables on short term investments. Interest rate
risk exposure arises from external  financing  denominated  both in domestic and
foreign  currency.  Our  interest  bearing  liabilities  are  based on fixed and
floating interest rates.

Debt liabilities based on fixed interest rate are as follows:

     o    the 10 3/4% Notes for the total value of U.S.$253,203,000

     o    the 11 1/4% Notes for the total value of U.S.$150,000,000

     o    the 11 1/4% Notes for the total value of (euro)300,000,000

     o    the 10 7/8% Notes for the total value of (euro)200,000,000

Debt liabilities  based on floating interest rate are our Bank Credit Facilities
for the total bank commitments of (euro)700 million of which (euro)387.5 million
is available in Zloty and (euro)312.5  million is available in other currencies.
The interest  rate related to each  drawdown is  determined at the drawdown date
and fixed for the maturity of the respective drawdown.

The interest rate exposure  consists of a risk of increasing short term interest
rates which would result in higher financing costs as well as a risk of decrease
of short  term  interest  rates  which may  result in a  decrease  of returns on
short-term  investments.  In general, much more important to us is the impact of
interest rate fluctuations on the financing costs than on revenues.

Our interest rate exposure is managed by:

     o    managing the maturity periods of investments and borrowings;

     o    varying the proportions of our debt which bear interest on a fixed and
          a floating basis; and

     o    varying  the  period of time for which the  interest  rate is fixed in
          respect to the loan facility.

In addition to the interest rate  management  tools  described  above we may, in
line with our Hedging  Policy,  and with the consent of our  Operating  Parties,
enter into the following interest rate hedging transactions:

     o    forward rate agreements (FRAs);

     o    interest rate swaps;

     o    interest rate options (caps, floors, collars).

In the year 2001, we did not conduct any interest rate hedging transactions.

Credit Risk

Commercial Credit Risk.

We operate in one industry segment,  providing cellular telephone  communication
services.  Substantially  all of our trade  debtors  are Polish  businesses  and
individuals.  Further, we have established a network of dealers within Poland to
distribute  our  products.  The  dealers  share many  economic  characteristics,
therefore receivables from each of these dealers present similar risks to us.

Concentrations  of credit risk with respect to trade receivables are limited due
to the large number of subscribers  comprising our customer base. Ongoing credit
evaluations of our customers'  financial  condition are performed and generally,
no collateral is required. We maintain provisions for potential


                                     - 69 -
<PAGE>


credit losses and such losses, in the aggregate,  have not exceeded management's
estimates.  No single customer accounts for 10% or more of revenues,  except for
transactions with TPSA.

Financial Credit Risk.

There is a risk that the  counterparties may be unable to meet their obligations
related to financial instruments.  This credit risk is monitored and measured by
our  Treasury   Department.   In  order  to  minimize  our  risk  we  limit  our
counterparties to a sufficient number of major banks and financial institutions.

The direct credit risk  represents the risk of loss resulting from  counterparty
default in relation  to  on-balance  sheet  products.  The held to maturity  and
market investments are subject to high quality credit criteria.  The investments
are also closely monitored by our Treasury  Department.  The Treasury Department
does not expect that we would be exposed to credit risk from our  counterparties
due to their high credit ratings.

Changes in Future Reporting Periods

In 2000,  we  implemented  our Hedging  Policy and engaged in our first  hedging
transactions.   Our  Treasury  Department  was  focused  on  hedging  short-term
transactional  exposure  with use of  forward  and NDF  instruments.  In 2001 we
increased the hedging  coverage of  short-term  foreign  currency  transactional
exposure and we started  hedging  transactional  exposures  related to long term
financial cash flows.

Our plans for 2002 are focused on further  limitation  of foreign  exchange  and
interest rate  fluctuations in our financial results and cash flows. In order to
complete this task we plan to spread the short term transaction exposure hedging
over the coming  year while  maintaining  the hedge  coverage  of the  long-term
financial cash flows at least at its current level.

Quantitative Information about Market Risk

Interest Rate Risk

Our significant  liabilities  consist of the Bank Credit Facilities (which as of
March 8, 2001,  replaced the 1997 Bank Credit  Facility),  the  Existing  Notes,
finance lease  agreements and license fee payables.  Our Bank Credit  Facilities
are based on  variable  interest  rates and,  consequently,  it is the source of
interest  rate risk for us. At any time,  a sharp rise in  interest  rates could
have a material  adverse  impact upon our cost of working  capital and  interest
expenses.  No material  changes have  occurred that would impact our exposure to
interest rate risk.

The Bank Credit  Facilities as at December 31, 2001 consisted of a Zloty tranche
of PLN 873.2  million  at the rate of WIBOR  plus  margin  under  the  (euro)550
Million Bank Credit  Facility and PLN 415.4  million at the rate of WIBOR plus a
margin  per  annum  under  the  (euro)150  Million  Bank  Credit  Facility.  The
multicurrency tranche of any of the Bank Credit Facilities was not utilized. The
floating  interest  rate  is  based  on the  appropriate  WIBOR  rates  for  the
outstanding Zloty tranches, plus applicable margins in the case of the (euro)550
Million Bank Credit Facility and the (euro)150 Million Bank Credit Facility. The
table  below  presents  principal  and  interest  payments  on the  Bank  Credit
Facilities as at December 31, 2001. For the purpose of the calculation of future
debt cash flows, we used WIBOR rates as of December 31, 2001, plus a margin. The
weighted  average  interest  rates  computed do not  consider  the rate at which
individual  drawdowns of the facility  will be  refinanced.  Each drawdown has a
short-term  maturity date and can be rolled over, subject to the annual schedule
for the entire facility.


                                     - 70 -
<PAGE>


Principal and interest  payments under the Bank Credit  Facilities (in thousands
of PLN)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
(euro)550 Million             2002        2003        2004        2005        2006   Thereafter      Total   Fair Value
Bank Credit                                                                                                   12/31/01
Facility
----------------------   ---------   ---------   ---------   ---------   ---------   ---------   ---------   ----------
<S>                        <C>         <C>         <C>         <C>         <C>       <C>         <C>           <C>
Variable Rate              186,482     136,312     309,254     592,097     178,456          --   1,402,601     923,404
(PLN)
----------------------   ---------   ---------   ---------   ---------   ---------   ---------   ---------   ----------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                             Weighted Average Effective Interest Rate 15.61%
-----------------------------------------------------------------------------------------------------------------------
(euro)150 Million Bank
Credit Facility
----------------------   ---------   ---------   ---------   ---------   ---------   ---------   ---------   ----------
<S>                        <C>         <C>         <C>         <C>         <C>       <C>         <C>           <C>
Variable Rate               71,950      61,390      61,390      61,390     352,487     103,896     712,503     425,920
(PLN)
-----------------------------------------------------------------------------------------------------------------------
                             Weighted Average Effective Interest Rate 14.78%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

In  comparison,  as at December  31,  2000 our  interest  rate risk  liabilities
consisted of the 1997 Bank Credit Facility.

Principal and interest payments under the 1997 Bank Credit Facility (in thousand
of PLN)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Bank Credit          2001      2002      2003      2004      2005   Thereafter     Total   Fair Value
Facility                                                                                   12/31/00
                  -------   -------   -------   -------   -------   ----------   -------   ----------
<S>               <C>       <C>       <C>       <C>       <C>       <C>          <C>       <C>
Variable Rate     189,271   186,100   178,559   155,254   131,948           --   841,132   529,416
(PLN)
-----------------------------------------------------------------------------------------------------
<CAPTION>
                             Weighted Average Effective Interest Rate 20.36%
-----------------------------------------------------------------------------------------------------
<S>               <C>       <C>       <C>       <C>       <C>       <C>          <C>       <C>
Variable Rate      17,086    17,086    17,086   158,298   172,416           --   381,972   308,415
(multicurrency)
-----------------------------------------------------------------------------------------------------
                              Weighted Average Effective Interest Rate 5.54%
-----------------------------------------------------------------------------------------------------
</TABLE>

The fair value of variable rate long-term debt presented in all tables  normally
equals to the carrying amount.

The fair value of fixed rate long-term debt presented in all tables is estimated
using the  expected  future  payments  discounted  at market  rates  except  for
publicly traded liabilities which are valued at market prices.

The interest rate exposure consists of a risk of increasing  short-term interest
rates, which would result in higher financing costs. Interest rate exposure also
arises from the  possibility of decreasing  long-term  interest rates that would
result in a relative  increase of the cost of financing versus market yields. We
are protected against such a scenario by a series of redemption options embedded
in the Existing Notes.

Foreign Currency Risk

As of  December  31,  2001  approximately  73% of our total  financing  debt was
denominated in foreign  currencies (Euro and U.S.  dollar).  The total financing
debt represents  selected  liabilities as presented in the Financial  Statements
including  the Bank Credit  Facilities,  denominated  in PLN, the 10 3/4% Notes,
11 1/4% Notes and 100% Notes,  which are  denominated in U.S.  dollars and Euros
and a finance  lease  payable  together  with index swaps  embedded in the lease
contract, which are denominated in U.S. dollars. A significant proportion of our
other liabilities is also denominated in foreign  currencies.  These include our
liability to the Polish  government for the GSM 1800 and UMTS Licenses which are
linked  to the Euro and  payable  in  Zloty,  liabilities  to our  suppliers  of
handsets,  which  are  generally  denominated  and/or  linked  to  Euros or U.S.
dollars.  As a result,  operating  income  and cash  flows  are and will  remain
significantly  exposed to an appreciation in these non-Polish currencies against
the Polish Zloty.

In order to manage the volatility  relating to our more  significant  short-term
market risks (cash  outflows),  we entered into number of hedging  transactions,
including forward foreign currency exchange contracts,  non-deliverable  forward
exchange  currency  contracts,   foreign  currency  options  and  cross-currency
interest rate swaps. A formalized risk management  policy was implemented at the
beginning of 2000 and describes the procedures and controls over executing these
transactions.  This policy also recommends  natural  hedging  strategies such as
changing the supplier invoicing currency to


                                     - 71 -
<PAGE>


Zloty and increasing Zloty commitments in the Bank Credit Facilities.  Under our
current  treasury  risk  management  policy  we  do  not  speculate  in  foreign
currencies,  although, due to the administrative  requirements imposed by IAS 39
to achieve hedge accounting,  short-term  hedging  transactions are presented as
derivative financial instruments which are held for trading purposes.

Foreign Currency Obligations

The table  below  summarizes,  as at  December  31,  2001 our  foreign  currency
denominated  long-term  obligations  together with short-term  portions thereof,
including  their fair value  together  with  accrued  interest.  For purposes of
calculating the future cash flows, we used applicable debt interest rates in the
case of fixed  interest  liabilities  and the  exchange  rates  applied  for the
calculation were PLN 3.9863 per U.S.$1.00 and PLN 3.5219 per (euro)1.00.

Principal and interest payments under foreign currency obligations (in thousands
of PLN)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                  2002       2003        2004        2005        2006     Thereafter     Total   Fair Value
                                                                                                                   12/31/01
---------------------------------------------------------------------------------------------------------------------------
Fixed interest rate (euro)
---------------------------------------------------------------------------------------------------------------------------
<C>                             <C>         <C>         <C>         <C>         <C>       <C>         <C>         <C>
GSM 1800 License                 58,870          --          --          --          --          --      58,870      55,747
---------------------------------------------------------------------------------------------------------------------------
UMTS License                         --          --          --      52,829      52,829   1,267,884   1,373,542     359,776
---------------------------------------------------------------------------------------------------------------------------
10? Notes                        76,602      76,602      76,602      76,602      76,602     838,433   1,221,443     736,297
---------------------------------------------------------------------------------------------------------------------------
11 1/4Notes                     118,864     118,864     118,864     118,864     118,864   1,413,162   2,007,482   1,077,041
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Fixed interest rate (U.S.$)
---------------------------------------------------------------------------------------------------------------------------
<C>                             <C>         <C>         <C>         <C>         <C>       <C>         <C>         <C>
10 3/4Notes                          --     108,504     108,504     108,504     108,504   1,117,848   1,551,864     878,129
---------------------------------------------------------------------------------------------------------------------------
11 1/4Notes                      67,268      67,268      67,268      67,268      67,268     799,749   1,136,089     615,510
---------------------------------------------------------------------------------------------------------------------------
Headquarters                     31,208      32,144      33,109      34,102      35,125     299,760     465,448     220,492
Lease (1)
---------------------------------------------------------------------------------------------------------------------------
Total                           352,812     403,382     404,347     458,169     459,192   5,736,836   7,814,738   3,942,992
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes index swaps embedded in the lease contract.

The table below summarizes comparative data as at December 31, 2000.

Principal and interest payments under foreign currency obligations (in thousands
of PLN)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                  2001        2002        2003        2004        2005    Thereafter     Total   Fair Value
                                                                                                                  12/31/00
---------------------------------------------------------------------------------------------------------------------------
Fixed interest rate (euro)
---------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>         <C>         <C>         <C>       <C>         <C>         <C>
GSM 1800 License                 64,428      64,428                                                     128,856     112,225
---------------------------------------------------------------------------------------------------------------------------
UMTS License                    963,600          --          --          --      57,816   1,445,400   2,466,816   1,244,531
---------------------------------------------------------------------------------------------------------------------------
11 1/4Notes                     130,086     130,086     130,086     130,086     130,086   1,676,664   2,327,094   1,098,504
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Fixed interest rate U.S.$
---------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>         <C>         <C>         <C>       <C>         <C>         <C>
10 3/4Notes                          --          --     112,775     112,775     112,775   1,274,621   1,612,946     692,387
---------------------------------------------------------------------------------------------------------------------------
11 1/4Notes                      69,917      69,917      69,917      69,917      69,917     901,146   1,250,731     584,191
---------------------------------------------------------------------------------------------------------------------------
Headquarters                     30,577      30,577      30,577      30,577      30,577     276,181     429,066     222,206
Lease (1)
---------------------------------------------------------------------------------------------------------------------------
Variable interest rate (DM)
---------------------------------------------------------------------------------------------------------------------------
1997 Bank Credit                 17,086      17,086      17,086     158,298     172,416          --     381,972     308,415
Facility (DM)
---------------------------------------------------------------------------------------------------------------------------
Total                         1,491,926     312,094     360,441     501,653     573,587   5,574,012   8,813,713   4,472,300
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                     - 72 -
<PAGE>


Hedging Transactions

In 2001,  we entered into seven  cross-currency  interest rate swaps hedging our
foreign  exchange risk exposure to changes in future cash flows arising from the
future  coupon  payments on the Existing  Notes for a total  notional  amount of
(euro)375 million and U.S.$200 million. The transactions were concluded in order
to hedge 75% of the coupon payments on the 10 7/8% Notes and the Euro portion of
the 11 1/4%  Notes and 50% of the coupon  payments  on the 10 3/4% Notes and the
U.S. dollar portion of 11 1/4% Notes.

As of December 31, 2001, the fair value of cross currency interest swaps hedging
a part of future interest payments on the Existing Notes amounted to a liability
of PLN 130.2 million.  In accordance with IAS 39 we applied Hedge  Accounting to
these  transactions and we recognized  change in fair value in the amount of PLN
97.0 million (net of deferred  tax effect) as other  reserve  capital in equity.
Additionally,  PLN 5.9 million was transferred  from equity to the statements of
operations (as other  financial  expense) to match with hedged  interests (as it
affects the statements of operation).

Additionally,  in 2001, we entered into 150 forward and Non Deliverable  Forward
transactions  and two  foreign  currency  options for total  notional  amount of
(euro)455  million and U.S.$50 million.  As at December 31, 2001 we had 109 open
forward and Non  Deliverable  Forward  transactions  for the notional  amount of
(euro)245 million and U.S.$50 million.  The purpose of these  transactions is to
hedge our short-term  foreign currency cash flow exposures arising from payments
for handsets.

As we have not applied our Hedge  Accounting to the forward and Non  Deliverable
Forward  transactions,  these contracts are valued in the balance sheet at their
fair  value  calculated  based on the  market  models.  The  fair  value of open
transactions as of December 31, 2001,  amounted to PLN 88.5 million and they all
were presented under current liabilities in our Financial Statements. For a more
detailed  presentation  of  these  transactions  see  Note  24 to the  Financial
Statements included elsewhere in this Form 20-F.

The  table  below  provides   information  about  foreign  currency   derivative
instruments as at December 31, 2001.

Derivative instruments subject to foreign exchange risk (in thousand PLN)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                        2002      2003      2004      2005      2006  Thereafter   Total  Fair Value
                                                                                                           12/31/01
--------------------------------------------------------------------------------------------------------------------
Foreign currency forward contracts
--------------------------------------------------------------------------------------------------------------------
<S>                                   <C>       <C>       <C>       <C>       <C>       <C>      <C>        <C>
Buy Euro/sell PLN                     84,154        --        --        --        --        --    84,154    84,154
                                                                                                                 7
--------------------------------------------------------------------------------------------------------------------
Buy U.S.$/ sell                        4,319        --        --        --        --        --     4,319     4,319
PLN (1)
--------------------------------------------------------------------------------------------------------------------
Total                                 88,473        --        --        --        --        --    88,473    88,473
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cross currency interest rate swaps
--------------------------------------------------------------------------------------------------------------------
<S>                                   <C>       <C>       <C>       <C>       <C>       <C>      <C>        <C>
Receive fixed                         28,221    42,406    42,804    42,286    42,871    39,110   237,698    89,522
EUR, pay fixed
PLN 8
--------------------------------------------------------------------------------------------------------------------
Receive fixed                          5,315    24,088    24,421    24,116    10,564    10,619    99,123    40,686
USD, pay fixed
PLN (2)
--------------------------------------------------------------------------------------------------------------------
Total                                 33,536    66,494    67,225    66,402    53,435    49,729   336,821   130,208
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Represents  estimated  cash  inflows/outflows  net from  settlement  of the
     contracts  using  settlement  rates  applicable  to the current  settlement
     period.

(2)  Represents  estimated  cash  inflows/outflows  net from  settlement  of the
     contracts using current spot rates, not discounted.

The fair  values of  derivative  financial  instruments  generally  reflect  the
estimated  amount that we would  receive or pay to terminate the contract at the
reporting  date,  thereby taking into account the current  unrealized  gains and
losses of open contracts.


                                     - 73 -
<PAGE>


Other hedging activities

Following  our entry into the Bank Credit  Facilities  in February  2001 and the
amendment to the (euro)150  Million Bank Credit  Facility in September 2001, the
payments  related to our  foreign  currency  obligations  under our senior  debt
obligations  changed.  As the PLN tranches were substantially  increased we were
able to fully repay all foreign  currency  drawdowns  and  decrease  the foreign
currency risk carried in our balance sheet.

To reduce the level of foreign  currency  exposure  resulting from the Notes, we
placed in escrow  accounts a portion of the net  proceeds  of the 11 1/4% Notes,
which amounted to (euro)80.5 million and U.S.$39.0  million.  As at December 31,
2001, the amounts  remaining in the escrow accounts were (euro)16.1  million and
U.S.$ 8.2 million. These amounts secure the interest payments due on the 11 1/4%
Notes on June 1, 2002.

Options Embedded in the Existing Notes

Redemption of the 10 7/8% Notes

The  issuer of the 10 7/8%  Notes  (PTC  International  Finance  II S.A.) at its
option may, from time to time,  redeem all or a part of the 10 7/8% Notes at any
time on or after May 1,  2005 on not less  than 30 nor more than 60 days'  prior
notice in amounts of (euro)1,000 or integral  multiples thereof at the following
redemption  prices  (expressed as percentages of principal  amount at maturity),
plus accrued  interest,  if any, to the redemption  date, if redeemed during the
12-month period  beginning on the dates indicated below (subject to the right of
holders of record on relevant record dates to receive interest due):

----------------------------- ------------------------------------------
Period                                                 Redemption price
----------------------------- ------------------------------------------
May 1, 2005                                                    105.438%
----------------------------- ------------------------------------------
May 1, 2006                                                    102.719%
----------------------------- ------------------------------------------
May 1, 2007 and thereafter                                     100.000%
----------------------------- ------------------------------------------

In  addition,  prior to May 1, 2004,  the issuer of the 10?% Notes may on one or
more occasions redeem up to 35% of the initial aggregate principal amount of the
10?%  Notes,  with all or a  portion  of the net  proceeds  of a  public  equity
offering, provided that:

     o    immediately  after the  offering at least 60% in  aggregate  principal
          amount of the applicable Notes remain outstanding,

     o    it has received an  equivalent  amount of proceeds as a prepayment  of
          the Intercompany Receivables, and

     o    the redemption  must occur within 75 days of the closing of the public
          equity offering.

