Arrangement of sale of State shares in Iceland Telecom hf.

Press release

Arrangement of sale of State shares in Iceland Telecom hf.

The Executive Committee on Privatisation has recently been preparing the sale of shares in Iceland Telecom in accordance with the policy formulated by the Icelandic Government and the Ministerial Committee on Privatisation.

The decision has been made to sell the State’s remaining share (98.8%) in one lot to a single consortium of core investors. The sale of the shares to a group of core investors will be subject to the following conditions:

• no single party, related or connected parties shall acquire a share in Iceland Telecom, or a company established for the purchase of the State’s share in Iceland Telecom, larger than 45%, directly or indirectly, until the company’s listing on the Main List of the Iceland Stock Exchange.
• a specified portion of the purchased shares, and no less than 30% of the company’s total share capital, shall be offered by the buyer to the general public and other investors for purchase before year-end 2007, and the sale of shares in the company to other parties shall not take place until such a sale is complete.
• Iceland Telecom shall be listed on the Main List of the Iceland Stock Exchange (ICEX) when the conditions of ICEX have been fulfilled, concurrently with the sale to the public and other investors, and redemption rights shall not be exercised vis-à-vis current shareholders in Iceland Telecom (1.2%) until the listing of the company on the ICEX Main List.
• the core investor shall not have direct or indirect holdings in companies competing with Iceland Telecom in Iceland.

All interested parties with sufficient capacity, experience and financial strength to conclude a purchase will then be considered as purchasers. Information regarding the progress of the sale process will be issued at regular intervals, but owing to the nature of the matter, and in order to maintain competitive prerequisites, certain information regarding the sale process will be confidential.

The aim is to conclude the sale process in July 2005. The Executive Committee on Privatisation reserves the right to deny all bids. The Ministerial Committee on Privatisation selects the parties to enter negotiations having received the proposals of the Executive Committee on Privatisation.

The assessment of bids will be based on, inter alia, price, financial strength and financing plans, experience of business operations and ideas and future vision regarding Iceland Telecom’s operations, its employees and services in urban and rural areas during the next five years.

The financial services company Morgan Stanley in London provides the Executive Committee on Privatisation with advice during the sale’s preparation.

Reykjavík, 4 April 2005
The Executive Committee on Privatisation