Budapest, June 7, 2004 09:00

Several Hungarian corporations, including Matáv, have come in the crossfire of political dispute in recent weeks.

Matáv is a business organization operating publicly in compliance with the regulations laid down in the Constitution, the Civil Code and the Act on Business Associations, it is free of political influence and a non-state-owned company. Matáv's economic, professional and procurement decisions and civil law contracts are adjusted to the statutory regulations, provisions of law, the company's internal regulations also acknowledged by international qualification organizations and the business interests of the shareholders.

In view of the above, Matáv rejects the allegations that question its fair business conduct by presenting a false picture of reality in the context of the tax reduction available under law for specific investments, and thus harm its good reputation which has been acknowledged in domestic and international business quarters alike, putting at risk the company’s business and the interests of the shareholders.

There is no truth in the allegation that there is a connection between the availability of the 3.2 billion HUF tax reduction on broadband investments and the civil law contracts of the company.

Matáv has not been granted any individual or exceptional tax reduction. The first provision for the tax reduction on investments was made in Government Decree 162/2001. (IX. 14.) then, with promulgation date November 15, 2002, the tax law on corporations was amended by Act XLII of 2002, which took effect on January 1, 2003. This law extended the scope of eligibility for the tax reduction to investments for the purpose of provision of broadband internet service, as well, in order to increase broadband penetration. (The amendment says that investments reaching the value of 100 million HUF and serving the purpose of broadband internet service provision are eligible for the tax reduction on the basis of their investment documentation.)

In compliance with the provisions of the regulations, Matáv has set up an investment plan documentation worth 7,644,317,000 HUF, which underlies its eligibility for 3,174,272,000 HUF tax reduction for the investments under the corporation tax regulations. The value of the investments Matáv actually realized in 2003 is 6,650,167,000 HUF, for which it is eligible for 2,787,125,000 HUF tax reduction over 5 tax years calculated from the date of putting the facilities into operation. Of this amount Matáv has so far used 87 million HUF tax reduction on investments.

Under the effective regulations, every player of the telecommunications market may take advantage of tax reduction on investments, and several companies have already availed themselves of this possibility.

In view of the statements made over the past weeks Matáv will examine every legal possibility provided by the Hungarian laws to take action against those parties that, by making false allegations, threaten or violate the company’s business, its good reputation and the interests of the shareholders.