The redemption  price for the 10 7/8% Notes is 110.875% of the principal  amount
thereof,  together  with  accrued  interest,  if any, to the date of  redemption
(subject to the right of holders of record on record  dates to receive  interest
due on interest payment dates).

Redemption of the 11 1/4% Notes

The  issuer of the 11 1/4%  Notes  (PTC  International  Finance  II S.A.) at its
option may, from time to time,  redeem all or a part of the 11 1/4% Notes at any
time on or after  December  1,  2004 on not less  than 30 nor more than 60 days'
prior notice in amounts of  (euro)1,000  or  U.S.$1,000,  as the case may be, or
integral  multiples  thereof at the following  redemption  prices  (expressed as
percentages of principal amount at maturity),  plus accrued interest, if any, to
the redemption  date, if redeemed  during the 12-month  period  beginning on the
dates  indicated  below  (subject  to the right of holders of record on relevant
record dates to receive interest due):

------------------------------------------ -----------------------------------
Period                                                       Redemption price
------------------------------------------ -----------------------------------
December 1, 2004                                                     105.625%
------------------------------------------ -----------------------------------
December 1, 2005                                                     103.750%
------------------------------------------ -----------------------------------
December 1, 2006                                                     101.875%
------------------------------------------ -----------------------------------
December 1, 2007 and thereafter                                      100.000%
------------------------------------------ -----------------------------------


                                     - 74 -
<PAGE>


In addition,  prior to December 1, 2002,  the issuer of the 11 1/4% Notes may on
one or more occasions redeem up to 35% of the initial aggregate principal amount
of the 11 1/4%  Notes,  with all or a portion  of the net  proceeds  of a public
equity offering, provided that:

     o    immediately  after the  offering at least 60% in  aggregate  principal
          amount of the applicable Notes remain outstanding,

     o    it has received an  equivalent  amount of proceeds as a prepayment  of
          the Intercompany Receivables, and

     o    the redemption  must occur within 75 days of the closing of the public
          equity offering.

The  redemption  price for the 11 1/4% Notes is 111.25% of the principal  amount
thereof,  together  with  accrued  interest,  if any, to the date of  redemption
(subject to the right of holders of record on record  dates to receive  interest
due on interest payment dates).

Redemption of the 10 3/4% Notes

The 10 3/4%  Notes  are not be  redeemable  at the  option  of the  issuer  (PTC
International Finance B.V.) prior to July 1, 2002. Thereafter, the 10 3/4% Notes
will be redeemable at the option of the issuer, in whole or in part, on not less
than 30 nor more than 60 days' prior notice, at the following  redemption prices
(expressed as percentages of principal amount), plus accrued and unpaid interest
(if any) to the date of  redemption,  if  redeemed  during the  12-month  period
beginning on the dates indicated below:

---------------------------------- -----------------------------------------
Period                                                     Redemption price
---------------------------------- -----------------------------------------
July 1, 2002                                                       105.375%
---------------------------------- -----------------------------------------
July 1, 2003                                                       103.583%
---------------------------------- -----------------------------------------
July 1, 2004                                                       101.792%
---------------------------------- -----------------------------------------
July 1, 2005 and thereafter                                        100.000%
---------------------------------- -----------------------------------------

Redemption of the 11 1/4%  and 10 7/8%  Notes at the Option of the Holders
The holders of the 11 1/4% and 10 7/8% Notes may, at their option, require us to
purchase their notes at a purchase  price equal to 101% of the principal  amount
of such notes,  plus accrued and unpaid interest to the date of purchase,  if we
encounter  certain change of control events.  Such change of control  provisions
principally  involve any person or group becoming the beneficial owner of 50% or
more of the total voting power of our shares, except if such person or group are
existing  shareholders  or  an  international  telecommunications  company  with
substantial experience in mobile telecommunications operations.

Redemption of the 10 3/4% Notes at the Option of the Holders

The  holders of the 10 3/4% Notes may, at their  option,  require us to purchase
their notes at a purchase  price equal to 101% of the  accreted  value  thereto,
plus unpaid  interest to the purchase  date, if we encounter  certain  change of
control events. Such change of control provisions principally involve any person
or group becoming the beneficial  owner of 50% or more of the total voting power
of our shares,  except if such person or group are  existing  shareholder  or an
international  telecommunications  company with substantial experience in mobile
telecommunications operations.

The above mentioned  accreted value means a redemption  price of U.S.$ 592.41 to
U.S.$ 1,000 per Note, depending on the redemption date.

Other embedded derivatives

Index swaps

We have bifurcated the derivatives from our finance leasing agreements (see Note
4.2.e and Note 20c to our Financial  Statements  included elsewhere in this Form
20-F).  These index swaps  derivatives swap payments based on the Consumer Price
Index in the USA ("CPI") into interest-based payments. The CPI is not related to
inflation  in  the  Company's  own  economic  environment.  Thus,  the  embedded
derivatives are not clearly and closely related to the host contracts.


                                     - 75 -
<PAGE>


The fair value of Index swaps is  estimated  using a model based on  discounting
estimated future cash flows at money market interest rates.

The Index swaps are  presented in the balance sheet in  liabilities  (separately
short-term and long-term  portion) and gains and losses arising from the changes
in fair value are recorded in the statement of operations for the period.

Rental derivatives

In accordance  with IAS 39 we have  bifurcated the  derivatives  embedded in the
foreign  currency  denominated  rental  contracts.  These contracts are our firm
commitments  and none of the parties to the contracts  uses foreign  currency in
its primary economic environment.  Some of these contracts also include indexing
of lease  payments  according  to  changes  in the price  indices,  which is not
related to our own economic environment.

We have separated the embedded derivatives and measured them at fair value using
models based on discounting estimated future cash flows at money market interest
rates.

The  rental  derivatives  are  presented  in  the  balance  sheet  in  financial
assets/(liabilities), separately short-term and long-term portion, and gains and
losses arising from changes in their fair value are included in the statement of
operations.

For  further  details  see Note  4.1.  a to the  Financial  Statements  included
elsewhere in this Form 20-F.

Item 12. Description of Securities other than Equity Securities

Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.  Material  Modifications  to the Rights of Security  Holders and Use of
Proceeds

None.

Item 15. [Reserved]

Item 16. [Reserved]

PART III

Item 17. Financial Statements

We are furnishing financial statements pursuant to the instructions of "Item 18.
Financial Statements" in lieu of responding to this item.

Item 18. Financial Statements

The  following  Financial  Statements  together  with the report of  Independent
Public Accountants, are included in this Annual Report:

Report of Independent Public Accountants ...............................     F-1
Consolidated Statements of Operations
    for the Years Ended December 31, 2001, 2000 and 1999................     F-3
Consolidated Balance Sheets as of December 31, 2001, 2000 and 1999......     F-4
Consolidated Statements of Cash Flows
    for the Years Ended December 31, 2001, 2000 and 1999................     F-5
Consolidated Statements of Changes in Equity
    for the Years Ended December 31, 2001, 2000 and 1999 ...............     F-6
Notes to the Consolidated Financial Statements..........................     F-7


                                     - 76 -
<PAGE>


Item 19. Exhibits

Exhibit No.         Description
-----------         -----------
10.1                Amended (euro)150 Million Bank Credit Facility Agreement
10.2                Letter from the Management Board of Polska Telefonia Cyfrowa
                    Sp. z o.o.,  dated March 27, 2002  regarding  representation
                    received from Arthur Andersen Sp. z o.o.


                                     - 77 -
<PAGE>


SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the  undersigned to sign
this annual report on its behalf.

                                             POLSKA TELEFONIA CYFROWA Sp. z o.o.
                                                                    (Registrant)


                                                    By: /s / Boguslaw Kulakowski
                                           Boguslaw Kulakowski, Director General


                                                       By: /s / Martin Schneider
                                         Martin Schneider, Director of Strategy,
                                                               Marketing & Sales


                                                       By: /s / Jonathan Eastick
                                           Jonathan Eastick, Director of Finance


Date: March 29, 2002


                                     - 78 -
<PAGE>

                    Report of Independent Public Accountants


     To the Supervisory Board of Polska Telefonia Cyfrowa Sp. z o.o.

     We have  audited the  accompanying  consolidated  balance  sheets of Polska
     Telefonia Cyfrowa Sp. z o.o. (a Polish limited  liability  company) and its
     subsidiaries  as of  December  31,  2001,  2000 and 1999,  and the  related
     consolidated  statements of operations,  consolidated statements of changes
     in  equity  and  consolidated  statements  of cash  flows  for  each of the
     consecutive  three  years  ended  December  31,  2001.  These  consolidated
     financial  statements are the  responsibility of the Company's  management.
     Our responsibility is to express an opinion on these consolidated financial
     statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
     standards in the United States.  Those  standards  require that we plan and
     perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
     financial statements are free of material  misstatement.  An audit includes
     examining, on a test basis, evidence supporting the amounts and disclosures
     in  the  financial  statements.   An  audit  also  includes  assessing  the
     accounting principles used and significant estimates made by management, as
     well as evaluating the overall financial statement presentation. We believe
     that our audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
     present  fairly,  in all  material  respects,  the  consolidated  financial
     position of Polska Telefonia Cyfrowa Sp. z o.o. and its subsidiaries, as at
     December 31, 2001,  2000 and 1999, and the results of their  operations and
     their cash flows for each of the consecutive three years ended December 31,
     2001 in accordance with Statements of  International  Accounting  Standards
     ("IAS") issued by the International Accounting Standards Board ("IASB").

     Accounting  practices  used by the Company in  preparing  the  accompanying
     consolidated  financial statements conform with IAS but do not conform with
     accounting  principles generally accepted in the United States ("US GAAP").
     A description of these  differences and a reconciliation  of net income and
     shareholders'  equity from accounting  principles  generally accepted under
     IAS and US GAAP are set forth in Note 32.

     As explained in Note 4.1.b to the consolidated  financial  statements,  the
     Company  has  given  retrospective  effect  to the  change  in its  revenue
     recognition policy relating to multiple-element contracts.



     Warsaw, Poland
     March 1, 2002


                                       F-1

<PAGE>

POLSKA TELEFONIA CYFROWA SP. Z O.O.

CONSOLIDATED FINANCIAL STATEMENTS
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE YEARS ENDED
DECEMBER 31, 2001, DECEMBER 31, 2000
AND DECEMBER 31, 1999



<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                      Consolidated Statements of Operations
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          Year ended           Year ended           Year ended
                                              Notes    December, 31 2001    December, 31 2000    December 31, 1999
                                              -----    -----------------    -----------------    -----------------
                                                                               (restated)           (restated)
<S>                                             <C>        <C>                  <C>                  <C>
Net sales                                       7           4,344,896            3,684,723            2,515,556

Cost of sales                                   8          (2,727,437)          (2,286,426)          (1,586,346)
                                                           ----------           ----------           ----------
Gross margin                                                1,617,459            1,398,297              929,210

Operating expenses                              8            (785,429)            (766,016)            (612,559)
                                                           ----------           ----------           ----------
Operating profit                                              832,030              632,281              316,651

Non-operating items
Interest and other financial income             9             316,616              227,125               58,042
Interest and other financial expenses          10            (694,546)            (716,665)            (456,305)
                                                           ----------           ----------           ----------
Profit/(loss) before taxation                                 454,100              142,741              (81,612)

Taxation charge                                11             (26,879)             (33,354)             (40,891)
                                                           ----------           ----------           ----------
Net profit/(loss) for the period                              427,221              109,387             (122,503)
                                                           ==========           ==========           ==========
</TABLE>

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


--------------------------------------------------------------------------------
                                     - 2 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                           Consolidated Balance Sheets
        as at December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   As at                As at               As at
                                                   Notes    December, 31 2001    December, 31 2000    December 31, 1999
                                                   -----    -----------------    -----------------    -----------------
                                                                                     (restated)          (restated)
<S>                                                               <C>                <C>                  <C>
Current assets
    Cash and cash equivalents                       28               36,511             29,465            1,095,509
    Short-term investments and other                12               98,278            191,679              198,468
    financial assets
    Debtors and prepayments                         13              543,422            481,666              464,245
    Inventory                                       14              167,114            209,290              183,980
                                                                  ---------          ---------            ---------
                                                                    845,325            912,100            1,942,202
Long-term assets
    Tangible fixed assets, net                      15            3,783,810          3,514,091            2,573,905
    Intangible fixed assets, net                    16            2,412,810          2,314,171            1,050,775
    Financial assets                                17              105,985             96,880              301,829
    Deferred costs                                  18               69,523            202,747              248,807
                                                                  ---------          ---------            ---------
                                                                  6,372,128          6,127,889            4,175,316
                                                                  ---------          ---------            ---------
Total assets                                                      7,217,453          7,039,989            6,117,518
                                                                  =========          =========            =========
Current liabilities
    Accounts payable                                19              290,436            521,983              709,714
    Amounts due to State Treasury                   19               46,184             44,732               27,790
    Interest-bearing liabilities                    19               82,272          1,335,526              234,746
    Accruals                                        21              234,763            131,614              152,061
    Other liabilities                               19              217,525            148,129               52,349
                                                                  ---------          ---------            ---------
                                                                    871,180          2,181,984            1,176,660
Long-term liabilities
    Interest-bearing liabilities                    20            5,083,933          3,986,391            4,578,412
    Non-interest-bearing liabilities                20              193,822            111,251              163,554
    Deferred tax liability, net                     11               52,121             60,508               27,322
    Provisions for liabilities and charges          21               20,652             12,908                3,764
                                                                  ---------          ---------            ---------
                                                                  5,350,528          4,171,058            4,773,052
                                                                  ---------          ---------            ---------
Total liabilities                                                 6,221,708          6,353,042            5,949,712
                                                                  ---------          ---------            ---------
Capital and reserves                                22
    Share capital                                                   471,000            471,000              471,000
    Additional paid-in capital                                      409,754            409,754                   --
    Hedge reserve                                                   (96,955)                --                   --
    Accumulated profit/(deficit)                                    211,946           (193,807)            (303,194)
                                                                  ---------          ---------            ---------
                                                                    995,745            686,947              167,806
                                                                  ---------          ---------            ---------
Total equity and liabilities                                      7,217,453          7,039,989            6,117,518
                                                                  =========          =========            =========
</TABLE>

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


--------------------------------------------------------------------------------
                                     - 3 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          Year ended           Year ended           Year ended
                                                       December, 31 2001    December, 31 2000    December 31, 1999
                                                       -----------------    -----------------    -----------------
                                                                                (restated)           (restated)
<S>                                                     <C>                     <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit /(loss) before taxation                           454,100              142,741              (81,612)
Adjustments for:
Depreciation and amortization                                850,572              519,705              281,697
Charge to provision                                           67,626              146,624              143,890
and write-offs of doubtful debtors
Charge to provision for inventory                             11,151                7,082                4,410
Other provisions long-term                                     7,744                9,144                3,764
Foreign exchange (gains)/losses, net and changes in          (91,609)             (92,207)             143,602
financial instruments fair value
(Gain)/loss on disposal of tangibles and intangibles          (1,582)               8,664                8,146
Interest expense, net                                        469,539              501,580              247,527
                                                                               ----------           ----------
Operating cash flows before working capital changes        1,767,541            1,243,333              751,424

(Increase)/decrease in inventory                              31,025              (32,392)            (110,918)
Increase in debtors, prepayments and deferred cost          (129,383)            (104,527)            (342,701)
Increase/(decrease) in trade payables and accruals           (69,851)              (1,869)             173,699
                                                          ----------           ----------           ----------
Cash from operations                                       1,599,332            1,104,545              471,504

Interest paid                                               (450,820)            (453,183)            (103,220)
Interest received                                             15,213               38,005                7,277
Income taxes paid                                             (1,325)              (4,451)             (25,549)
                                                          ----------           ----------           ----------
Net cash from operating activities                         1,162,400              684,916              350,012

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of intangible fixed assets                      (1,372,058)            (329,064)            (346,019)
Purchases of tangible fixed assets                        (1,128,118)          (1,434,875)            (985,298)
Proceeds from/ (purchase of) investments, net                199,699              193,959             (511,603)
Proceeds from sale of equipment and intangibles               25,250               14,905                7,309
                                                          ----------           ----------           ----------
Net cash used in investing activities                     (2,275,227)          (1,555,075)          (1,835,611)

CASH FLOWS (USED IN)/
FROM FINANCING ACTIVITIES:
Net proceeds from Bank Credit Facilities                   1,288,594                   --                   --
Proceeds from/(repayment) of Loan Facility                  (836,158)            (248,643)             487,972
Proceeds from Notes issued                                   704,141                   --            1,843,822
Proceeds from shareholder's loan                                  --                   --              296,756
Net change in overdraft facility                             (36,342)              36,342              (24,558)
Additional paid-in capital, net                                   --               16,827                   --
                                                          ----------           ----------           ----------
Net cash (used in)/from financing activities               1,120,235             (195,474)           2,603,992

Net (decrease)/increase in cash and cash equivalents           7,408           (1,065,633)           1,118,393

Effect of foreign exchange changes                              (362)                (411)             (28,579)
on cash and cash equivalents

Cash and cash equivalents at beginning of period              29,465            1,095,509                5,695
                                                          ----------           ----------           ----------
Cash and cash equivalents at end of period                    36,511               29,465            1,095,509
                                                          ==========           ==========           ==========
</TABLE>

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


--------------------------------------------------------------------------------
                                     - 4 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                  Consolidated Statements of Changes in Equity
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                 Additional
                                      Share       paid-in       Hedge      Accumulated
                                     Capital      capital      reserve   profit/(deficit)     Total
                                     -------     ----------    -------   ----------------     -----
<S>                                  <C>          <C>          <C>            <C>             <C>
Balance as at January 1, 1999        471,000           --           --       (180,691)        290,309
(restated)

Net loss for the period                   --           --           --       (122,503)       (122,503)
                                     -------      -------      -------       --------        --------
Balance as at December 31, 1999      471,000           --           --       (303,194)        167,806
(restated)
                                     =======      =======      =======       ========        ========

Balance as at January 1, 2000        471,000           --           --       (303,194)        167,806
(restated)

Additional paid-in capital                --      409,754           --             --         409,754

Net profit for the period                 --           --           --        109,387         109,387
                                     -------      -------      -------       --------        --------
Balance as at December 31, 2000      471,000      409,754           --       (193,807)*       686,947
(restated)
                                     =======      =======      =======       ========        ========

Balance as at January 1, 2001        471,000      409,754           --       (193,807)*       686,947

Effect of adopting IAS 39 (see            --           --           --        (21,468)        (21,468)
Note 4.1.a)
                                                               -------       --------        --------
Adjusted balance as at January       471,000      409,754           --       (215,275)        665,479
1, 2001

Fair value losses on cash flow            --           --      (96,955)            --         (96,955)
hedge, less tax effect

Net profit for the period                 --           --           --        427,221         427,221
                                     -------      -------      -------       --------        --------
Balance as at December 31, 2001      471,000      409,754      (96,955)       211,946         995,745
                                     =======      =======      =======       ========        ========
</TABLE>

* The amount of PLN 193,807 representing accumul ated deficit as at December 31,
2000  includes  PLN 11,736  (decrease  of accumu  lated defici t) of the revenue
recognition retrospective adjustment (see Note 4. 1.b).


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


--------------------------------------------------------------------------------
                                     - 5 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

1.   Incorporation and Principal Activities

     Polska  Telefonia  Cyfrowa Sp. z o.o. (the "Company") is located in Warsaw,
     Al.  Jerozolimskie  181 and was  incorporated  by the  Notarial  Deed dated
     December  20,  1995 and  entered on the  National  Court  Register  kept by
     District  Court in  Warsaw,  XIX  Economic  Department  of  National  Court
     Register, Entry No. KRS 0000029159.

