05/10/2004

QSC accelerates growth and free cash flow break even

• Preliminary results for the first quarter of 2004
  
• Quarterly growth doubled due to expansion of large enterprise business
  
• Sustained positive EBITDA
  
• Positive free cash flow brought forward to the second quarter of 2004
  
• Revenue growth of at least 20 percent in 2004

Cologne, May 10, 2004. According to preliminary results, Cologne-based QSC AG grew its revenues in the first quarter of 2004 by 6.3 percent to EUR 32.2 million compared to the preceding quarter. The company thus succeeded in further accelerating its growth rate. Following the full consolidation of the Ventelo acquisition for the first time in the first quarter of 2003, the company grew on average 3.2 percent per quarter in 2003. The 6.3-percent quarter-to-quarter rise to EUR 32.2 million represents thus twice the average quarterly growth in 2003. This acceleration was mainly attributable to the completion of Ventelo´s integration and to stronger demand for higher-margin services from business and project customers. On a year-to-year comparison, QSC grew its revenues by 16.7 percent (Q1 2003: EUR 27.6 million).

Focusing on large enterprise business customers played a major role in enabling QSC to generate a positive EBITDA for the first time in the first quarter of 2004, as had previously been announced. According to preliminary results, operating profit before depreciation and amortization totaled EUR 0.1 million; during the same quarter the year before, EBITDA had been negative at EUR -10.0 million.

According to preliminary results, QSC´s balance sheet recorded net liquid assets of EUR 38.8 million as of March 31, 2004, and virtually no debt. The cash use for the first quarter of 2004 amounted to EUR -15.5 million, as opposed to EUR -10.9 million for the comparable period the year before. In addition to regular prepayments to Deutsche Telekom for the entire year and order driven increases in customer installations in the first quarter, non-recurring effects from selected investments in local network expansion in twelve further cities and the introduction of a new integrated billing system were also significant uses of cash in that period.

In March 2004, QSC´s forecast for the current year had included revenue growth of at least 20 percent to more than EUR 138 million, a sustained positive EBITDA, as well as a positive free cash flow by mid-year 2004 at the latest. Given the highly positive development of its operative business, the company raises its forecast and now expects to record a positive sustained free cash flow for the second quarter instead of for the third quarter. As a result QSC has managed to bring forward the planned free cash flow break even date by almost one quarter

Queries to:
QSC AG
Arne Thull
Investor Relations
Fon: +49(0)221-6698-724
Fax: +49(0)221-6698-009
E-Mail: invest@qsc.de

Notes :
The 3 months-report of QSC AG is available starting the 25th of May at www.qsc.de. This corporate news contains forward-looking statements pursuant to the US "Private Securities Litigation Act" of 1995. These forward-looking statements are based on current expectations and forecasts of future events by the management of QSC AG. Due to risks or mistaken assumptions, actual results may deviate substantially from those made in such forward-looking statements. The assumptions that may involve material deviations due to unforeseeable developments include, but are not limited to, the demand for our products and services, the competitive situation, the development, dissemination and technical performance of DSL technology and its prices, the development and dissemination of alternative broadband technologies and their respective prices, changes in respect of telecommunications regulation, legislation and adjudication, prices and timely availability of essential third-party services and products, the timely development of additional marketable value-added services, the ability to maintain and enlarge upon marketing and distribution agreements and to conclude new marketing and distribution agreements, the ability to obtain additional financing in the event that managements planning targets are not attained, the punctual and full payment of outstanding debts by sales partners and resellers of QSC AG, and the availability of sufficient skilled personnel.