03/28/2007

QSC focuses on high-margin growth and plans significantly higher profits

Cologne, March 29, 2007. Cologne-based QSC AG today presented its 2006 consolidated financial statements. During the past fiscal year, the Company grew its revenues by 35 percent to € 262.5 million, as opposed to € 194.4 million in 2005. With revenues surging by 115 percent to € 65.4 million, the Company recorded its strongest growth in the Wholesale/Resellers segment, especially in the wholesale business with strong branded marketing partners like HanseNet and freenet. The growth dynamics in this segment became particularly transparent in a sequential quarter-to-quarter comparison: Revenues advanced from € 7.6 million in the first quarter of 2006 to € 28.9 million in the fourth quarter of that year, whereupon the growth in the fourth quarter was further accelerated by one-time effects in the wholesale business as well as seasonal effects in the reseller business with voice carriers. "We focused on expanding our wholesale business in 2006, and have laid the foundation for strong growth in the subsequent years", notes QSC Chief Executive Officer Dr. Bernd Schlobohm. Particularly due to strong growth in the wholesale business, QSC's revenues in the fourth quarter of 2006 increased by 56 percent to € 83.1 million, as opposed to € 53.1 million for the same period the year before.

Since revenues were also up significantly in the other two strategic, high-margin segments of Large Accounts and Business Customers, QSC succeeded in disproportionately improving its results for the fourth quarter of 2006 as well as for the entire fiscal year 2006: In 2006, EBITDA nearly quadrupled to € 21.2 million, as opposed to € 5.8 million the year before. QSC's net loss amounted to € -5.3 million, as opposed to € -18.2 million in 2005, and was thus even better than the € -6.7 million loss that was announced in the release of the preliminary results on February 28, 2007. In the fourth quarter of 2006, the very positive development of the operating business led to an EBITDA increase to € 9.5 million, as opposed to € 0.8 million the same quarter a year ago, as well as the first-time generation of a net income of € 2.8 million as opposed to € -4.4 million.

In the current fiscal year, QSC expects to grow its profitability significantly and will consequently continue its high-margin growth. The Company confirms its guidance for 2007, first published on February 28: QSC is planning revenues of more than € 350 million, an EBITDA of between € 50 million and € 60 million, as well as a net profit between € 15 million and € 25 million.

The expansion of the DSL network to nearly 2,000 central offices, which will be concluded by year-end 2007, is already fully financed and will further strengthen the company's competitive position in its three strategic segments; at the end of this network expansion program QSC will be able to directly connect some 50 percent of all German households and some 70 percent of all German VPN locations to its network: "With this larger network, QSC will be able to reach even more potential customers, enhance its attractiveness as a partner and simultaneously improve its cost structure," explains Dr. Schlobohm. Overall, through the network expansion QSC expects a significant increase in the order win rate from large accounts, as it will then be able to directly connect more locations and require fewer connections from third-parties. Dr. Schlobohm: "This network expansion will open up even better growth opportunities for QSC."

The complete annual report is available under http://www.qsc.de/en/investor-relations.html.

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:
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 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.