     The principal  activities of the Company are providing  cellular  telephone
     communication  services in  accordance  with the GSM 900 and 1800  licenses
     granted  by the  Minister  of  Communications  and  the  sale  of  cellular
     telephones  and  accessories  compatible  with its  cellular  services.  On
     December  20,  2000 the  Minister of  Communications  granted the Company a
     license to provide  telecommunication  services  according to the Universal
     Mobile Telecommunication System ("UMTS") standard (see Note 4.2.b and 16).

     The principal activities of the Company are not seasonal or cyclical.

     Authorization of the consolidated financial statements

     These  consolidated  financial  statements,  which  include  the  financial
     statements  of Polska  Telefonia  Cyfrowa Sp. z o.o.  and its wholly  owned
     subsidiaries,  PTC International Finance B.V. and PTC International Finance
     (Holding) B.V. (consolidated) were authorized for issue by Management Board
     of Polska Telefonia Cyfrowa Sp. z o.o. on March 1, 2002.

2.   Significant events in the year 2001

     On February 20, 2001 the Company  signed the two loan  facility  agreements
     ("Main Bank Facility Agreement" and "Supplemental Bank Facility Agreement"-
     together  "Bank Credit  Facilities")  with the  consortium  of banks ("Bank
     Consortium")  organized by Deutsche  Bank AG London,  Deutsche  Bank Polska
     S.A., Dresdner Bank Luxembourg S.A. and the European Bank of Reconstruction
     and Development. The Bank Credit Facilities were signed in order to support
     the GSM business and UMTS  development  and to refinance  the Loan Facility
     arranged in 1997 with Citibank N.A. (see Note 20b).

     On March  30,  2001 the  Company  signed  the  senior  subordinated  bridge
     facility agreement organized by Deutsche Bank AG London ("Bridge Facility")
     to fund  approximately  one third of the UMTS  License  installment  due on
     March 30, 2001. The Bridge Facility was repaid in May 2001.

     On April 24, 2001 the Registration Court in Warsaw registered the pledge on
     substantially all of the Company's assets in favour of Deutsche Bank Polska
     S.A., as the Security Agent of the Bank Consortium.

     On May 8, 2001, the Company  finalized its third  long-term  Notes issuance
     for the amount of EUR 200 million that will mature on May 1, 2008 (see Note
     20a).  Proceeds from the Notes  issuance  were used to partially  repay the
     Bank  Credit  Facilities  in the amount of EUR 150  million  and the Bridge
     Facility in the amount of EUR 28 million.


--------------------------------------------------------------------------------
                                     - 6 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

2.   Significant events in the year 2001 (continued)

     On May 25,  2001,  the Bank  Consortium  that  organized  the  Bank  Credit
     Facilities  accepted the UMTS business  plan of the Company.  This approval
     removes all  restrictions  on the Company's  utilization of funds available
     under these facilities for UMTS operational and capital expenditures.

     On September 24, 2001 the Supplemental Bank Facility  Agreement was amended
     to increase the  available  tranches of the facility by EUR 50 million (see
     Note 20b).

     During  September  2001,  the  Company  together  with both other  wireless
     operators  in Poland  submitted  a request  to URT (the  Regulator  for the
     Telecommunication  Market in  Poland)  to extend  the UMTS  service  launch
     deadlines  by 12  months  till  January  1,  2005.  As at the date of these
     financial statements the Company has not received a response from URT.

     Also during August 2001,  the Company  submitted a request to URT to reduce
     the cost of its GSM 1800 license from EUR 100 million to EUR 50 million. In
     1999, the Company  committed to pay EUR 100 million for use of the relevant
     frequencies  across  the whole  country  while its  competitors,  purchased
     similar rights for a limited area for lower price. In its claim the Company
     is seeking equal treatment to its competitors. As at today, the Company has
     not received any decision from URT.


--------------------------------------------------------------------------------
                                     - 7 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

3.   Principles of Consolidation

     a.   Group Entities

     The consolidated  financial  statements include the financial statements of
     Polska Telefonia Cyfrowa Sp. z o.o. and its wholly owned subsidiaries,  PTC
     International  Finance B.V. and PTC  International  Finance  (Holding) B.V.
     (consolidated).

     All intercompany balances and transactions are eliminated in consolidation.

     On June 17, 1997, PTC International Finance B.V. was incorporated under the
     laws of the Netherlands  for the purpose of issuing  long-term  Notes.  The
     Company acquired 40 fully paid shares with a par value of 1,000 Netherlands
     Guilders each, issued by PTC  International  Finance B.V. PTC International
     Finance B.V. has no subsidiaries on its own.

     On  November 5, 1999 PTC  International  Finance II S.A.  was  incorporated
     under the laws of Luxembourg  and on November 16, 1999,  PTC  International
     Finance  (Holding) B.V. was incorporated  under the laws of the Netherlands
     for the purpose of issuing  long-term  Notes. The Company acquired 40 fully
     paid shares with a par value of 1,000 Netherlands  Guilders each, issued by
     PTC International Finance (Holding) B.V.

     Additionally,  the Company acquired 125 fully-paid  shares with a par value
     of EUR  1,000  each  issued  by  PTC  International  Finance  II  S.A.  and
     contributed all of its shares except one,  (owned by the Company,  but held
     locally, due to legal requirements) to PTC International  Finance (Holding)
     B.V.  in  exchange  for 1  additional  share of PTC  International  Finance
     (Holding) B.V. thus, PTC International Finance II S.A. became a fully owned
     subsidiary of PTC  International  Finance  (Holding) B.V. PTC International
     Finance II S.A. has no subsidiaries on its own.

     b.   Reporting Currency

     The Company  generates  and expends cash through its  operating  activities
     mostly in Polish zloty ("PLN").  The majority of the Company's  receivables
     and the  large  part of its  short-term  liabilities  are PLN  denominated.
     Therefore,   the  Management  has  designated  the  PLN  as  the  reporting
     (functional) currency of the Company.

     The  accompanying   consolidated   financial  statements  are  reported  in
     thousands of PLN.


--------------------------------------------------------------------------------
                                     - 8 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

4.   Principal Accounting Policies

     The Company  maintains its books of account in accordance  with  accounting
     principles  and practices  employed by enterprises in Poland as required by
     Polish  Accounting   Standards  ("PAS").   The  accompanying   consolidated
     financial  statements  reflect  certain  adjustments  not  reflected in the
     Company's  statutory  books to present these  statements in accordance with
     standards issued by the  International  Accounting  Standards Board.  These
     adjustments  and their effect on earnings for the years ended  December 31,
     2001, December 31, 2000 and December 31, 1999 are shown in Note 31 to these
     consolidated financial statements.

     The differences  between  International  Accounting  Standards  ("IAS") and
     generally accepted accounting principles in the United States ("U.S. GAAP")
     and their effect on net results for the years ended December 31, 2001, 2000
     and 1999 have been  presented  in Note 32 to these  consolidated  financial
     statements.

     The IAS rules that were  mandatory  as at December 31, 2001 were applied to
     these consolidated financial statements.

     At January 1, 2001 the  Company  adopted  IAS 39 -  Financial  Instruments:
     Recognition and Measurement ("IAS 39"). The effect of adopting of IAS 39 is
     summarized in the consolidated statement of changes in shareholders' equity
     and further information is disclosed in the Note 4.1.a.

     In the first  quarter of 2001 the Company  applied new revenue  recognition
     policy  related to  multiple-element  contracts.  Accordingly,  the Company
     calculated  the effect of the revenue  recognition  policy and restated all
     interim  information  previously  reported  during 2000.  The effect of the
     application is disclosed in the Note 4.1.b.

4.1. Introduction of new standards

     a.   Adoption of IAS 39

     At the beginning of year 2001, the Company applied the  identification  and
     valuation criteria required by the standard. Any adjustment of the previous
     carrying  amount was recognized as an adjustment of the balance of retained
     earnings at the beginning of the year 2001.

     The  adoption  of IAS 39  resulted  as at January 1, 2001 in an increase of
     accumulated deficit of PLN 21,468, which was due to following adjustments:


          Options embedded in long-term Notes                           (22,174)
          Derivatives embedded in finance lease contracts               (11,715)
          Derivatives split from rental contracts                         6,789
          Initial treatment of transaction costs                          5,632
                                                                        -------
                                                                        (21,468)
                                                                        =======


--------------------------------------------------------------------------------
                                     - 9 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

4.   Principal Accounting Policies (continued)

4.1. Introduction of new standards (continued)

     a.   Adoption of IAS 39 (continued)

     Recognition and measurement

     In accordance with IAS 39, all financial  assets and financial  liabilities
     are  recognized  in the  balance  sheet.  All these  financial  assets  and
     liabilities are initially  measured at cost, which is the fair value of the
     consideration given or received to acquire the financial asset or liability
     (plus  certain  hedging gains and losses).  All "regular way"  purchases of
     financial assets are accounted for at the trade date.

     The table below presents the measurement categorization of financial assets
     and liabilities

<TABLE>
<CAPTION>
       Category                       Balance sheet item                Measurement

       Financial assets

<S>    <C>                            <C>                               <C>
       Held for trading               Cash and cash equivalent,         Fair value
                                      Derivatives: forward contracts,   Fair value model using market data
                                      Note options

       Held to maturity               Short-term investments            Amortized cost

       Loans and receivables          Trade and other debtors           Original recorded cost
       originated by the Company

       Hedging derivatives            Cross currency interest rate      Fair value model using market data
                                      swaps

       Financial liabilities

       Held for trading               Forward contracts                 Fair value model using market data
                                      Index swaps                       Fair value model using market data

       Non-trading liabilities        License liabilities               Amortized cost
                                      Construction payables             Original recorded cost
                                      Trade and other creditors         Original recorded cost
                                      Long-term Notes                   Amortized cost
                                      Finance lease                     Amortized cost
                                      Bank Credit Facilities            Costs plus accrued interest
                                      Overdrafts                        Costs plus accrued interest
                                      Accruals                          Original recorded cost

       Hedging derivatives            Cross currency interest rate      Fair value model using market data
                                      swaps
</TABLE>

     Derecognition

     The  Company  derecognises  a  financial  asset or a portion of a financial
     asset if the Company loses control of the contractual  rights that comprise
     the financial asset or a portion of a financial asset.

     The  Company  removes  a  financial  liability  (or a part  of a  financial
     liability) from its balance sheet when, and only when, it is extinguished -
     that is when  the  obligation  specified  in the  contract  is  discharged,
     cancelled, or expires.


--------------------------------------------------------------------------------
                                     - 10 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

4.   Principal Accounting Policies (continued)

4.1. Introduction of new standards (continued)

     a.   Adoption of IAS 39 (continued)

     Notes

     The Company is full and unconditional  guarantor of the Notes issued by its
     subsidiaries  (see Note 20a).  The Notes were  recognized  at fair value of
     consideration  received with transaction costs and call options recognition
     included in the initial  measurements.  They are amortized  accordingly  to
     effective interest rates.

     Foreign exchange forward contracts ("Forward contracts")

     The Company enters into derivative  financial  instruments  such as forward
     contracts to hedge its foreign exchange transaction exposure (see Note 24).
     Forward  contracts  are valued in the balance sheet at their fair value and
     are  presented  in  current  assets  or  liabilities.  The  fair  value  is
     calculated using a market model.

     The Company has not applied hedge  accounting for forward  contracts in the
     consolidated financial statements. They are treated as derivative financial
     instruments  held for trading  purposes and gains or losses  resulting from
     these   transactions  are  included  in  the   consolidated   statement  of
     operations.  The forward  contracts  are used  according  to the  Company's
     hedging policy and strategy.

     The  Company  had applied IAS 39  principles  to forward  contracts  before
     January 1, 2001.

     Cross currency interest rate swaps ("CC swaps")

     The Company uses cross currency  interest rate swap  transactions  to hedge
     its  exposure  against  foreign  currency  fluctuations  on fixed  interest
     liabilities  related  to the  Notes  (see  Note 24).  These  contracts  are
     designated  as hedges  against  exposure  to changes  in future  cash flows
     arising from the foreign exchange risk on the future coupon  payments.  The
     CC swaps are valued in the  balance  sheet at their fair value based on the
     quoted  market   prices.   They  are   presented  in  long-term   financial
     assets/(liabilities)  and  short-term   assets/(liabilities)  depending  on
     maturity of the related coupon.

     The Company applied hedge  accounting for the CC swaps. As a result changes
     in the  fair  value  of the  derivatives  that  are  highly  effective  are
     recognized in shareholders' equity, net of tax effect.  Amounts deferred in
     shareholders'  equity are  transferred  to the statement of operations  and
     classified  as  financial  income or expense in the periods when the hedged
     coupon payments accrue in the statement of operations.


--------------------------------------------------------------------------------
                                     - 11 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

4.   Principal Accounting Policies (continued)

4.1. Introduction of new standards (continued)

     a.   Adoption of IAS 39 (continued)

     Cross currency interest rate swaps ("CC swaps") (continued)

     The Company  documents at the inception of the transaction the relationship
     between  the  hedging  instruments  and hedged  items,  as well as its risk
     management   objective   and  strategy  for   undertaking   various   hedge
     transactions.  This process includes linking all derivatives  designated as
     hedges to specific  hedged  transactions.  The Company also  documents  its
     assessment,  both at the hedge inception and on the ongoing basis,  whether
     the  derivatives  used in  hedging  transactions  are highly  effective  in
     offsetting changes in cash flows of hedged items.

     Embedded derivatives

     An embedded  derivative causes some or all of the cash flows that otherwise
     would be required by the  contract to be modified by a variable  such as an
     interest rate,  security price,  commodity  price,  foreign  exchange rate,
     index of prices or rates and others.  The Company  separates  the  embedded
     derivatives from the host contracts and accounts for them as derivatives if
     the following conditions are met:

     -    the  economic  characteristics  together  with  risks of the  embedded
          derivatives  and the  host  contracts  are  not  clearly  and  closely
          related,

     -    a separate  instrument with the same terms as the embedded  derivative
          would meet the definition of a derivative,

     -    the hybrid  instrument  is not  measured at fair value with changes in
          fair value reported in the statement of operations.

     o    Options embedded in the long- term Notes ("Note options")

     Long-term  Notes issued by the Company have embedded  derivatives - options
     of issuer and  holders  (see  Notes 20a and 24).  The  issuer  options  are
     separated from host  contracts and accounted for as a derivative  under IAS
     39.

     The valuation of Note options is done with the use of the binominal  model.
     The  model  is  based  on the  backward  induction  methodology  using  the
     replication  rule,  stating that a portfolio of base  instruments  at their
     present value can replace an option.

     The options are  presented  in the balance  sheet in  financial  assets and
     gains and losses  arising  from changes in their fair value are included in
     the statement of operations for the period.

     As at January  1, 2001 the  Company  recognized  the  options  value at PLN
     18,077.  The  respective  adjustment  resulted  in an increase of the Notes
     liabilities by PLN 46,874 and an increase of the accumulated deficit by PLN
     22,174, net of a tax benefit.


--------------------------------------------------------------------------------
                                     - 12 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

4.   Principal Accounting Policies (continued)

4.1. Introduction of new standards (continued)

     a.   Adoption of IAS 39 (continued)

     Embedded derivatives (continued)

     o    Derivatives embedded in finance lease contracts ("Index swaps")

     The  Company  has  bifurcated  the  derivatives  from its  finance  leasing
     agreements (see Note 4.2.e and 20c). These  derivatives swap payments based
     on  the  Consumer  Price  Index  in the  USA  ("CPI")  into  interest-based
     payments.  CPI is not related to  inflation in the  Company's  own economic
     environment.  Thus,  the embedded  derivatives  are not clearly and closely
     related to the host contracts.

     The  fair  value  of  Index  swaps  is  estimated  using a model  based  on
     discounting estimated future cash flows at money market interest rates.

     The  Index  swaps  are  presented  in  the  balance  sheet  in  liabilities
     (separately  short-term and long-term portion) and gains and losses arising
     from the changes in fair value are recorded in the  statement of operations
     for the period.

     As at  January  1, 2001 the  Company  separated  the Index  swaps  from the
     leasing liabilities and recognized with a negative fair value of PLN 35,962
     as derivatives under long-term liabilities. As a result the finance leasing
     liabilities  decreased by PLN 20,748. The respective adjustment of retained
     earnings resulted in an increase of the accumulated  deficit by PLN 11,715,
     net of a tax benefit.

     o    Derivatives split from rental contracts ("Rental derivatives")

     In  accordance  with IAS 39 the  Company  has  bifurcated  the  derivatives
     embedded  in the  foreign  currency  denominated  rental  contracts.  These
     contracts  are firm  commitments  of the Company and none of the parties to
     the contracts uses foreign  currency in its primary  economic  environment.
     Some of these contracts also include  indexing of lease payments  according
     to changes in the price indices,  which is not related to the Company's own
     economic environment.

     The Company has  separated  the embedded  derivatives  and measured them at
     fair value using models based on discounting estimated future cash flows at
     money market interest rates.

     The rental  derivatives  are  presented  in the balance  sheet in financial
     assets/(liabilities),  separately  short-term  and long-term  portion,  and
     gains and losses  arising  from changes in their fair value are included in
     the statement of operations.

     The  respective  adjustment as at January 1, 2001 resulted in a decrease of
     the accumulated deficit by PLN 6,789, net of a tax charge.


--------------------------------------------------------------------------------
                                     - 13 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

4.   Principal Accounting Policies (continued)

4.1. Introduction of new standards (continued)

     a.   Adoption of IAS 39 (continued)

     Transaction costs

     In accordance with IAS 39 transaction  costs,  being incremental costs that
     are directly attributable to the acquisition or disposal of financial asset
     or  liability  are  included in the initial  measurement  of all  financial
     assets and liabilities. Prior to IAS 39 implementation the Company deferred
     transaction  costs  and  amortized  over the  period  of  financing.  After
     adoption of IAS 39 the Company  included the  transaction  costs related to
     the issuance of the Notes (fixed term to maturity instruments) in the Notes
     initial measurement.

     The related  adjustment as at January 1, 2001 resulted in a decrease of the
     accumulated deficit by PLN 5,632, net of a tax charge.

     The  transaction  costs  related  to the  Loan  Facility  and  Bank  Credit
     Facilities  (variable term to maturity  instrument) were  reclassified from
     deferred costs into intangible assets (see Note 16 and 18).

     b.   Revenue recognition - multi-element contracts

     In the first quarter of 2001, the Company  adopted a new accounting  policy
     regarding  multi-element sale transactions and applied it  retrospectively.
     The resulting  adjustment to the opening balance of accumulated  deficit as
     at  January 1, 2001  resulted  in a decrease  by PLN  11,736,  net of a tax
     charge and there were no changes to the  balances as at January 1, 2000 and
     1999. Both, net sales and cost of sales increased by PLN 41,728, PLN 52,303
     and decreased by PLN 76,505 in 2001, 2000 and 1999, respectively.

     The  change  in the  revenue  recognition  policy  was  initiated  by Staff
     Accounting Bulletin No. 101 "Revenue  Recognition in Financial  Statements"
     ("SAB  101")  that was issued by the  Securities  and  Exchange  Commission
     staff. SAB 101 reflects basic principles of revenue recognition in existing
     generally accepted accounting principles in the United States. Based on the
     above  bulletin and further  interpretations,  the Company set criteria for
     recognition of multiple-element  transactions and their presentation in the
     IAS consolidated financial statements.


--------------------------------------------------------------------------------
                                     - 14 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

     The multiple-element  transactions with post-paid clients are classified as
     separable or  non-separable  contracts  whereas the  pre-paid  services are
     treated  as   separable   transactions.   The   initial   revenue   from  a
     multiple-element  arrangement  that is  non-separable  (handset  price  and
     activation fee) is deferred over the average expected life of the customer.
     The direct cost of a product sold in this contract is also deferred in line
     with  the  revenue.  The  initial  excess  of  cost  over  the  revenue  is
     immediately   expensed.   The  revenue  from   separable   multiple-element
     transactions and costs related to these  transactions are recognized in the
     statement of operations as incurred.

