03/30/2004

QSC: Strong growth in the highly profitable business customer segment in 2003 / Sustained positive EBITDA result and crossing of cash flow breakeven threshold planned for 2004

Cologne, March 30, 2004. QSC AG, a nationwide telecommunication provider with its own DSL network, sustained its highly profitable growth in 2003. The company significantly expanded its market position during 2003 driven by a comprehensive portfolio of products and solutions for voice and data services for business customers, as well as by further enhancing its competence as a provider of telecommunication solutions for large enterprises. During the past fiscal year, QSC´s revenues grew by 145 percent to EUR 115.6 million (2002: EUR 47.1 million). In addition to the consolidation effect stemming from the Ventelo acquisition, this rise was attributable first and foremost to the company´s growing solutions business. Consequently, the percentage of total revenues accounted for by business customers reached 53 percent in 2003, as opposed to 32 percent in 2002 and 25 percent in 2001.

While revenues soared by 145 percent, network expenses, QSC´s largest expense item, rose by only 44 percent to EUR 135.2 million (2002: EUR 93.6 million). A quarterly comparison for the year 2003 more clearly illustrates the scalability of the QSC business model: Although revenues rose significantly, network expenses declined from EUR 35.6 million in the first quarter of 2003 to EUR 32.9 million in the fourth quarter of 2003. Strict cost management, as well as the successful implementation of synergies stemming from the Ventelo acquisition, led to considerable savings in other operating expense items as well: Selling and marketing expenses in 2003, for example, fell by 28 percent to EUR 23.2 million (2002: EUR 32.0 million). In spite of the Ventelo integration, administrative expenses declined by 17 percent to EUR 17.2 million (2002: EUR 20.6 million).

These improvements in QSC´s operative business also manifested themselves in the company´s profitability: The annual EBITDA loss dropped by 53 percent to EUR -28.5 million, as opposed to EUR -60.3 million in 2002. In 2003, the annual net loss declined by 41 percent to EUR -60.6 million (2002: EUR -102.6 million). While the relocation of the Ventelo administration to Cologne ahead of schedule in the fourth quarter of 2003 did lead to a non-recurring impact on profitability, this is far outweighed by the lasting savings in rent as well as by the formation of a joint team in a single location. The company reached the EBITDA breakeven point on schedule at year-end 2003. And since January 2004, QSC has also been generating a positive monthly EBITDA.

QSC again reduced its cash burn from quarter to quarter in 2003. While the reduction of liquid assets had totaled EUR -10.9 million in the first quarter of 2003, it amounted to only EUR -5.9 million in the fourth quarter of 2003. As of December 31, 2003, the company had net liquid assets of EUR 54.3 million, while continuing to remain debt-free. Given this position, the company views itself as being fully financed until it crosses the cash flow breakeven threshold as planned during the course of the first half of 2004, and even beyond that point. QSC plans on earning a sustained monthly cash flow surplus beginning in July 2004, at the latest. For the current fiscal year, QSC anticipates revenue growth of at least 20 percent to more than EUR 138 million, as well as a sustained positive EBITDA.

* Including depreciation and non-cash compensation

The complete annual report is available here.

This ad hoc announcement 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 management´s 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.

Cologne-based QSC AG (QSC) is a nationwide telecommunication provider with its own DSL network, supplying businesses and premium residential customers with a comprehensive portfolio of broadband communication options ranging from leased lines in various bandwidths to voice and data services right through to custom enterprise networks (VPN). QSC serves more than 40 of Germany´s largest cities with its own broadband network infrastructure and additionally offers its services to business customers nationwide through partners. The company presently employs a workforce of some 380 people and will be a member of the TecDAX 30, representing Germany´s 30 leading public technology companies

Further information is available from:
QSC AG 
Claudia Zimmermann
Leiterin Unternehmenskommunikation
Mathias-Brüggen-Str. 55
50829 Köln
Fon: +49(0)221-6698-235
Fax: +49(0)221-6698-289
E-Mail: presse@qsc.de  

QSC AG
Arne Thull
Investor Relations
Mathias-Brüggen-Str. 55
50829 Köln
Fon: +49(0)221-6698-112
Fax: +49(0)221-6698-009
E-Mail: invest@qsc.de