Iceland Telecom

3/1/02

Press Release

The decision has been made to bring to an end the process of selling a substantial interest in Iceland Telecom to a core investor.
Uncertainty, particularly in the global financial market and in the telecommunications sector in general, are the main reasons that a sale could not take place at this time. However, it remains the intention of the Icelandic government to divest itself of its interest in Iceland Telecom and transfer the company to the private sector. The sale of the state interest will therefore be resumed as soon as conditions in the financial market permit, and as soon as investor interest in acquiring stocks in Iceland Telecom is revived.
On the initiative of the Icelandic State, the major shareholder of Iceland Telecom, the emphasis in the short-term will be on strengthening the operation of the company. It is clear that as a result of the work relating to the sale process, various opportunities in the operation of Iceland Telecom have been neglected. In light of this fact, efforts will now be continued to increase the profitability of the Company's operations and improve its services.
As the proposed sale to a core investor did not materialise, the State is now under obligation to offer to buy out the shares of other investors in Iceland Telecom, and an offer will be made for such shares at the price of 5.75. Notwithstanding the obligation of the State to buy out other shareholders, those shareholders are under no obligation to accept redemption of their shares, and the are free to retain possession of their holdings. The shares will continue to be listed on the OTC market of the Iceland Stock Exchange.
The sale of shares in Iceland Telecom and the entire sales process is discussed in detail in the attached report. In addition, a legal opinion has been produced by Professor Stefán Már Stefánsson and Mr. Ásgeir Thoroddsen, attorney at law, regarding the redemption of shares.