     The accounting  treatment of revenues and relevant costs for  multi-element
     arrangements is summarized in the following table:

     Multi-element contract (handset, activation and telecommunication service)

<TABLE>
<CAPTION>
                          Separable                               Non-separable

<S>                       <C>                                     <C>
       Accounting         Activation represents up-front          Handset, activation and service are
       treatment          non-refundable fee.                     treated as multi-element contract
                                                                  that is non-separable.

                          Handset is sold separately from
                          the rest of the multi-element
                          contract

       Revenue            Activation and handset revenue is       Multiple Element Revenue:
       recognition        recognized immediately.                 Activation and handset revenue is
                                                                  deferred over average expected life
                                                                  of the customer.

       Cost               Cost of the activation card and         Multiple Element Cost:
       recognition        handset is recognized immediately.      Cost of activation card and cost of
                                                                  handset equal to activation and handset
                                                                  revenue is deferred over average
                                                                  expected life of the customer. The
                                                                  excess of the costs over revenues is
                                                                  immediately expensed.
</TABLE>

     Total sales price of handsets sold  together with prepaid  service cards is
     allocated  on a  pro-rata  basis  based on the  relative  fair value of the
     elements.

4.2. Other accounting standards

     a.   Tangible Fixed Assets

     Tangible  fixed  assets  are  shown at  historical  cost  less  accumulated
     depreciation.

     The costs of tangible fixed assets include foreign exchange differences and
     interests resulting from payments or valuation of liabilities financing the
     relevant tangible fixed asset acquisition or construction.


--------------------------------------------------------------------------------
                                     - 15 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

4.   Principal Accounting Policies (continued)

4.2. Other accounting standards (continued)

     a.   Tangible Fixed Assets (continued)

     Depreciation  is  calculated  using  the  straight-line   method  over  the
     estimated useful life of the asset. The following  depreciation  rates have
     been applied:

                                       Annual rate               Estimated
                                          in %             Useful Lives in years
                                      -------------        ---------------------
       Leasehold improvements                                    Lease term
       Buildings                         2.5%                        40
       Plant and equipment             6.7 -  30.0%               3.3 - 15
       Motor vehicles                 12.5 - 30.0%                3.3 -  8
       Other                           4.0 - 20.0%                  5 - 25

     b.   Intangible Fixed Assets

     Licenses

     Intangible  fixed assets include three licenses (GSM 900, GSM 1800 and UMTS
     licenses),   which   the   Company   acquired   from  the   Polish   State.
     Telecommunication   licenses   are   measured  at  cost  less   accumulated
     depreciation.  As the payments are deferred  beyond normal credit terms the
     cost of license is the cash price equivalent.  The difference  between this
     amount and total payments is recognized as interest expense over the period
     of  credit  unless  it is  capitalized  on the  license  value  during  its
     development  period.  The cost of the GSM 1800 and UMTS  licenses  includes
     also interests and foreign exchange differences  resulting from payments or
     valuation of liabilities related to financing the license acquisitions. The
     licenses are amortized using the  straight-line  method over the periods of
     their  validity,  i.e. GSM 900 license - over 14.5 years (173 months);  GSM
     1800  license - over 14.5  years  (174  months)  and UMTS  license  will be
     amortized  over 20 years  (240  months)  from  the date of the  operational
     start-up of the underlying services.

     For further disclosure see Note 16.

     Other intangible fixed assets

     Other intangible  assets are stated at cost less accumulated  amortization.
     Amortization  is  calculated  using  the  straight-line   method  over  the
     estimated useful life of the asset. The following  amortization  rates have
     been applied:

                                   Annual rate in %
                                   ----------------
       Computer software             20.0 - 50.0%
       Network software               6.7 - 66.7%
       Trademarks                        6.7%

     The Company  implemented in 2001  amortization  rates for computer software
     used in the network  equipment in range of 6.7% - 66.7%.  The  amortization
     charges for this software are  calculated  using the  straight-line  method
     over the further  estimated useful life of the network  equipment  starting
     from the date on which new software is brought into use.


--------------------------------------------------------------------------------
                                     - 16 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

4.   Principal Accounting Policies (continued)

4.2. Other accounting standards

     c.   Debtors

     Amounts  due  from  debtors  are  measured  at cost net of  provisions  for
     doubtful  accounts.  The provisions are based on specific amounts due where
     realization is unlikely and on a general basis,  calculated  using historic
     collection experience.

     d.   Inventories

     Inventories are stated at the lower of cost and net realizable  value.  The
     cost of inventories is principally  assigned by using weighted average cost
     formulas.

     The costs of inventories  become  unrecoverable  if those  inventories  are
     damaged,  become  wholly of partially  obsolete or if their  selling  price
     declines. The Company writes down the cost of inventories to net realizable
     value by setting adequate provisions netted with related inventory balance.

     e.   Leasing

     The  Company   acquired  its  head-office   premises  under  finance  lease
     conditions and initially  recognized  assets and liabilities in the balance
     sheet at amounts equal to the present value of the minimum lease  payments.
     In  calculating  the  present  value  of the  minimum  lease  payments  the
     Company's  incremental borrowing rate was used. The finance lease liability
     was  initially  measured at an amortized  cost.  After the  bifurcation  of
     embedded  derivative  (Index swaps - see Note 4.1.a) it has two components:
     main  liability  measured at  amortized  costs and the  indexing  (embedded
     derivative)  measured at fair value.  See also "Tangible  fixed assets held
     under capital lease" in Note 15, "Finance leases" in Note 20c.

     f.   Special funds

     Special funds consist  primarily of the social fund.  The social fund is an
     employer's  obligation based on a government mandated  calculation based on
     number of employees  and the monthly  minimum  wage in Poland.  The amounts
     calculated  under  this  formula  must be  used  for  the  benefits  of the
     employees.

     g.   Advertising expense

     The Company charges the cost of advertising to expense as incurred.

     h.   Vacation pay

     Vacation pay is accrued when earned by employees.


--------------------------------------------------------------------------------
                                     - 17 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

4.   Principal Accounting Policies (continued)

4.2. Other accounting standards (continued)

     i.   Taxation

     The  income  tax  charge is based on profit  for the  period and takes into
     account  deferred  taxation.  Deferred  taxation  is  calculated  using the
     balance sheet liability  method.  Under the balance sheet liability  method
     the expected  tax effects of temporary  differences  are  determined  using
     enacted tax rates and reported  either as liabilities  for taxes payable or
     assets  representing  the  amounts of income  taxes  recoverable  in future
     periods  in  respect  of  deductible  temporary  differences  and the carry
     forward of unused tax losses and  credits.  Temporary  differences  are the
     differences  between the carrying  amount of an asset or a liability in the
     balance sheet and its taxable base.

     Deferred tax assets are recognized for all deductible temporary differences
     to the extent that it is probable  that  taxable  profit will be  available
     against which the deductible temporary differences can be utilized.

     j. Net sales

     Net sales  consist  of the value of sales  (excluding  value  added tax) of
     goods  and   services  in  the  normal   course  of  business  but  exclude
     extraordinary   disposals  of  inventory  and  other  assets.   Revenue  is
     recognized  when  services  are  provided or goods are shipped  out.  Sales
     allowances  are  accounted  in the same period when the related  portion of
     revenue is recognized.

     k.   Transactions in foreign currencies

     Transactions  denominated  in foreign  currencies are recorded in the local
     currency (the Polish zloty - PLN) at actual  exchange  rates  prevailing at
     the date of the transaction. Monetary assets and liabilities denominated in
     foreign currencies are reported at the rates of exchange  prevailing at the
     end of the period. Any gain or loss arising from a change in exchange rates
     subsequent to the date of the  transaction  is recorded in the statement of
     operations as a foreign exchange gain or loss and included in non-operating
     items in the statement of operations,  unless capitalized - see points: (a)
     tangible  fixed assets and (b)  intangible  fixed assets  (license) and (m)
     below (borrowing costs).

     l.   Use of estimates

     Preparation of consolidated  financial  statements  requires  Management to
     make estimates and assumptions  that affect the reported  amounts of assets
     and liabilities  and disclosure of contingent  assets and liabilities as at
     the date of the consolidated  financial statements and the reported amounts
     of revenues and expenses during the reporting period.  Actual results could
     differ from these estimates.

     m.   Capitalization of borrowing costs

     Borrowing costs (including interest,  foreign exchange gains and losses and
     the discount  relating to the present value of license  payments)  that are
     attributable to the  acquisition,  construction or production of qualifying
     assets are capitalized as a part of the cost of those assets. The borrowing
     costs capitalized are only those incurred during the period of construction
     or production of qualifying assets.


                                     - 18 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

5.   Events after the balance sheet date

     Effective  January 2002 the Company  changed the useful lives for a part of
     network fixed assets and related  depreciation rates from 4% - 12.5% to 10%
     - 25%,  according to the Management  Board's  Resolution  dated January 29,
     2002.

6.   Financial risk management

     The Company's  treasury function is responsible for managing financial risk
     in accordance with the Company's  hedging policy.  Principle  exposures and
     methods  used by the  Company to mitigate  those  exposures  are  described
     below:

     The hedging policy  approved by the Supervisory  Board provides  principles
     for overall  financial risk  management in the Company.  This policy sets a
     framework  within which the hedging  activity should operate.  However,  it
     also allows some discretion in the precise hedging  strategy to be adopted,
     to allow the treasury function to react to market conditions.  According to
     the hedging  policy,  each year the  treasury  function  prepares a hedging
     strategy  regarding  transaction  risk,  which  is later  submitted  to the
     Management Board and Supervisory Board.

     The ultimate  responsibility for agreeing the details of the annual hedging
     strategy rests with the Management Board and the Supervisory Board based on
     the recommendations of the Risk Management Committee consisting of the CFO,
     the Treasurer,  the Controller and the Tax Manager.  The responsibility for
     the  execution of foreign  exchange and interest  rate hedge  transactions,
     within the agreed strategy and in conformity with the hedging policy, rests
     with  the  treasury  function  of the  Company.  On  the  other  hand,  the
     Management  Board and the Supervisory  Board must approve any actions taken
     to hedge translation risk.

     a.   Foreign exchange risk

     A significant  proportion of the  financing  liabilities  of the Company is
     denominated  in  foreign  currencies  (EUR and  USD).  The  financial  risk
     management is aimed both at minimizing the volatility of cash flows, in PLN
     terms,  arising from  fluctuations  in the exchange rate of the PLN against
     other  currencies  and at  minimizing  the adverse  effect of  movements in
     exchange rates on the earnings and book value of the Company in PLN terms.

     The  treasury  function  manages the  foreign  exchange  exposure  based on
     forecasts of cash flows denominated in foreign currencies.  These forecasts
     distinguish  between  forecasts  of cash flows where  there is  significant
     certainty  as to both the amount  and  timing of the cash flow  ("Committed
     Exposures")  and those  where  there is some  uncertainty  about the amount
     and/or timing of the cash flow ("Uncommitted Exposures").

     Hedge  activities  are  undertaken on the basis of short to long-term  cash
     flow  forecasts  provided by treasury  function and  business  units of the
     Company.  The Company  normally seeks to cover  Committed  Exposures in the
     range  of  such  figures  to be  agreed  by the  Management  Board  and the
     Supervisory  Board on at least an annual  basis,  providing  hedging can be
     obtained at acceptable  cost.  The Company may  undertake  actions to cover
     individually  identified  Uncommitted  Exposures  providing,  they  are  in
     compliance  with hedging  policy and  constitute  integral part of annually
     accepted hedging strategies.


--------------------------------------------------------------------------------
                                     - 19 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

6.   Financial risk management (continued)

     a.   Foreign exchange risk (continued)

     The Company does not speculate in foreign currency.  Speculation is defined
     as taking any action to increase an exposure  beyond that which  exists due
     to an  underlying  commercial  activity,  in the  expectation  of  making a
     foreign currency gain.

     Foreign  exchange  risk  management  transactions  of  the  Company  may be
     undertaken using the following instruments:

     -    forward  and  non-delivery   forward   transactions  ("NDF  contracts/
          transactions"),

     -    currency swaps,

     -    cross-currency interest rate swaps,

     -    foreign exchange options.

     In 2001 the Company started hedging its long-term foreign exchange exposure
     arising from coupon payments on EUR and USD denominated Notes by concluding
     cross-currency interest rate swaps (see Note 4.1.a and 24).

     In respect of  short-term  hedging  the  Company  entered  into a series of
     foreign exchange  forward and NDF contracts  together with foreign exchange
     options to reduce  volatility of current operating and financial cash flows
     resulting from foreign exchange rate fluctuations (see Note 24).

     The Company has not applied hedge  accounting to the above risk  management
     activities, except for CC swaps (see Note 4.1.a).

     b.   Interest rate risk

     The  Company is exposed to interest  rate risk  related to  short-term  and
     long-term  credit  facilities.  Interest  rate risk  exposure  arises  from
     external financing denominated both in domestic and foreign currencies. The
     Company's  interest  bearing  liabilities  are based on fixed and  floating
     interest rates.

     Debt  liabilities  based on fixed  interest  rate are as follows  (see Note
     20a):

     -    the 103/4 Notes with a face value of USD 253,203,000

     -    the 111/4 Notes with a face value of USD 150,000,000

     -    the 111/4 Notes with a face value of EUR 300,000,000

     -    the 10 ? Notes with a face value of EUR 200,000,000

     Debt  liabilities  based on floating  interest rates consist of Bank Credit
     Facilities  (see Note 20b).  The  Company may  utilize  all  facilities  by
     individual  drawdowns for the maturity of one, three, six or twelve months.
     The interest  rate related to each  drawdown is  determined at the drawdown
     date and fixed for the maturity of the respective drawdown.

     The interest  rate  exposure  consists of a risk of  increasing  short-term
     interest rates, which would result in higher financing costs. Interest rate
     exposure also arises from the possibility of decreasing  long-term interest
     rates that would  result in relative  increase of  financing  costs  versus
     market yields.  The Company is protected  against such a scenario by series
     of prepayment options embedded into all Notes.


--------------------------------------------------------------------------------
                                     - 20 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

6.   Financial risk management (continued)

     b.   Interest rate risk (continued)

     The Company's interest rate exposure is managed by:

     -    varying the maturity periods of investments and borrowings,

     -    varying the  proportions of debt which bears interest on a fixed and a
          floating basis,

     -    varying  the  period of time for which the  interest  rate is fixed in
          respect to the Bank Credit Facilities.

     In addition to the interest rate  management  tools  described  above,  the
     Company  may,  in line with its  hedging  policy  enter into the  following
     interest rate hedging transactions:

     -    forward rate agreements (FRAs),

     -    interest rate swaps,

     -    interest rate options (caps, floors, collars).

     c.   Credit risk

     Commercial credit risk

     The Company operates in one industry segment,  providing cellular telephone
     communication  services.  Substantially  all of the Company's trade debtors
     are Polish businesses and individuals. Further, the Company has established
     a network of dealers within Poland to distribute its products.  The dealers
     share many economic  characteristics  thus  receivables  from each of these
     dealers present similar risk to the Company.

     Concentrations of credit risk with respect to trade receivables are limited
     due to the large  number of customers  comprising  the  Company's  customer
     base.

     The Company  maintains  provisions  for  potential  credit  losses and such
     losses which in the aggregate, have not exceeded Management's expectations.
     With the  exception  of  Telekomunikacja  Polska S.A.  ("TP  S.A."),  which
     purchases terminating  interconnection services from the Company, no single
     customer accounts for 10% or more of revenues.

     The balance of receivables as at December 31, 2001,  representing the total
     net  commercial  credit risk exposure as at this date, is presented in Note
     13.

     Financial credit risk

     There  is a risk  that  the  counterparties  may be  unable  to meet  their
     obligations related to financial instruments. This credit risk is monitored
     and measured by the treasury function in the Company.  In order to minimize
     the risk the Company limits its  counterparties  to a sufficient  number of
     major banks and financial institutions with high financial ratings.

     The balance of financial assets, short-term investments and other financial
     assets as at December 31, 2001,  representing  the total  financial  credit
     exposure, is presented in Notes 12 and 17.


--------------------------------------------------------------------------------
                                     - 21 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

7.   Net sales
<TABLE>
<CAPTION>

                                              Year ended           Year ended           Year ended
                                           December, 31 2001    December, 31 2000    December 31, 1999
                                           -----------------    -----------------    -----------------
                                                                    (restated)           (restated)
<S>                                            <C>                  <C>                  <C>
     Service revenues and fees                 4,123,555            3,460,579            2,374,827
     Sales of telephones and accessories         221,341              224,144              140,729
                                               ---------            ---------            ---------
                                               4,344,896            3,684,723            2,515,556
                                               =========            =========            =========
</TABLE>

     The Company operates in one segment (providing  cellular  telecommunication
     services and the ancillary sale of cellular telephones and accessories) and
     in one market (the  Republic of Poland).  The main sources of the Company's
     revenue are airtime tariffs,  consisting  primarily of monthly service fees
     (from incoming and outgoing calls), and charges for calls that originate or
     terminate  in the  Company's  network,  and calls  placed by the  Company's
     subscribers on foreign networks ("roaming calls").

8.       Costs and expenses

<TABLE>
<CAPTION>
                                                  Year ended           Year ended           Year ended
                                               December, 31 2001    December, 31 2000    December 31, 1999
                                               -----------------    -----------------    -----------------
                                                                        (restated)           (restated)
<S>                                                <C>                  <C>                  <C>
     Cost of sales:
          Cost of services sold                    1,778,687            1,383,893              944,420
          Cost of sales of telephones and            948,750              902,533              641,926
          accessories
                                                   ---------            ---------            ---------
                                                   2,727,437            2,286,426            1,586,346

     Operating expenses:
          Selling and distribution costs             585,463              576,318              454,807
          Administration and other operating         199,966              189,698              157,752
          costs
                                                   ---------            ---------            ---------
                                                     785,429              766,016              612,559
                                                   ---------            ---------            ---------
                                                   3,512,866            3,052,442            2,198,905
                                                   =========            =========            =========
</TABLE>


--------------------------------------------------------------------------------
                                     - 22 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

8.   Costs and expenses (continued)

     The following costs and expenses were included in cost of sales:

<TABLE>
<CAPTION>
                                         Year ended           Year ended           Year ended
                                      December, 31 2001    December, 31 2000    December 31, 1999
                                      -----------------    -----------------    -----------------
                                                               (restated)           (restated)
<S>                                       <C>                  <C>                  <C>
     Merchandise sold                       949,805              895,452              637,516
     External services                      869,995              815,227              635,557
     Depreciation and amortization          790,796              476,011              257,071
     Staff costs                             81,315               71,091               36,717
     Other                                   35,526               28,645               19,485
                                          ---------            ---------            ---------
                                          2,727,437            2,286,426            1,586,346
                                          =========            =========            =========
</TABLE>

     The following costs and expenses were included in selling and  distribution
     costs:

<TABLE>
<CAPTION>
                                         Year ended           Year ended           Year ended
                                      December, 31 2001    December, 31 2000    December 31, 1999
                                      -----------------    -----------------    -----------------
                                                               (restated)           (restated)
<S>                                         <C>                  <C>                  <C>
     External services including all        292,367              259,124              193,396
     advertising costs
     Staff costs                            158,700              127,043               88,873
     Depreciation and amortization           40,213               22,491                9,563
     Other                                   94,183              167,660              162,975
                                            -------              -------              -------
                                            585,463              576,318              454,807
                                            =======              =======              =======
</TABLE>

     The following costs and expenses were included in administration costs:

<TABLE>
<CAPTION>
                                         Year ended           Year ended           Year ended
                                      December, 31 2001    December, 31 2000    December 31, 1999
                                      -----------------    -----------------    -----------------
                                                               (restated)           (restated)
<S>                                         <C>                  <C>                  <C>
     External services                       87,100               80,076               77,623
     Staff costs                             77,904               70,366               52,036
     Depreciation and amortization           19,563               21,203               15,063
     Other                                   15,399               18,053               13,030
                                            -------              -------              -------
                                            199,966              189,698              157,752
                                            =======              =======              =======
</TABLE>


--------------------------------------------------------------------------------
                                     - 23 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

9.   Interest and other financial income

<TABLE>
<CAPTION>
                                           Year ended           Year ended           Year ended
                                        December, 31 2001    December, 31 2000    December 31, 1999
                                        -----------------    -----------------    -----------------
                                                                 (restated)           (restated)
<S>                                           <C>                  <C>                  <C>
     Foreign exchange gains                   207,911              185,195              45,414
     Gains on valuation of derivatives         81,944                   --                  --
     Interest income                           26,761               41,930              12,628
                                              -------              -------              ------
                                              316,616              227,125              58,042
                                              =======              =======              ======
</TABLE>

10.  Interest and other financial expenses

<TABLE>
<CAPTION>
                                           Year ended           Year ended           Year ended
                                        December, 31 2001    December, 31 2000    December 31, 1999
                                        -----------------    -----------------    -----------------
                                                                 (restated)           (restated)
<S>                                           <C>                  <C>                 <C>
     Interest expense                         496,300              543,510             260,155
     Losses on valuation of derivatives       144,226               67,884                  --
     Foreign exchange losses                   54,020              105,271             196,150
                                              -------              -------             -------
                                              694,546              716,665             456,305
                                              =======              =======             =======
</TABLE>

11.  Taxation

<TABLE>
<CAPTION>
                                              Year ended           Year ended           Year ended
                                           December, 31 2001    December, 31 2000    December 31, 1999
                                           -----------------    -----------------    -----------------
                                                                    (restated)           (restated)
<S>                                              <C>                  <C>                  <C>
     Polish current tax benefit/(charge)              --                  802              (10,555)
     Polish deferred tax charge                  (25,460)             (33,186)             (30,088)
     Foreign current tax charge                   (1,419)                (970)                (248)
                                                 -------              -------              -------
     Tax charge                                  (26,879)             (33,354)             (40,891)
                                                 =======              =======              =======

</TABLE>

     Tax loss carry  forwards  available as at December 31, 2001 amounted to PLN
     911,374.  The loss can be offset against  taxable income if any, during the
     next five fiscal years after December 31, 2001.

     According to the Polish tax  regulations,  the tax rates in effect in 2001,
     2000 and 1999 were 28%,  30% and 34%,  respectively.  The tax rates set for
     years  2002,   2003  and  2004  and   thereafter  are  28%,  24%  and  22%,
     respectively.


--------------------------------------------------------------------------------
                                     - 24 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

11.  Taxation (continued)

     The reconciliation  between tax charge and the product of accounting profit
     or loss multiplied by the applicable statutory tax rates is as follows:

<TABLE>
<CAPTION>
                                                 Year ended           Year ended           Year ended
                                              December, 31 2001    December, 31 2000    December 31, 1999
                                              -----------------    -----------------    -----------------
                                                                       (restated)           (restated)
<S>                                                <C>                   <C>                   <C>
     Profit / (loss) before taxation                454,100              142,741              (81,612)

     Tax rate                                            28%                  30%                  34%
                                                   --------             --------              -------
     Tax benefit / (charge) using statutory        (127,148)             (42,822)              27,748
     rate

         Permanent differences                       12,309              (19,256)              (5,643)

         Change in temporary differences for         32,653                 (712)             (62,053)
         which realization is not probable

         Effect of different tax rates                1,881                4,685                  559
         and rules in foreign entities

         Change in tax rates                         51,803               23,343               14,364

         Tax loss carry forward for which                --                   --              (12,049)
         realization is not probable

         Refilling of previous years' tax                --                  802              (10,555)
         return

         Adjustments to deferred taxes                1,623                  606                6,738

                                                   --------             --------              -------
     Tax charge                                     (26,879)             (33,354)             (40,891)
                                                   ========             ========              =======
</TABLE>


--------------------------------------------------------------------------------
                                     - 25 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

11.  Taxation (continued)
<TABLE>
<CAPTION>
                                                 Year ended           Year ended           Year ended
                                              December, 31 2001    December, 31 2000    December 31, 1999
                                              -----------------    -----------------    -----------------
                                                                       (restated)           (restated)
<S>                                                <C>                  <C>                  <C>
     Deferred tax assets in Poland:
          Tax loss carry forward                    227,661               17,688                   --
          Bad debt provision                         82,807               84,365               71,807
          Accrued interest                           49,864               19,132               26,029
          Unrealized foreign exchange                    --                4,474               37,623
          loss, net
          Accrued expenses                           52,672               14,730                9,457
          Financial instruments, net                 46,530               12,844                   --
          Inventory provision                         7,398                4,276                2,293
          Accrued advertising                         7,847                3,812                1,638
          Development costs                              --                  656                1,719
          Book versus tax basis of fixed                 --                   --               21,631
          assets
                                                   --------             --------             --------
                                                    474,779              161,977              172,197

     Temporary differences for which
     realization is not probable ("valuation        (54,585)             (87,967)             (97,037)
     allowance")
                                                   --------             --------             --------
                                                    420,194               74,010               75,160
     Deferred tax liabilities in Poland:
          Book versus tax basis of GSM /UMTS       (386,037)            (127,418)            (102,482)
          licenses
          Book versus tax basis of fixed            (62,794)              (7,100)                  --
          assets
          Unrealized foreign exchange gain,         (23,484)                  --                   --
          net
                                                   --------             --------             --------
     Net deferred tax liability                     (52,121)             (60,508)             (27,322)
                                                   ========             ========             ========
</TABLE>

     The  amount  of  valuation  allowance  as at  December  31,  2001  consists
     primarily  of the bad debt  provision  for which tax  deductibility  is yet
     uncertain  and as at December  31, 2000 and  December 31, 1999 - of the bad
     debt provision not recoverable  together with unrealized  foreign  exchange
     losses.

     The increase in tax loss carry  forward  resulted  mainly from payments for
     telecommunication  licenses  in  2001  which  are tax  deductible  expenses
     whereas under accounting  rules they  represented  decrease of liabilities.
     Under  accounting  rules the licenses are expensed during their useful life
     through amortization.


--------------------------------------------------------------------------------
                                     - 26 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

12.  Short-term investment and other financial assets

<TABLE>
<CAPTION>
                                                      As at              As at              As at
                                                December 31, 2001  December 31, 2000  December 31, 1999
                                                -----------------  -----------------  -----------------
                                                                       (restated)       (restated)
<S>                                                    <C>               <C>                <C>
     Treasury Bills                                    91,456            191,679            198,468
     Rental derivatives - short-term portion            6,822                 --                 --
     (see Note 17)
                                                      -------            -------            -------
                                                       98,278            191,679            198,468
                                                      =======            =======            =======
</TABLE>

     The Treasury Bills represent  short-term  portion of US Treasury and German
     Treasury  Bills  which are part of an  escrow  fund  established  to secure
     payment of  interest  during the first two and a half years on the 11 1/4 %
     Notes.

     The  Treasury  Bills  are  recorded  at cost  plus  accrued  interest  that
     approximates  their market value.  Their fair value as at December 31, 2001
     amounted to PLN 92 million comparing to PLN 191 million and PLN 198 million
     as at December 31, 2000 and December 31, 1999, respectively.

     Rental  derivatives   represent   short-term  portion  of  the  derivatives
     separated from rental contracts (see also Notes 4.1.a and 17).

13.  Debtors and prepayments

<TABLE>
<CAPTION>
                                                      As at              As at              As at
                                                December 31, 2001  December 31, 2000  December 31, 1999
                                                -----------------  -----------------  -----------------
                                                                       (restated)       (restated)
<S>                                                  <C>                <C>                <C>
     Trade debtors and accrued revenue                671,621            626,054            505,043
     Prepaid expenses                                  24,141             17,660             27,862
     Other debtors                                     19,078             26,188             43,145
     Amounts due from State Treasury                   11,908             32,390             54,835
     Accounts receivable from shareholders                614              1,195                194
                                                     --------           --------           --------
                                                      727,362            703,487            631,079
     Provision for doubtful debtors                  (183,940)          (221,821)          (166,834)
                                                     --------           --------           --------
                                                      543,422            481,666            464,245
                                                     ========           ========           ========
</TABLE>


                                      - 27 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

14.  Inventory

<TABLE>
<CAPTION>
                                                      As at              As at              As at
                                                December 31, 2001  December 31, 2000  December 31, 1999
                                                -----------------  -----------------  -----------------
                                                                       (restated)       (restated)
<S>                                                   <C>                <C>                 <C>
     Telephones                                       117,653            154,015            135,362
     Network spare parts and accessories               75,884             70,547             56,808
                                                     --------           --------           --------
                                                      193,537            224,562            192,170
     Inventory provision                              (26,423)           (15,272)            (8,190)
                                                     --------           --------           --------
                                                      167,114            209,290            183,980
                                                     ========           ========           ========
</TABLE>

15.  Tangible fixed assets, net

<TABLE>
<CAPTION>
                                           As at              As at              As at
                                     December 31, 2001  December 31, 2000  December 31, 1999
                                     -----------------  -----------------  -----------------
                                                            (restated)       (restated)
<S>                                      <C>                <C>                <C>
     Land and buildings                    186,473            191,372            195,771
     Plant and equipment                 2,821,953          2,688,668          1,954,057
     Motor vehicles                         18,800             12,456             12,061
     Other fixed assets                    548,470            420,473            208,389
     Construction in progress              208,114            201,122            203,627
                                         ---------          ---------          ---------
                                         3,783,810          3,514,091          2,573,905
                                         =========          =========          =========
</TABLE>

     During the year ended December 31, 2001 the Company  capitalized  PLN 6,817
     of foreign  exchange gains,  PLN 15,116 of interest  expense and PLN 187 of
     hedging  expense.  For  the  year  ended  December  31,  2000  the  Company
     capitalized PLN 3,412 of foreign  exchange losses and PLN 3,111 of interest
     expense and for the year ended  December  31,  1999,  PLN 10,043 of foreign
     exchange losses and no interest expense was capitalized.


--------------------------------------------------------------------------------
                                     - 28 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

15.  Tangible fixed assets, net (continued)

     The restated movement in each year was as follows:

<TABLE>
<CAPTION>
                               Land and     Plant and     Motor    Other fixed  Construction
                               Buildings    equipment    vehicles     assets    in progress       Total
                               ---------    ---------    --------     ------    -----------       -----
<S>                              <C>        <C>            <C>        <C>           <C>         <C>
     Cost
     As at January 1, 1999        80,768      951,995      14,915      48,530       702,567     1,798,775
     Additions                   119,169           --          --       4,164     1,023,527     1,146,860
     Transfers                        --    1,287,060       9,317     182,419    (1,503,373)      (24,577)
     Disposals                        --       (1,273)       (794)     (2,923)      (19,094)      (24,084)
                               ---------   ----------    --------    --------    ----------    ----------
     As at December 31, 1999     199,937    2,237,782      23,438     232,190       203,627     2,896,974
                               ---------   ----------    --------    --------    ----------    ----------
     Depreciation
     As at January 1, 1999           814      107,266       6,661      12,852            --       127,593
     Charge                        3,352      189,142       5,158      13,678            --       211,330
     Transfers                        --      (12,190)         --           4            --       (12,186)
     Disposals                        --         (493)       (442)     (2,733)           --        (3,668)
                               ---------   ----------    --------    --------    ----------    ----------
     As at December 31, 1999       4,166      283,725      11,377      23,801            --       323,069
                               ---------   ----------    --------    --------    ----------    ----------
     Net book value
     as at December 31, 1999     195,771    1,954,057      12,061     208,389       203,627     2,573,905
                               =========   ==========    ========    ========    ==========    ==========

     Cost
     As at January 1, 2000       199,937    2,237,782      23,438     232,190       203,627     2,896,974
     Additions                       125        7,670          --       2,564     1,323,533     1,333,892
     Transfers                        --    1,060,431       6,140     237,067    (1,303,638)           --
     Disposals                        --      (12,186)       (851)     (3,020)      (22,400)      (38,457)
                               ---------   ----------    --------    --------    ----------    ----------
     As at December 31, 2000     200,062    3,293,697      28,727     468,801       201,122     4,192,409
                               ---------   ----------    --------    --------    ----------    ----------
     Depreciation
     As at January 1, 2000         4,166      283,725      11,377      23,801            --       323,069

     Charge                        4,524      331,671       5,559      26,903            --       368,657
     Disposals                        --      (10,367)       (665)     (2,376)           --       (13,408)
                               ---------   ----------    --------    --------    ----------    ----------
     As at December 31, 2000       8,690      605,029      16,271      48,328            --       678,318
                               ---------   ----------    --------    --------    ----------    ----------
     Net book value
     as at December 31, 2000     191,372    2,688,668      12,456     420,473       201,122     3,514,091
                               =========   ==========    ========    ========    ==========    ==========
</TABLE>


--------------------------------------------------------------------------------
                                     - 29 -
<PAGE>


              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

15.  Tangible fixed assets, net (continued)

<TABLE>
<CAPTION>
                               Land and     Plant and     Motor    Other fixed  Construction
                               Buildings    equipment    vehicles     assets    in progress       Total
                               ---------    ---------    --------     ------    -----------       -----
<S>                              <C>        <C>            <C>        <C>           <C>         <C>
     Cost
     As at January  1, 2001      200,062    3,293,697      28,727     468,801       201,122     4,192,409
     Additions                        35           --          --       8,881       912,561       921,477
     Transfers                        --      709,370      13,698     164,274      (887,342)           --
     Disposals                        --       (7,450)     (7,204)    (10,930)      (18,227)      (43,811)
                               ---------   ----------    --------    --------    ----------    ----------
     As at December 31, 2001     200,097    3,995,617      35,221     631,026       208,114     5,070,075
                               ---------   ----------    --------    --------    ----------    ----------
     Depreciation
     As at January 1, 2001         8,690      605,029      16,271      48,328            --       678,318
     Charge                        4,934      571,670       7,076      44,510            --       628,190
     Transfer                         --        1,108           5      (1,113)           --            --
     Disposals                        --       (4,143)     (6,931)     (9,169)           --       (20,243)
                               ---------   ----------    --------    --------    ----------    ----------
     As at December 31, 2001      13,624    1,173,664      16,421      82,556            --     1,286,265
                               ---------   ----------    --------    --------    ----------    ----------
     Net book value
     as at December 31, 2001     186,473   2,821,953       18,800     548,470     208,114     3,783,810
                               =========   ==========    ========    ========    ==========    ==========
</TABLE>

     In 2001 the Company  recognized PLN 119,641 of impairment losses related to
     scheduled sales of part of network  equipment.  The impairment  losses were
     calculated on the basis of net selling  price,  which was the price offered
     by  the  potential  buyers.   The  impairment  losses  were  recognized  as
     additional depreciation.

     Tangible fixed assets held under capital  leases  (included in the previous
     schedule):

<TABLE>
<CAPTION>
                              As at                        As at                      As at
                        December 31, 2001            December 31, 2000          December 31, 1999
                        -----------------            -----------------          -----------------
                                                         (restated)                  (restated)

                    Land    Buildings   Other    Land   Buildings  Other    Land   Buildings   Other
                    ----    ---------   -----    ----   ---------  -----    ----   ---------   -----
<S>                 <C>      <C>         <C>    <C>      <C>         <C>    <C>      <C>         <C>
     Cost           6,293    193,177     990    6,293    193,177     990    6,293    193,177     990
     Accumulated
     depreciation      --    (13,625)   (240)      --     (8,690)   (140)      --     (4,166)    (41)
                    -----   --------     ---    -----   --------     ---    -----   --------     ---
     Net            6,293    179,552     750    6,293    184,487     850    6,293    189,011     949
                    =====   ========    ====    =====   ========    ====    =====   ========    ====
</TABLE>


--------------------------------------------------------------------------------
                                     - 30 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

16.  Intangible fixed assets, net

<TABLE>
<CAPTION>
                                               As at              As at              As at
                                         December 31, 2001  December 31, 2000  December 31, 1999
                                         -----------------  -----------------  -----------------
                                                               (restated)          (restated)
<S>                                           <C>                <C>                   <C>
     GSM and UMTS licenses                    2,143,111          2,166,875             953,226
     Computer and network software              240,402            147,150              97,388
     Trademark                                      132                146                 161
     Transaction costs                           29,165                 --                  --
                                              ---------          ---------           ---------
                                              2,412,810          2,314,171           1,050,775
                                              =========          =========           =========
</TABLE>

     During  the year  ended  December  31,  2001  the  Company  capitalized  to
     intangible  fixed assets PLN 101,873 of foreign exchange gains, PLN 153,808
     of interest expense and PLN 1,428 of hedging  expenses.  For the year ended
     December 31, 2000 the Company  capitalized  to intangible  fixed assets PLN
     764 of foreign  exchange  losses and PLN 7,255 of interest  expense and for
     the year ended  December  31,  1999 the  Company  capitalized  PLN 3,416 of
     foreign exchange losses and PLN 15,569 of interest expense.

     Transaction  costs as at  December  31,  2001  related  to the Bank  Credit
     Facilities (see Note 4.1.a).

     The Company has no intangible assets generated internally.

         The restated movement in each year was as follows:

<TABLE>
<CAPTION>
                                           Computer and
                               GSM & UMTS    network                   Transaction
                                Licenses     software     Trade Mark      costs        Total
                               ----------  ------------   ----------   -----------     -----
<S>                            <C>           <C>               <C>                  <C>
     Cost
     As at January 1, 1999       700,564      46,691           206           --       747,461
     Additions                   408,905      82,833            --           --       491,738
                               ---------     -------         -----        -----     ---------
     As at December 31, 1999   1,109,469     129,524           206           --     1,239,199
                               ---------     -------         -----        -----     ---------
     Amortization
     As at January 1, 1999       107,498      10,527            32           --       118,057
     Charge                       48,745      21,609            13           --        70,367
                               ---------     -------         -----        -----     ---------
     As at December 31, 1999     156,243      32,136            45           --       188,424
                               ---------     -------         -----        -----     ---------
     Net book value as at
     December 31, 1999           953,226      97,388           161           --     1,050,775
                               =========     =======         =====        =====     =========
</TABLE>


--------------------------------------------------------------------------------
                                     - 31 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

16.  Intangible fixed assets, net (continued)

<TABLE>
<CAPTION>
                                           Computer and
                               GSM & UMTS    network                   Transaction
                                Licenses     software     Trade Mark      costs        Total
                               ---------   ------------   ----------   -----------     -----
<S>                            <C>            <C>              <C>        <C>        <C>
     As at January 1, 2000     1,109,469      129,524          206            --     1,239,199
     Additions                 1,286,030      129,922           --            --     1,415,952
     Disposals                        --       (6,149)          --            --        (6,149)
                               ---------     --------        -----       -------    ----------
     As at December 31, 2000   2,395,499      253,297          206            --     2,649,002
                                             --------        -----       -------    ----------
     Amortization
     As at January 1, 2000       156,243       32,136           45            --       188,424
     Charge                       72,381       78,652           15            --       151,048
     Disposals                        --       (4,641)          --            --        (4,641)
                               ---------     --------        -----       -------    ----------
     As at December 31, 2000     228,624      106,147           60            --       334,831
                               ---------     --------        -----       -------    ----------
     Net book value as at
     December 31, 2000         2,166,875      147,150          146            --     2,314,171
                               =========     ========        =====       =======    ==========

     Cost
     As at January 1, 2001     2,395,499      253,297          206            --     2,649,002
     IAS 39 adjustments               --           --           --        16,553        16,553
                                                                                    ----------
     As at January 1, 2001     2,395,499      253,297          206        16,553     2,665,555
     Additions                        --      222,168           --        34,254       256,422
     Disposals                        --       (6,524)          --       (15,670)      (22,194)
     Capitalization               53,363           --           --            --        53,363
                               ---------     --------        -----       -------    ----------
     As at December 31, 2001   2,448,862      468,941          206        35,137     2,953,146
                               ---------     --------        -----       -------    ----------
     Amortization
     As at January 1, 2001       228,624      106,147           60            --       334,831
     IAS 39 adjustments               --           --           --         5,217         5,217
                               ---------     --------        -----       -------    ----------
     As at January 1, 2001       228,624      106,147           60         5,217       340,048
     Charge                       77,127      128,816           14        16,425       222,382
     Disposals                        --       (6,424)          --       (15,670)      (22,094)
                               ---------     --------        -----       -------    ----------
     As at December 31, 2001     305,751      228,539           74         5,972       540,336
                               ---------     --------        -----       -------    ----------
     Net book value as
     at December 31, 2001      2,143,111      240,402          132        29,165     2,412,810
                               =========     ========        =====       =======    ==========
</TABLE>

     Licenses

     The balance of GSM and UMTS licenses consist of GSM 900, GSM 1800, UMTS and
     Lease  line  licenses  acquired  by the  Company  from  the  Polish  State,
     represented by the Minister of Communications.


--------------------------------------------------------------------------------
                                     - 32 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

16.  Intangible fixed assets, net (continued)

     Licenses (continued)

     The GSM 900 license was acquired on February 23, 1996 and issued for a term
     of 15 years and allows the Company to apply for an extension  for an agreed
     period  one year prior to its  expiration  date  together  with a permit to
     install and utilize telecommunication equipment and network, and allocation
     of  frequencies  in the ETSI/GSM 900 MHz band.  The Company was required to
     pay the Polish  government a fee equal to the Zloty  equivalent  of EUR 218
     million, which was fully paid till December 31, 2001.

     The GSM 900  license  is subject to a number of  commercial  and  technical
     conditions.  While Polish law  provides  that the license may be revoked or
     limited  in the  event  that  the  Company  fails  to  meet  any  of  these
     conditions.  The Company  believes  that it is currently in  compliance  in
     substance with all of the GSM 900 license conditions.

     The GSM 1800  license  was  acquired on August 11, 1999 and was in use from
     March 1, 2000. The Company was required to pay the Polish  government a fee
     equal to the Zloty equivalent of EUR 100 million,  which is payable in four
     installments.  As at December 31, 2001 the  outstanding  liability  balance
     amounted to PLN 55,747 being the last installment payable in 12 months.

     Similar to the GSM 900  license,  the GSM 1800  license  requires  that the
     Company  meets  certain  coverage  and  technical  criteria,   including  a
     requirement that the dropped call rate does not exceed 5% during peak hours
     and that the Company attains  geographical  coverage  combined with the 900
     MHz and 1800 MHz  frequencies  of 90% by June 2004. The Company has already
     exceeded this level of coverage.

     On September 29, 2000 the Minister of Communications  granted the Company a
     license  to lease the  telecommunication  lines in the  Company's  network,
     including a permit to install and utilize  telecommunication  equipment and
     network ("the Lease Lines license"). The Lease Line license is valid for 15
     years  from the date  when it was  delivered  to the  Company  and has been
     valued  at the  nominal  value  as the  license  fee was  paid in a  single
     installment.

     On December 20, 2000 the Minister of  Communications  granted the Company a
     license  to  provide  telecommunication  services  according  to  the  UMTS
     standard  in the 2 GHz band,  including  a permit to  install  and  utilize
     telecommunication  equipment and network,  and allocation of frequencies in
     the 2 GHz band ("the UMTS license"). The UMTS license is valid for 22 years
     from the date of acquisition.  The Company is required to pay to the Polish
     government a fee equal to the Zloty equivalent of EUR 650 million, which is
     payable in 22 installments. For the further disclosure of liability balance
     see Note 20d.

     The UMTS license requires the Company to attain 20% population  coverage by
     the end of 2004 and 40% population coverage by the end of 2007.


--------------------------------------------------------------------------------
                                     - 33 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

16.  Intangible fixed assets, net (continued)

     Licenses (continued)

     Currently the Company is also required to start  offering UMTS services not
     earlier that  January 1, 2003 and not later than  January 1, 2004.  In 2001
     along with the other wireless  operators in Poland the Company  submitted a
     request  to URT to extend  the UMTS  launch  deadlines  by 12  months.  The
     Company has not  received the answer till the day of the  authorization  of
     these consolidated financial statements.

     The above-described GSM 900 license, the GSM 1800 license, the UMTS license
     and the Lease Lines license are not transferable assets.

17.  Financial assets

<TABLE>
<CAPTION>
                                                  As at              As at              As at
                                            December 31, 2001  December 31, 2000  December 31, 1999
                                            -----------------  -----------------  -----------------
                                                                   (restated)          (restated)
<S>                                               <C>                 <C>               <C>
     Note Options (see Note 4.1.a and 24)          82,860                 --                 --
     Rental derivatives long-term portion          23,125                 --                 --
     (see Note 4.1.a and 24)
     Long-term investments                             --             96,880            301,829
                                                  -------            -------            -------
                                                  105,985             96,880            301,829
                                                  =======            =======            =======
</TABLE>

     As at December 31, 2001 financial assets consisted of the Note options that
     were  separated  from  host  contracts  and  Rental  derivatives  that were
     bifurcated from the foreign  currency  denominated  rental  contracts - for
     description of derivatives see Note 4.1.a and 24.

     As at  December  31,  2000,  and  December  31, 1999 the  financial  assets
     consisted of the long-term portion of the Treasury Bills, which are part of
     an escrow fund  established  to secure  payments of  interests on the Notes
     issued by PTC International  Finance II S.A. in 1999. Those Bills have been
     partially paid during the year 2001. The outstanding balance as at December
     31, 2001 amounted to PLN 91,456 and is included in  short-term  investments
     and other financial assets (see Note 12).

18.  Deferred costs

<TABLE>
<CAPTION>
                                                  As at              As at              As at
                                            December 31, 2001  December 31, 2000  December 31, 1999
                                            -----------------  -----------------  -----------------
                                                                   (restated)          (restated)
<S>                                                <C>               <C>                <C>
     Multiple-element transaction costs            69,523            111,251            163,554
     Notes issuance cost                               --             67,522             69,897
     Loan Facility issuance cost                       --             11,336             12,493
     Other                                             --             12,638              2,863
                                                  -------            -------            -------
                                                   69,523            202,747            248,807
                                                  =======            =======            =======
</TABLE>


--------------------------------------------------------------------------------
                                     - 34 -
<PAGE>


              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

18.  Deferred costs (continued)

     Multiple-element  transaction  cost  represents  the  deferred  costs  from
     non-separable contracts (see Note 4.1.b).

     According to the  requirements of IAS 39 Notes issuance costs were included
     in the initial measurement of long-term Notes liabilities and Loan Facility
     and Bank Credit Facilities issuance costs were reclassified into intangible
     assets (see Note 4.1.a).

19.  Current liabilities

<TABLE>
<CAPTION>
                                                           As at              As at              As at
                                                     December 31, 2001  December 31, 2000  December 31, 1999
                                                     -----------------  -----------------  -----------------
                                                                            (restated)         (restated)
<S>                                                        <C>                <C>                <C>
     Accounts payable
     Construction payables                                 139,817            354,727            455,557
     Trade creditors                                       147,699            165,508            247,956
     Accounts payable to shareholders                        2,920              1,748              6,201
                                                         ---------          ---------          ---------
                                                           290,436            521,983            709,714

     Amounts due to State Treasury                          46,184             44,732             27,790

     Interest-bearing liabilities
     GSM and UMTS licenses  liability  current              55,747          1,184,488            206,666
     portion (see Note 20d)
     Finance lease  payable - current  portion              21,802             28,845             28,080
     (see Note 20c)
     Index  swaps-current  portion  (see  Note               4,723                 --                 --
     4.1.a, 20c and 24)
     Short-term  portion of Loan Facility                       --             85,851                 --
     (see Note 20b)
     Overdraft facilities                                       --             36,342                 --
                                                         ---------          ---------          ---------
                                                            82,272          1,335,526            234,746

     Accruals (see Note 21)                                234,763            131,614            152,061

     Other liabilities
     Deferred income                                       123,005            100,209             48,998
     Forward contracts (see Note 24)                        88,473             45,873                 --
     Payroll                                                   138              2,047              3,351
     CC swaps-current  portion (see Note 4.1.a               5,909                 --                 --
     and 24)
                                                         ---------          ---------          ---------
                                                           217,525            148,129             52,349
                                                         ---------          ---------          ---------
                                                           871,180          2,181,984          1,176,660
                                                         =========          =========          =========
</TABLE>

     In May 1998,  the Company  entered  into a short-term  renewable  overdraft
     agreement  with Bank Rozwoju  Eksportu S.A. The terms  provided for maximum
     borrowings of PLN 30,000 and interest based on 1 month WIBOR plus 0.5% p.a.
     (12.61 % as at December 31,  2001).  As at December 31, 2001 the  overdraft
     facility was not  utilized  comparing  to  utilization  of PLN 25,950 as at
     December 31, 2000.


--------------------------------------------------------------------------------
                                     - 35 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

19. Current liabilities (continued)

     In June 2000,  the Company  entered into a short-term  renewable  overdraft
     agreement with Bank Handlowy w Warszawie S.A. (a member of Citigroup).  The
     terms provided for maximum  borrowings of DEM 10,000 thousands and interest
     based on TOMNEXT  WIBOR plus 0.5% p.a.  counted  for each  interest  period
     separately  (13.50% as at December 31,  2001).  As at December 31, 2001 the
     overdraft  facility was not utilized comparing to utilization of PLN 10,392
     (DEM 5,273 thousands) as at December 31, 2000.

20.      Long-term liabilities

<TABLE>
<CAPTION>
                                                           As at              As at              As at
                                                     December 31, 2001  December 31, 2000  December 31, 1999
                                                     -----------------  -----------------  -----------------
                                                                            (restated)         (restated)
<S>                                                      <C>                <C>                <C>
     Interest-bearing liabilities
     Long-term Notes                                     3,258,680          2,651,052          2,654,021
     Bank Credit Facilities                              1,288,594                 --                 --
     GSM and UMTS licenses liability                       342,692            389,998            332,491
     Loan Facility                                              --            751,980          1,076,566
     Finance leases payable                                174,112            193,361            190,259
     Index swaps - long-term  portion (see Note             19,855                 --                 --
     4.1.a, 20c and 24)
     Shareholders Loan                                          --                 --            325,075
                                                         ---------          ---------          ---------
                                                         5,083,933          3,986,391          4,578,412

     Non-interest-bearing liabilities
     Multiple-element transaction revenue                   69,523            111,251            163,554
     CC swaps -  long-term  portion  (see  Note            124,299                 --                 --
     4.1.a and 24)
                                                         ---------          ---------          ---------
                                                           193,822            111,251            163,554

     Deferred tax liability, net
     (see Note 11)                                          52,121             60,508             27,322

     Provisions  for  liabilities  and  charges
     (see Note 21)                                          20,652             12,908              3,764
                                                         ---------          ---------          ---------
                                                         5,350,528          4,171,058          4,773,052
                                                         =========          =========          =========
</TABLE>


--------------------------------------------------------------------------------
                                     - 36 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

20.  Long-term liabilities (continued)

     a.   Notes

     10 3/4 Senior Subordinated Guaranteed Discount Notes ("10 3/4 Notes")

     On July 1, 1997, PTC International  Finance B.V., a wholly owned subsidiary
     of the  Company,  issued 10 3/4  Notes.  The 10 3/4  Notes  are  unsecured,
     subordinated  obligations of PTC International Finance B.V. and are limited
     to an  aggregate  principal  amount at  maturity of  approximately  USD 253
     million (PLN 1,009 million as at December 31, 2001).  The 10 3/4 Notes were
     issued at a discount  to their  principal  amount at  maturity  to generate
     gross  proceeds  of  approximately  USD 150  million  (PLN 493  million  at
     historical  exchange  rate).  The 10 3/4 Notes will mature on July 1, 2007.
     Cash  interest  does not accrue on the 10 3/4 Notes  prior to July 1, 2002.
     The  obligations of PTC  International  Finance B.V. under the 10 3/4 Notes
     are  fully  and  unconditionally  guaranteed  by the  Company  on a  senior
     subordinated and unsecured basis pursuant to the Company's  guarantee.  The
     net proceeds from the 10 3/4 Notes are loaned to the Company.

     The 10 3/4 Notes are  redeemable  at the option of the holders or issuer at
     the following redemption conditions:

     Issuer Option (CALL)     Redemption, American Type

     Period 1                 July 1, 2002 - July 1, 2007
     Redemption Amount        In whole or in part at price in range of  105.375%
                              - 100.00% of nominal value
     Plus                     Accrued  and  unpaid   interest  to  the  date  of
                              redemption

     Period 2                 July 1, 1997 - July 1, 2000
     Redemption Amount        Any amount up to 35% of the outstanding  principal
                              amount,  from the net  proceeds of the issuance of
                              ordinary   shares  of  the  Company  in  a  public
                              offering.  Redemption  price - 110.75% of Accreted
                              Value in range of USD 592.41 - USD 1,000 per Note,
                              depending on the redemption date
     Plus                     Accrued  and  unpaid   interest  to  the  date  of
                              redemption

     Option of holders (PUT)  Right  to  require  the  issuer  to  purchase  the
                              holder's Notes

     Condition                Occurrence of a change of control
     Purchase Amount          All or any part at price of  101.00%  of  Accreted
                              Value in range of USD 592.41 - USD 1,000 per Note,
                              depending on the redemption date
     Plus                     Accrued and unpaid interest to the purchase date

     Change of control events
     Rating Decline           At least two Notches below or withdrawing and, 50%
     50% Voting Power         Voting  Power If any person or group  becomes  the
                              beneficial  owner  of of the  total  voting  power
                              except for Permitted Holders  (basically  existing
                              shareholders     or     large     and     reliable
                              telecommunication  company)
     Consolidation            Sale  of  substantially  all  the  assets  of  the
                              Company


--------------------------------------------------------------------------------
                                     - 37 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

20.  Long-term liabilities (continued)

     a.   Notes (continued)

     10 3/4 Senior  Subordinated  Guaranteed  Discount  Notes  ("10 3/4  Notes")
     (continued)

     The 10 3/4 Notes are measured in the balance  sheet at an  amortized  cost.
     They are traded  publicly in the United States and their market value as at
     December 31, 2001 was 87 % of the nominal value (USD 220 million or PLN 878
     million) whilst the carrying amount was PLN 953 million.

     11 1/4 Senior Subordinated Guaranteed Discount Notes ("11 1/4 Notes")

     On November 23,  1999,  PTC  International  Finance II S.A., a wholly owned
     subsidiary of PTC International Finance (Holding) B.V. that is wholly owned
     by the  Company,  issued 11 1/4  Notes.  The 11 1/4  Notes  are  unsecured,
     subordinated  obligations  of PTC  International  Finance  II S.A.  and are
     limited to an aggregate principal amount at maturity of EUR 300 million and
     USD 150 million  (together PLN 1,655 million as at December 31, 2001).  The
     11 1/4  Notes  were  issued  at a  discount  to their  principal  amount at
     maturity to generate  gross proceeds of  approximately  EUR 296 million and
     USD 148 million  (together PLN 1,897 million at historical  exchange rate).
     The 11 1/4 Notes will mature on December 1, 2009. Cash interest  accrues on
     the 11 1/4 Notes and is payable semi-annually,  on each June 1 and December
     1,  beginning  in year 2000.  The  accrued  interest on the 11 1/4 Notes is
     presented in the balance sheet within the current liabilities.

     Payment of the first five interest  coupons were and will be delivered from
     the funds set on escrow  account and  invested in the  Treasury  Bills (see
     Note 12). The obligations of PTC International Finance II S.A. under the 11
     1/4 Notes are fully and  unconditionally  guaranteed  by the  Company  on a
     senior   subordinated   and  unsecured  basis  pursuant  to  the  Company's
     guarantee.  The net  proceeds  from  the 11 1/4  Notes  are  loaned  to the
     Company.


--------------------------------------------------------------------------------
                                     - 38 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

20.  Long-term liabilities (continued)

     a.   Notes (continued)

     11   1/4 Senior  Subordinated  Guaranteed  Discount  Notes ("11 1/4 Notes")
          (continued)

     The 11 1/4 Notes are  redeemable  at the option of the holders or issuer at
     the following redemption conditions:

     Issuer Option (CALL)     Redemption, American Type

     Period 1                 December 1, 2004 - December 1, 2009
     Redemption Amount        In whole or in part at price in range of  105.625%
                              - 100.00% of nominal value
     Plus                     Accrued  and  unpaid   interest  to  the  date  of
                              redemption

     Period 2                 November 23, 1999 - December 1, 2002
     Redemption Amount        Any amount up to 35% of the outstanding  principal
                              amount,  from the net  proceeds of the issuance of
                              ordinary   shares  of  the  Company  in  a  public
                              offering.  Redemption  price - 111.25%  of nominal
                              value
     Plus                     Accrued  and  unpaid   interest  to  the  date  of
                              redemption

     Option of holders (PUT)  Right  to  require  the  issuer  to  purchase  the
                              holder's Notes

     Condition                Occurrence of a change of control
     Purchase Amount          All or any  part at price of  101.00%  of  nominal
                              value
     Plus                     Accrued and unpaid interest to the purchase date

     Change of control events
     Rating Decline           At least two Notches below or withdrawing and,
     50% Voting Power         If any  person  or group  becomes  the  beneficial
                              owner  of 50% or more of the  total  voting  power
                              except for Permitted Holders  (basically  existing
                              shareholders     or     large     and     reliable
                              telecommunication company)
     Consolidation            Sale  of  substantially  all  the  assets  of  the
                              Company

     The 11 1/4 Notes are measured in the balance  sheet at an  amortized  cost.
     They are traded  publicly in the United States and their market value as at
     December  31, 2001 was 101% of the nominal  value for the EUR part (EUR 303
     million or PLN 1,067  million)  and 102 % of the nominal  value for the USD
     part (USD 153  million  or PLN 610  million).  The  carrying  amounts as at
     December  31,  2001 were PLN 1,035  million and PLN 581 million for EUR and
     USD parts, respectively.


--------------------------------------------------------------------------------
                                     - 39 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

20.  Long-term liabilities (continued)

     a.   Notes (continued)

     10   Senior Subordinated Guaranteed Notes ("10 ? Notes")

     On May  8,  2001,  PTC  International  Finance  II  S.A.,  a  wholly  owned
     subsidiary of the Company, issued 10 ? Notes with the face value of EUR 200
     million (PLN 704 million as at December 31, 2001) and maturity  date on May
     1, 2008.  The 10 ? Notes were issued at par.  The  interest  coupon is paid
     every January 31 and July 31, commencing July 31, 2001.

     The obligations of PTC  International  Finance II S.A. under the 10 ? Notes
     are  fully  and  unconditionally  guaranteed  by the  Company  on a  senior
     subordinated and unsecured basis pursuant to the Company's  guarantee.  The
     net proceeds from the 10 ? Notes are loaned to the Company.

     The 10   Notes are  redeemable at the option of the holder or issuer at the
     following redemption conditions:

     Issuer Option (CALL)     Redemption, American Type

     Period 1                 May 1, 2005 - May 1, 2008
     Redemption Amount        In whole or in part at price in range of  105.438%
                              - 100.00% of nominal value
     Plus                     Accrued  and  unpaid   interest  to  the  date  of
                              redemption

     Period 2                 May 8, 2001 - May 1, 2004
     Redemption Amount        Any amount up to 35% of the outstanding  principal
                              amount,  from the net  proceeds of the issuance of
                              ordinary   shares  of  the  Company  in  a  public
                              offering.  Redemption  price - 110.875% of nominal
                              value
     Plus                     Accrued  and  unpaid   interest  to  the  date  of
                              redemption

     Option of holders (PUT)  Right  to  require  the  issuer  to  purchase  the
                              holder's Notes

     Condition                Occurrence of a change of control
     Purchase Amount          All or any  part at price of  101.00%  of  nominal
                              value
     Plus                     Accrued and unpaid interest to the purchase date

     Change of control events:
     Rating Decline           At least two Notches below or withdrawing and,
     50% Voting Power         if any  person  or group  becomes  the  beneficial
                              owner  of 50% or more of the  total  voting  power
                              except for Permitted Holders  (basically  existing
                              shareholders     or     large     and     reliable
                              telecommunication company) and,
     Consolidation            sale  of  substantially  all  the  assets  of  the
     Supervisory Board        Company, certain changes in Supervisory Board.

     The 10   Notes are measured in the balance sheet at an amortized cost. They
     are traded  publicly  in the United  States  and their  market  value as at
     December  31, 2001 was 100% of  the  nominal  value (EUR 200 million or PLN
     704  million).  The  carrying  amount as at  December  31, 2001 was PLN 690
     million.


--------------------------------------------------------------------------------
                                     - 40 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

20.  Long-term liabilities (continued)

     b.   Bank Credit Facilities

     On February 20, 2001 the Company  signed the Main Bank  Facility  Agreement
     amounting to EUR 550 million and the Supplemental  Bank Facility  Agreement
     amounting  to EUR 100 million  with the  consortium  of banks  organized by
     Deutsche  Bank  AG  London,   Deutsche  Bank  Polska  S.A.,  Dresdner  Bank
     Luxembourg S.A. and the European Bank of Reconstruction and Development.

     As at  December  31,  2001 the  balance  outstanding  under  the Main  Bank
     Facility Agreement amounted to PLN 873 million,  which consisted in full of
     the domestic  tranche  (equivalent  of EUR 257.5  million at the  drawndown
     foreign exchange rate).

     The main terms of the Main Bank Facility Agreement are as follows:

     Facilities               limits  equivalent  of EUR 550  million  available
                              under  two  tranches:   foreign  exchange  tranche
                              amounting  to  EUR  292.5   million  and  domestic
                              tranche of EUR 257.5 million available in PLN

     Interests                LIBOR, EURIBOR, WIBOR plus negotiated margins

     Collateral               pledge on the  Company's  assets and rights except
                              for future real estates, the escrow fund for Notes
                              and leased assets

     Repayment date           quarterly  reduction  in facility  limit  starting
                              from September 30, 2004 to February 20, 2006.

     As at December 31, 2001 the balance  outstanding  under  Supplemental  Bank
     Facility  Agreement  amounted  to  PLN  415  million  of  domestic  tranche
     (equivalent of EUR 108 million at the drawndown foreign exchange rate). The
     agreement  was  amended on  September  21, 2001 and  extended  from EUR 100
     million to EUR 150 million.


--------------------------------------------------------------------------------
                                     - 41 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

20.  Long-term liabilities (continued)

     b.   Bank Credit Facilities (continued)

     The main terms of the amended  Supplemental Bank Facility  Agreement are as
     follows:

     Facilities               limits  equivalent  of EUR 150  million  available
                              under  two  tranches:   foreign  exchange  tranche
                              amounting to EUR 20 million and  domestic  tranche
                              of EUR 130 million available in PLN

     Interests                LIBOR, EURIBOR, WIBOR plus negotiated margins

     Collateral               pledge on the  Company's  assets and rights except
                              for future real estates, the escrow fund for Notes
                              and leased assets

     Repayment date           reduction   in  facility   limit   starting   from
                              September 30, 2005 to March 31, 2007.

     The  changes  in  the  pledge  agreement  related  to the  increase  of the
     Supplemental Bank Facility Agreement were registered on October 26, 2001.

     The Loan Facility was paid out from the Bank Credit Facilities newly signed
     in February 2001.

     c.   Finance leases

     On March  25,  1997 the  Company  entered  into a finance  lease  agreement
     relating  to  its  new  headquarters  building  and  underlying  land.  The
     headquarters lease obligation is denominated in USD and payable in PLN. The
     term of the lease is 15 years and the  Company  has a right to acquire  the
     leased  asset at the end of the lease not sooner than on April 30, 2013 and
     not later  than by the July 31,  2013  (the  value of the  purchase  option
     calculated  as the rental  space  multiplied  by the price per square meter
     amounts to USD 11,825).

     The minimum lease payments have been  discounted at 11.338% (first building
     leased in second half of 1998) and at 11.174%  (second  building  leased in
     July 1999), which  approximated the Company's  borrowing rate for USD as at
     the date of acquisition of the leased assets.

     The timing and values of lease payments are presented below.


--------------------------------------------------------------------------------
                                     - 42 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

20.  Long-term liabilities (continued)

     c.   Finance leases (continued)

     The future  value  payments  under  finance  leases as at December 31, 2001
     include full indexing of minimal lease payments (Index swap).

                                                   As at
                                             December 31, 2001
                                             -----------------
                            Future                                        Index
                             Value    Interest  Discounted  Discounted    swaps
                            ------    --------  with index  ----------    -----
                                                   swaps
                                                   -----
     Due in
     one year               31,208      4,683     26,525      21,802      4,723
     two years              32,144      9,757     22,387      18,763      3,624
     three years            33,109     14,361     18,748      16,148      2,600
     four years             34,102     18,565     15,537      13,897      1,640
     five years             35,125     21,798     13,327      12,586        741
     after five years      299,760    175,792    123,968     112,718     11,250
                           -------    -------    -------     -------    -------
                           465,448    244,956    220,492     195,914     24,578
                           =======    =======    =======     =======    =======

                                                 As at
                                          December 31, 2000
                                              (restated)
                           Future Value        Interest           Discounted
                           ------------        --------           ----------
Due in
one year                      30,577              1,732             28,845
two years                     30,577              4,671             25,906
three years                   30,577              7,306             23,271
four years                    30,577              9,662             20,915
five years                    30,577             11,768             18,809
after five years             276,181            171,721            104,460
                             -------            -------            -------
                             429,066            206,860            222,206
                             =======            =======            =======

                                                 As at
                                          December 31, 1999
                                              (restated)
                           Future Value        Interest           Discounted
                           ------------        --------           ----------
Due in
one year                      29,807              1,727             28,080
two years                     29,807              4,676             25,131
three years                   29,807              7,315             22,492
four years                    29,807              9,673             20,134
five years                    29,807             11,782             18,025
after five years             300,363            195,886            104,477
                             -------            -------            -------
                             449,398            231,059            218,339
                             =======            =======            =======


--------------------------------------------------------------------------------
                                     - 43 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

     20.  Long-term liabilities (continued)

     d.   License fee payables

     The  fees for the  Company's  GSM 900,  GSM  1800  and  UMTS  licenses  are
     denominated in EUR and payable in  installments.  These  deferred  payments
     have been discounted at 6.78% (the GSM 900 license), at 9.52% (the GSM 1800
     license) and at 12.06% for short-term and 12.11% for long-term installments
     (the UMTS license), which approximated the Company's borrowing rate for EUR
     as at the date of acquisition of the licenses.  As at December 31, 2001 the
     carrying amount of the GSM 1800 license approximated its fair value and the
     fair value of the UMTS license amounted to PLN 360 million. As at that date
     there was no GSM 900 license liability outstanding.

     The balances payable on the licenses as at December 31, 2001 were:

                                        EUR'000       EUR'000      PLN'000
                                        nominal     discounted   discounted
                                        -------     ----------   ----------
     Maturity
     Due in one year (see Note 19)       16,716       15,829       55,747
     Due in year four                    15,000        9,783       34,454
     Due in year five                    15,000        8,726       30,733
     Due after year five                360,000       78,794      277,505
                                        -------      -------      -------
                                        406,716      113,132      398,439
                                        =======      =======      =======

     The restated balances payable as at December 31, 2000 were:

                                        EUR'000       EUR'000      PLN'000
                                        nominal     discounted   discounted
                                        -------     ----------   ----------
     Maturity
     Due in one year (see Note 19)      322,816       307,309     1,184,488
     Due in year two                     16,715        14,498        55,881
     Due in year five                    15,000         8,715        33,592
     Due after year five                375,000        77,969       300,525
                                      ---------     ---------     ---------
                                        729,531       408,491     1,574,486
                                      =========     =========     =========

     The restated balances payable as at December 31, 1999 were:

                                        EUR'000       EUR'000      PLN'000
                                        nominal     discounted   discounted
                                        -------     ----------   ----------
     Maturity
     Due in year one (see Note 19)       51,035       49,573      206,666
     Due in year two                     72,815       66,587      277,596
     Due in year three                   16,716       13,168       54,895
                                        -------      -------      -------
                                        140,566      129,328      539,157
                                        =======      =======      =======


--------------------------------------------------------------------------------
                                     - 44 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

21.  Accruals and Provisions for liabilities and charges

<TABLE>
<CAPTION>
                                                  As at         As at         As at
                                              December 31,   December 31,  December 31,
                                                  2001          2000          1999
                                              ------------   ------------  ------------
                                                             (restated)    (restated)
<S>                                              <C>           <C>           <C>
     Accruals
     Accruals                                    231,843       129,756       150,841
     Social fund                                   2,920         1,858         1,220
                                                --------      --------      --------
                                                 234,763       131,614       152,061
                                                ========      ========      ========
     Provisions for liabilities and charges
     Provision for loyalty program
     and potential losses
     Opening balance                              12,908         3,764            --
     Additions                                    15,144        18,789         3,764
     Disposals, including:
         Usage                                    (1,048)       (1,242)           --
         Cancellation                             (6,352)       (8,403)           --
                                                --------      --------      --------
     Closing balance                              20,652        12,908         3,764
                                                ========      ========      ========
</TABLE>

     The  presentation  of  the  accruals  has  been  changed  comparing  to the
     consolidated   financial   statements   for  the  year  2000.  The  Company
     transferred the provision for the loyalty program that has been implemented
     in October 1999 from short to long-term liabilities.

     The balances of accruals  included mainly  interests,  employee bonuses and
     operating costs not invoiced.

     The social fund is an employer's obligation based on a mandated calculation
     based on the number of  employees  and the monthly  minimum wage in Poland.
     The amounts  calculated under this formula must be used for the benefits of
     the employees.

22.  Capital

<TABLE>
<CAPTION>
                                                  As at         As at         As at
                                              December 31,   December 31,  December 31,
                                                  2001          2000          1999
                                              ------------   ------------  ------------
                                                             (restated)    (restated)
<S>                                              <C>           <C>           <C>
     Allotted, called-up and fully paid:
     471,000 ordinary shares of PLN              471,000       471,000       471,000
     1,000 each
     Additional paid-in capital                  409,754       409,754            --
                                                 -------       -------       -------
                                                 880,754       880,754       471,000
                                                 =======       =======       =======
</TABLE>

     According to the Company's  Shareholders' Meeting resolution dated November
     30,  2000,  the  shareholders'  equity was  increased  with the  additional
     paid-in capital. The shareholders contributed the capital proportionally to
     their  voting  rights.   The   contributions   were  transferred  from  the
     Shareholder loan and paid in cash in the amount of PLN 16,827.


--------------------------------------------------------------------------------
                                     - 45 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

23.  Related party transactions

<TABLE>
<CAPTION>
                                            As at and for the    As at and for     As at and for
                                                year ended      the year ended    the year ended
                                               December 31,       December 31,      December 31,
                                                    2001             2000               1999
                                                    ----             ----               ----
                                                                  (restated)          (restated)
<S>                                               <C>               <C>                <C>
     Elektrim S.A
         Inter-company receivables                   93                132                 --
         Inter-company payables                      23                224                925*
         Inter-company sales                        741                839                560
         Inter-company purchases                    272              1,990              5,615

     Elektrim Telekomunikacja Sp. z o.o. ("ET")
         Inter-company sales                         38                 --                 --

     DeTeMobil Deutsche Telekom MobilNet GmbH ("DeTeMobil")
         Inter-company receivables                  521              1,063                 --
         Inter-company payables                   2,897              1,524              5,082*
         Inter-company sales                     24,365             19,670             19,795
         Inter-company purchases                 22,128             22,246             27,543

     MediaOne International B.V. ("MediaOne")
         Inter-company purchases                    278              7,834             14,426
</TABLE>

     *    Balances  of  the  inter-company  payables  as at  December  31,  1999
          represent net amounts.

     Management   believes  that  related  party   transactions  were  conducted
     primarily on market terms.


--------------------------------------------------------------------------------
                                     - 46 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

24.  Derivative financial instruments

<TABLE>
<CAPTION>
     Type of derivative               Forward and     Note       CC swaps     Index        Rental       Total
                                        option      options                   swaps     derivatives
                                      contracts
                                      -----------   -------      --------     -----     -----------     -----

<S>                                    <C>           <C>         <C>         <C>          <C>          <C>
     Balance as at January 1, 2001     (45,873)      18,077          --      (35,962)       8,853      (54,905)
     asset/(liability)

     Reclassification between
     leasing liability and index
     swap                                   --           --          --       20,890           --       20,890

     Initial measurement of new          1,076        4,227          --           --           --        5,303
     financial instruments

     Cash paid/(received)               90,485           --       1,959       (4,910)      (2,272)      85,262

     Changes in the fair value
     reported in the statement of
     operations                       (134,161)      60,556      (7,868)      (4,596)      23,366      (62,703)

     Changes in the fair value
     reported in shareholders'
     equity (hedge reserve)                 --           --    (124,299)          --           --     (124,299)
                                      --------     --------    --------     --------     --------     --------
     Balance as at December 31,
     2001 asset/(liability)            (88,473)      82,860    (130,208)     (24,578)      29,947     (130,452)
                                      ========     ========    ========     ========     ========     ========
</TABLE>

     Forward and foreign exchange option contracts

     During the year 2001 the Company  undertook  actions  aimed at reducing the
     foreign currency  transaction  exposure resulting from operating activities
     forecasted for 2001 and 2002. Realization of the operating activity hedging
     program included entering into 130 NDF transactions for the total amount of
     EUR 297 million.

     In order to hedge part of the UMTS license fees payable in 2001 the Company
     concluded  ten NDF  transactions  for the total  amount of EUR 116  million
     maturing in March and September 2001, and two EUR call PLN put non-delivery
     options for total amount of EUR 20 million maturing in September 2001.

     The Company entered also into five forward  transactions  for the amount of
     EUR 22 million to hedge  foreign  exchange  rate for the  repayment of Bank
     Credit Facility EUR tranche in November 2001.

     CC swaps

     On April 4, 2001 the Company entered into the cross currency  interest rate
     swap  transaction  which swapped its fixed rate interest coupon payments on
     EUR 60 million aggregate amount of 11 1/4 Notes with 15.20% coupon payments
     on PLN 217,140. The coupons will be swapped during the period commencing on
     June 3, 2002 and terminating on December 1, 2007.

     On May 21, 2001 the Company  entered into the cross currency  interest rate
     swap  transaction  which swapped its fixed rate interest coupon payments on
     EUR 90 million aggregate amount of 11 1/4 Notes with 15.26% coupon payments
     on PLN 314,640. The coupons will be swapped during the period commencing on
     June 3, 2002 and terminating on December 1, 2007.


--------------------------------------------------------------------------------
                                     - 47 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

24.  Derivative financial instruments (continued)

     CC swaps (continued)

     On May 23, 2001 the Company  entered into the cross currency  interest rate
     swap  transaction  which swapped its fixed rate interest coupon payments on
     EUR 100 million  aggregate amount of 10 ? Notes with 13.96% coupon payments
     on PLN 344,890. The coupons will be swapped during the period commencing on
     May 8, 2001 and terminating on May 1, 2007.

     On June 1, 2001 the Company  entered into the cross currency  interest rate
     swap  transaction  which swapped its fixed rate interest coupon payments on
     USD 75 million aggregate amount of 11 1/4 Notes with 14.79% coupon payments
     on PLN 298,837. The coupons will be swapped during the period commencing on
     June 3, 2002 and terminating on December 1, 2007.

     On June 11, 2001 the Company entered into the cross currency  interest rate
     swap  transaction  which swapped its fixed rate interest coupon payments on
     USD 125  million  aggregate  amount  of 10 3/4  Notes  with  13.52%  coupon
     payments  on PLN  496,438.  The coupons  will be swapped  during the period
     commencing on July 1, 2002 and terminating on July 1, 2005.

     On December 10, 2001 the Company  entered into two cross currency  interest
     rate swap transactions.  The Company swapped its fixed rate interest coupon
     payments  on EUR 75 million  aggregate  amount of 11 1/4 Notes with  13.56%
     coupon  payments on PLN  271,650.  The coupons  will be swapped  during the
     period  commencing on December 1, 2002 and terminating on December 1, 2007.
     Under the terms of the second  transaction  the  Company  swapped its fixed
     rate interest  coupon payments on EUR 50 million  aggregate  amount of 10 ?
     Notes with 12.69%  coupon  payments  on PLN  181,700.  The coupons  will be
     swapped during the period commencing on January 31, 2002 and terminating on
     May 1, 2007.

     As at  December  31,  2001 the fair value of the CC swaps  described  above
     amounted to a liability  of PLN 130,208 of which PLN 124,299 is deferred in
     equity (as effective cash flow hedge) net of tax effect of PLN 27,344.

     As at December 31, 2001 the Company  transferred PLN 5,909 relating to fair
     value of the CC swaps from the equity to the  statement  of  operations  to
     match with hedged interests. The hedge is fully effective.

     Index swaps and rental derivatives

     As at December  31, 2001 the fair value of rental  derivatives  amounted to
     PLN 29,947. The change of fair value in the amount of PLN 21,094 net of tax
     effect of PLN 4,852 was  recognized  in the net income (see also Note 4.1.a
     and 20c).

     Index swaps were presented in the Note 20c.

     Note options

     See Note 4.1.a (recognition and measurement) and Note 20a (conditions).


--------------------------------------------------------------------------------
                                     - 48 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

25.  Financial commitments

     a.   Operating leases (not included in liabilities)

     The minimum annual rentals payable on operating leases are as follows:

<TABLE>
<CAPTION>
                                                 As at              As at             As at
                                           December 31, 2001  December 31, 2000 December 31, 1999
                                           -----------------  ----------------- -----------------
                                                                 (restated)         (restated)
<S>                                            <C>                <C>                 <C>
         Operating leases maturity
         Due in one year                        13,621              9,218              17,475
         Due in two years                       11,440             13,399               9,010
         Due in three years                      8,244             10,008              14,201
         Due in four years                       8,185              7,182               6,253
         Due in five years                      10,081              6,202               2,345
         Due after five years                   89,693             95,185              31,896
                                               -------            -------             -------
                                               141,264            141,194              81,180
                                               =======            =======             =======
</TABLE>

     Assets under  operating  leases include  primarily  network  sites,  office
     space, retail outlets and warehouses.

     b.   Capital equipment commitments (not included in liabilities)

<TABLE>
<CAPTION>
                                                As at              As at              As at
                                          December 31, 2001  December 31, 2000  December 31, 1999
                                          -----------------  -----------------  -----------------
                                                                 (restated)         (restated)

<S>                                          <C>                <C>                 <C>
         Authorized and contracted             393,841            970,532             319,725
         Authorized and not contracted         709,780          1,487,877           1,495,522
                                             ---------          ---------           ---------
                                             1,103,621          2,458,409           1,815,247
                                             =========          =========           =========
</TABLE>

26.  Contingent liabilities

     As at December 31, 2001 the Company did not have any significant contingent
     liabilities.

27.  Dividend restriction

     The Company's  statutory  financial  statements  are prepared in accordance
     with Polish accounting regulations.  Dividends may only be distributed from
     the  net  profit  reported  in  the  Polish  annual   statutory   financial
     statements.   As  at  the  date  of  signing  this  report  there  was  not
     Shareholders' decision regarding net income distribution.

     As at the day of authorization of these consolidated  financial  statements
     the  Company's   Shareholders'  Meeting  has  not  made  a  decision  of  a
     distribution of profits, yet.

     Dividend distribution is restricted mainly by Notes Agreements that require
     the  Company to have Debt to Adjusted  Consolidated  Net Worth ratio at the
     level below 2.0:1.0.


--------------------------------------------------------------------------------
                                     - 49 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

28.  Supplementary cash flow information

     Cash and cash equivalents  consist of cash on hand, balances deposited with
     banks and short-term, highly liquid investments.

<TABLE>
<CAPTION>
                                                As at               As at              As at
                                            December 31,        December 31,       December 31,
                                                2001                2000               1999
                                            ------------        ------------       ------------
                                                                 (restated)         (restated)
<S>                                             <C>                <C>              <C>
     Balances deposited with banks:
        Current accounts                        10,416             14,669              29,422
        Term deposits with original             25,609             14,033             654,305
        maturity of less than 90 days
        Treasury bills with original                --                 --             410,694
        maturity of less than 90 days
        Social fund cash                           301                602                 468
     Cash on hand                                  185                161                 620
                                             ---------          ---------           ---------
                                                36,511             29,465           1,095,509
                                             =========          =========           =========
</TABLE>

     As at  December  31, 2001 the Company  revalued  cash on hand and  balances
     deposited with banks denominated in foreign  currencies.  The net result of
     the revaluation was PLN 362 of foreign exchange losses, which were reported
     under  interest  and other  financial  expenses.  The  social  fund cash is
     restricted for the benefits of the employees as described in Note 4.2.f.

<TABLE>
<CAPTION>
     Non-cash transactions                      As at               As at              As at
                                            December 31,        December 31,       December 31,
                                                2001                2000               1999
                                            ------------        ------------       ------------
                                                                 (restated)         (restated)
<S>                                              <C>            <C>                  <C>
     UMTS license acquisition                    --             1,279,147                  --
     Transfer of Shareholders' Loan to
     capital (see Note 22)                       --               392,927                  --
     GSM 1800 license acquisition                --                    --             389,923
     Assets acquired under finance lease         --                    --             119,963
</TABLE>

29.  Employment

     Average headcount in the Company during the presented years was as follows:

<TABLE>
<CAPTION>
     Non-cash transactions                   Year ended          Year ended         Year ended
                                            December 31,        December 31,       December 31,
                                                2001                2000               1999
                                            ------------        ------------       ------------
                                                                 (restated)         (restated)
<S>                                            <C>                 <C>                <C>
     Average headcount                         3,399               2,865              2,170
</TABLE>


--------------------------------------------------------------------------------
                                     - 50 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

30.  Estimation of the fair values

     The following  table  presents the carrying  amounts and fair values of the
     Company's financial  instruments  outstanding as at December 31, 2001, 2000
     and 1999, in million PLN. The carrying amounts in the table are included in
     the balance sheet under the indicated captions.

<TABLE>
<CAPTION>
                                            As at                   As at                   As at
                                        December 31,            December 31,             December 31,
                                            2001                    2000                     1999
                                            ----                    ----                     ----
                                                                 (restated)               (restated)

                                        million PLN             million PLN              million PLN

                                    Carrying   Fair value   Carrying   Fair value    Carrying    Fair value
                                     amount                  amount                   amount

<S>                                  <C>         <C>         <C>         <C>          <C>          <C>
     Financial Assets
     Cash and cash equivalents          37          37          29          29        1,096        1,096
     Short-term investments and         98          99         192         191          198          198
     other financial assets
     Debtors and accrued revenue       507         507         432         432          382          382
     Financial assets                  106         106          97          97          302          299
     (long-term)

     Financial Liabilities
     Current liabilities and           680         680       2,008       2,008        1,072        1,072
     accruals
     Long-term liabilities           5,055       5,073       3,806       3,526        4,392        4,315
</TABLE>

     Debtors, current liabilities and accruals

     The carrying  amounts are a reasonable  estimate of the fair values because
     of the short maturity of such instruments.

     The carrying  amounts of forward  foreign  exchange  contracts are based on
     quoted market forward rates as at the year-end balance sheet dates.

     Cash and cash  equivalents,  short-term  investments  and financial  assets
     (long-term)

     The carrying amounts of cash and cash equivalents  approximate fair values.
     The fair value of publicly traded  short-term and long-term  investments is
     based on quoted market values.

     Long-term liabilities

     The fair value of fixed rate long-term debt is estimated using the expected
     future  payments  discounted  at  market  interest  rates,  except  for the
     publicly  traded  liabilities,  which  are  quoted at  market  values.  The
     carrying amount of market-based  floating rate long-term loans approximates
     their fair value.


--------------------------------------------------------------------------------
                                     - 51 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

31.  Supplementary Information to IAS Consolidated Financial Statements

     A reconciliation of the Company's  consolidated net profit/(loss) under PAS
     and IAS is summarized as follows:

<TABLE>
<CAPTION>
                                                   Year ended         Year ended        Year ended
                                                  December 31,       December 31,      December 31,
                                                      2001               2000              1999
                                                      -----              ----              ----
                                                                      (restated)        (restated)

<S>                                                  <C>               <C>             <C>
     Net profit / (loss)                             263,442           62,795          (138,203)
     under PAS
     Foreign translation difference                   (2,098)            (636)           (1,582)
     IAS adjustment for GSM                            6,279            5,992             4,562
     licenses amortization
     IAS adjustment for GSM                          (11,186)         (26,591)          (22,602)
     licenses discount
     Unrealized foreign exchange differences         111,227           45,188            29,569
     Finance lease                                    (5,173)            (511)            1,113
     IAS assets adjustment                            (2,400)          (2,972)             (964)
     Development and start-up costs                    2,296            3,586             3,586
     Notes valuation                                   6,132               --                --
     Valuation of financial instruments               77,056               --                --
     Change in revenue recognition policy             50,019           16,300                --
     Deferred tax benefit/(charge)                   (68,373)           6,236             2,018
                                                    --------         --------          --------
     Net profit/(loss)
     under IAS (restated)                            427,221          109,387          (122,503)
                                                    ========         ========          ========
</TABLE>


--------------------------------------------------------------------------------
                                     - 52 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

31.  Supplementary Information to IAS Consolidated Financial Statements
     (continued)

     A reconciliation of the Company's shareholders' equity under PAS and IAS is
     summarized as follows:

<TABLE>
<CAPTION>
                                                     As at              As at             As at
                                                  December 31,       December 31,      December 31,
                                                      2001               2000              1999
                                                      -----              ----              ----
                                                                      (restated)        (restated)

<S>                                                  <C>               <C>             <C>
     Shareholders' equity under PAS                   788,192          623,371          151,681
     Foreign translation difference                    (1,861)          (1,429)          (1,652)
     IAS adjustment for GSM                            27,892           21,613           15,621
     licenses amortization
     IAS adjustment for GSM                           (90,961)         (79,775)         (53,184)
     licenses discount
     Unrealized foreign exchange                      196,270           85,043           39,855
     differences
     Finance lease                                    (17,681)           2,706            3,217
     IAS assets adjustment                              5,396            7,796           10,768
     Development and start-up costs                        --           (2,296)          (5,882)
     Notes valuation                                   17,012               --               --
     Valuation of financial instruments                53,424               --               --
     Change in revenue recognition policy              66,319           16,300               --
     Deferred tax asset/(liability)                   (48,257)          13,618            7,382
                                                     --------         --------         --------
     Shareholders' equity under IAS (restated)        995,745          686,947          167,806
                                                     ========         ========         ========
</TABLE>


--------------------------------------------------------------------------------
                                     - 53 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

31.  Supplementary Information to IAS Consolidated Financial Statements
     (continued)

     The above differences are caused by the following reasons:

     o    Recognition of the long-term license  liabilities at present value for
          IAS purposes,  while they were recorded at undiscounted  nominal value
          under Polish accounting regulations. This accounting results in higher
          interest  expense  under  IAS,  which  is  partially  offset  by lower
          amortization expense and foreign exchange losses.

     o    Unrealized  foreign  exchange gains recognized as financial income for
          IAS purposes but deferred for PAS purposes.

     o    Recognition of the finance lease liabilities at present value together
          with bifurcation of the index derivative for IAS purposes,  while they
          were recorded at  undiscounted  nominal value under Polish  accounting
          regulations.  Difference  in  treatment  of assets held under  finance
          lease and other capital assets written off for PAS purposes.

     o    Development  and start-up  costs  expensed in IAS  according to IAS 38
          "Intangible Assets".

     o    The  transaction  costs  related  to the Bank  Credit  Facilities  are
          amortized under IAS based on the credit limits available, whereas they
          are  amortized  on  a  straight-line  basis  under  Polish  accounting
          regulations.

     o    Recognition  of  long-term  Notes  liabilities  at present  value with
          transaction  costs  included in the initial  measurement in IAS. Under
          Polish  accounting  regulations  they were  recorded  at  undiscounted
          nominal value and are recognized as deferred  expenses being amortized
          on a straight-line basis.

     o    Derivatives   embedded  in  the   Company's   Notes,   finance   lease
          liabilities, rental and other trade contracts recognized under IAS are
          not recognized for PAS purpose (see Note 4.1.a).

     o    Certain costs not relating to multiple-element  transactions under IAS
          are accrued for PAS purpose (see Note 4.1.b).

     o    Adjustment  to deferred  tax on  temporary  differences  in  preceding
          adjustments.


--------------------------------------------------------------------------------
                                     - 54 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

32.  Differences between IAS and U.S. GAAP

     The Company's  consolidated financial statements are prepared in accordance
     with International  Accounting  Standards,  which differ in certain aspects
     from U.S. GAAP.

     The  effects of the  principal  differences  between  IAS and U.S.  GAAP in
     relation to the Company's  consolidated  financial statements are presented
     below,  with   explanations  of  certain   adjustments  that  affect  total
     comprehensive net income.

     Reconciliation of consolidated net income/(loss):

<TABLE>
<CAPTION>
                                                   Year ended         Year ended        Year ended
                                                  December 31,       December 31,      December 31,
                                                      2001               2000              1999
                                                      -----              ----              ----
                                                                      (restated)        (restated)

<S>                                                  <C>                <C>              <C>
     Net income/(loss)                               427,221            109,387          (122,503)
     under IAS (restated)

     U.S. GAAP adjustments:

     (a)   Removal of foreign exchange               107,075              4,176           (18,224)
           differences capitalized for IAS

     (b)   Depreciation and amortization of
           foreign exchange differences                9,268              9,188             6,392

     (c)   Development and start-up cost                  --                 --            (9,468)

     (d)   Revenue recognition (SAB 101)               1,151             (1,589)               --

     (e)   SFAS 133/IAS 39 implementation            (28,072)                --                --

     (g)   Deferred tax on above                      (8,367)               445             2,938
                                                     -------            -------          --------
     Net income/(loss) under U.S. GAAP before
     cumulative effect on accounting changes         508,276            121,607          (140,865)

     Accounting changes adjustments:

     (e)   SFAS 133/IAS 39 implementation            (35,158)                --                --

     (f)   Transaction costs                           7,220                 --                --

     (g)   Deferred tax on above                       6,470                 --                --
                                                     -------            -------          --------
     Net income/(loss) under U.S. GAAP               486,808            121,607          (140,865)
                                                     =======            =======          ========
</TABLE>


--------------------------------------------------------------------------------
                                     - 55 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

32.  Differences between IAS and U.S. GAAP (continued)

     Reconciliation of consolidated shareholders' equity:

<TABLE>
<CAPTION>
                                                     As at              As at             As at
                                                  December 31,       December 31,      December 31,
                                                      2001               2000              1999
                                                      -----              ----              ----
                                                                      (restated)        (restated)

<S>                                                 <C>                 <C>              <C>
     Consolidated shareholders' equity               995,745            686,947          167,806
     under IAS (restated)

     U.S. GAAP adjustments:
     (a)   Removal of foreign exchange
           differences capitalized
           for IAS                                     8,011            (99,064)        (103,240)

     (b)   Depreciation and amortization on           32,233             22,965           13,777
           above

     (c)   Development and start-up cost                  --                 --               --

     (d)   Revenue recognition (SAB 101)                (438)            (1,589)              --

     (e)   SFAS 133/IAS 39 implementation            (56,869)                --               --

     (f)   Transaction costs                              --                 --               --

     (g)   Deferred tax on above                      (1,299)               445               --
                                                -------------           -------         --------
     Consolidated shareholders' equity
     under U.S. GAAP before cumulative effect
     on accounting changes                           977,383            609,704           78,343

     Accounting changes adjustments:

     (e)   SFAS 133/IAS 39 implementation             28,797                 --               --

     (g)   Deferred tax on above                      (6,623)                --               --
                                                     -------            -------         --------
     Consolidated shareholders' equity under
     U.S. GAAP                                       999,557            609,704           78,343
                                                     =======            =======         ========
</TABLE>

     a.   Removal of foreign exchange differences capitalized for IAS

     In  accordance  with IAS 23  "Borrowing  Costs",  the  Company  capitalizes
     financing costs,  including  interest and foreign exchange gains or losses,
     into assets under construction.

     For  tangible  fixed  assets under  construction,  the Company  capitalizes
     interest  and  foreign  exchange  gains or  losses  incurred  and  directly
     attributable to the acquisition and  construction of the qualifying  assets
     that would have been avoided if the  expenditure on the  qualifying  assets
     had not been made.  The  financing  costs are  capitalized  only during the
     period of construction of the qualifying  assets (see Note 15). The Company
     capitalized financing costs attributable to the acquisition of its GSM 900,
     GSM 1800 and UMTS  licenses,  including  interest on the related  long-term
     obligation and foreign  exchange losses because these licenses are integral
     parts of the network (see Note 16).


--------------------------------------------------------------------------------
                                     - 56 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

32.  Differences between IAS and U.S. GAAP (continued)

     a.   Removal  of  foreign   exchange   differences   capitalized   for  IAS
          (continued)

     Under  Statement of  Financial  Accounting  Standards 52 "Foreign  Currency
     Translation",  however,  foreign exchange differences relating to financing
     obligations  should be  included  in the  statement  of  operations  of the
     Company.   Consequently,   the  amounts  of  foreign  exchange  differences
     capitalized  in  accordance  with  IAS  23 in  the  Company's  consolidated
     financial statements are expensed under U.S. GAAP.

     b.   Depreciation and amortization

     The U.S. GAAP adjustments for  depreciation  and  amortization  shown above
     represent the amounts of depreciation and amortization  charges relating to
     capitalized foreign exchanges differences in the Company's IAS consolidated
     financial  statements.   Since  under  U.S.  GAAP  these  foreign  exchange
     differences are not permitted to be capitalized  and are instead  expensed,
     the depreciation and amortization of these  capitalized  differences  under
     IAS has been reversed.

     c.   Development and start-up cost

     The  Company  has  adopted  IAS 38  "Intangible  Assets" in 1999 giving its
     effect retrospectively. This has resulted in writing-off of development and
     start-up  cost when they arose in 1996.  For U.S. GAAP purposes the Company
     has written off in 1999 start-up costs  following the issuance the SOP 98-5
     in the United States.

     d.   Revenue recognition (SAB 101)

     As described in Note 4.1.b the Company applied under IAS certain principles
     of SAB 101  retrospectively.  Under U.S.  GAAP a calendar  year  company is
     required to adopt the new rules in the fourth  quarter of 2000. The Company
     should  calculate  the effect of SAB 101 as at  January  1, 2000,  make the
     cumulative  entry as at that date,  and restate all  quarterly  information
     previously reported during 2000.

     Under U.S.  GAAP,  the  application  of SAB 101  results  in the  different
     treatment  of the  separable  multiple-element  transactions.  Revenues and
     costs related to those  transactions are recognized in the income statement
     as incurred,  except for up-front non-refundable fees (activation fees) and
     direct costs related to these fees. These activation fees and related costs
     are deferred  over the average  expected  life of the  customer.  Under IAS
     up-front non-refundable fees are recognized immediately.

     e.   SFAS 133

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
     Statement  of  Financial  Accounting  Standards  No.  133,  Accounting  for
     Derivative  Instruments  and  Hedging  Activities.  In June 1999,  the FASB
     issued Statement No. 137, Accounting for Derivative Instruments and Hedging
     Activities - Deferral of the Effective  Date of FASB  Statement No. 133. In
     June 2000, the FASB issued Statement 138, Accounting for Certain Derivative
     Instruments and Certain Hedging Activities,  an amendment of FASB Statement
     No. 133.


--------------------------------------------------------------------------------
                                     - 57 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

32.  Differences between IAS and U.S. GAAP (continued)

     e.   SFAS 133 (continued)

     Statement 133, as amended,  establishes  accounting and reporting standards
     requiring that every derivative  instrument  (including  certain derivative
     instruments  embedded in other  contracts) be recorded in the balance sheet
     as either an asset or liability  measured at its fair value.  The Statement
     requires  that  changes  in  the  derivative  instrument's  fair  value  be
     recognized  currently in earnings unless specific hedge accounting criteria
     are met.  Special  accounting  for  qualifying  hedges  allows a derivative
     instrument's  gains and losses to offset related results on the hedged item
     in the income  statement,  to the extent  effective,  and  requires  that a
     company must formally document,  designate, and assess the effectiveness of
     transactions that receive hedge accounting.

     The Company adopted  Statement 133 on January 1, 2001 and applied it to all
     hybrid instruments.

     Long-term  Notes  issued by the Company  have  embedded  derivatives  (CALL
     options).  These  options  should  be  separated  from  host  contract  and
     accounted  for as a  derivative  under IAS 39,  while  they  should  not be
     separated  under  SFAS 133.  Therefore,  the fair  value of the  bifurcated
     options is not recognized for U.S. GAAP purposes.

     The  transition  rules  of IAS 39  specifies  that  any  adjustment  of the
     previous  carrying amount was recognized as an adjustment of the balance of
     retained  earnings at the beginning of the year 2001. The accounting change
     principles  under U.S. GAAP advise to include the cumulative  effect in the
     net income of the period of the change.  However,  for qualifying cash flow
     hedge instruments portion (or the entirety) of the cumulative effect should
     be  classified  in  the  other  comprehensive  income  (hedge  reserve),  a
     component of shareholders' equity.

     The cumulative  adjustment as at January 1, 2001 resulted in an increase of
     accumulated deficit of PLN 4,926, net of a tax benefit.

     f.   Transaction costs

     As  described  in Note  4.1.a,  IAS 39  requires  transaction  costs  to be
     included in the initial  measurement of financial  assets and  liabilities.
     Under U.S.  GAAP these costs should be  presented as deferred  costs in the
     amount of PLN 73,642 as at  January  1, 2001 and PLN 83,645 as at  December
     31, 2001.

     The cumulative  adjustment to the net income as at January 1, 2001 resulted
     in the  increase of PLN 5,632 due to  differences  in  transition  rules in
     implementation of IAS 39 and SFAS 133.


--------------------------------------------------------------------------------
                                     - 58 -
<PAGE>

              POLSKA TELEFONIA CYFROWA SP. Z O.O. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
 for the years ended December 31, 2001, December 31, 2000 and December 31, 1999
                              (in thousands of PLN)
--------------------------------------------------------------------------------

32.  Differences between IAS and U.S. GAAP (continued)

     g.   Presentation of deferred taxation

     Under IAS the Company  may, if certain  criteria  are met, net deferred tax
     liabilities  and assets and  present a net  balance in the  balance  sheet.
     Under U.S. GAAP current and non-current portions,  by tax jurisdiction,  of
     the above  should be  disclosed  separately.  As at  December  31, 2001 the
     Company  recognized  PLN  210,978 of net  current  deferred  tax asset (PLN
     47,574 as at December  31, 2000 and PLN 21,254 as at December 31, 1999) and
     PLN 271,021 of net  long-term  deferred  tax  liability  (PLN 107,637 as at
     December 31, 2000 and PLN 48,576 as at December 31, 1999).

     h.   Extraordinary item

     In the first  quarter of 2001 the  Company  refinanced  the  existing  Loan
     Facility by the new Bank Credit Facilities. The intangible asset related to
     the Loan facility arrangement amounting to PLN 10,122 was written-off,  net
     of a tax benefit of PLN 2,834.  According to U.S.  GAAP the Company  should
     recognize this costs as an  extraordinary  item.  Under IAS it is presented
     under amortization expense.

     i.   Other comprehensive income

     The hedge reserve under U.S. GAAP constitutes a part of other comprehensive
     income,  a  component  of  shareholders'   equity.  The  changes  in  other
     comprehensive  income (hedge  reserve) are reflected in  accumulated  other
     comprehensive  income. A sum of other  comprehensive  income and net income
     for the period represents comprehensive income for the period.

     j.   SFAS 95

     According to IAS 7-Cash Flow Statement cash flow from operating  activities
     begins with net income  before  taxation,  whereas  Statement  of Financial
     Accounting  Standards  No. 95,  Statement of Cash Flows  requires cash flow
     from operating activities to begin with net income after tax.

     k.   New accounting standards

     The  Company  plans  to  implement  the   Statements   No.  141,   Business
     Combinations,  No. 142,  Goodwill and Other Intangible  Assets and No. 144,
     Accounting for the Impairment of Long Lived Assets from January 1, 2002 and
     the Statement No. 143,  Accounting for Asset  Retirement  Obligations  from
     January 1, 2003 as the  Statement is effective  for fiscal years  beginning
     after June 15, 2002.


--------------------------------------------------------------------------------
                                     - 59 -