12/01/2005

QSC AG resolves increase of capital of 5.49 million new shares without right of subscription

Cologne, December 01, 2005. Today, the Management and Supervisory Board of QSC AG have resolved to increase the company's share capital by 5.49 million no-par shares of stock from authorized capital against contributions in cash at a price of € 3.67 per share. The shares are placed institutionally. The proceeds generated by the increase of capital will total € 20.15 million and will be employed in the demand-driven expansion of QSC's own infrastructure, enabling the company to exploit attractive growth opportunities.

In connection with the increase of capital, the company's capital stock will be increased from € 109.4 million to € 114.9 million. The new shares will be fully entitled to share in the company's profits for the 2005 fiscal year. The shareholders' right of subscription will be excluded pursuant to § 203, Sub-Para. 1, § 186, Sub-Para. 3, Sentence 4, German Stock Corporation Act. The free float will increase to 46.0 percent of the share capital.

The two founders and major shareholders of QSC, Dr. Bernd Schlobohm and Gerd Eickers, have agreed a conditional lock up until December 31, 2006, with the investor.

Strategic update and expansion of the nationwide network
The funds generated by the increase of capital will finance the complete upgrade of the company's existing nationwide broadband network in more than 110 cities to the ADSL2+ standard and the targeted expansion of the network into further cities. The entire investment programme is expected to be largely concluded by the end of next year and will benefit QSC's wholesale partners as well as the fast growing business with Large Accounts. The network upgrade with ADSL2+ is being carried out with a view to QSC's wholesale partners, who are predominantly active in the residential customer market. These wholesale partners increasingly want to be able to provide their customers with Triple Play offerings - Internet, telephony and television over a DSL connection - and are asking for correspondingly high bandwidth. ADSL2+ affords transfer speeds of up to 25 Mbit/s, thus also making it suitable for HDTV.

Strengthening the business opportunities with wholesale partners and Large Accounts
QSC will continue to realize its planned network expansion on a strictly demand-driven basis. In addition to the demand on the part of existing and potential customers in the solutions business with Large Accounts, QSC follows the assured demand on the part of existing wholesale partners as well as further potential wholesale partners with whom QSC is in negotiations. Both the timing as well as the geographical prioritization of the network upgrade and expansion will be driven by the demand that is identified and assured. This should result in relatively short payback periods of the capital investments, averaging less than one year.

With this measure, QSC will once again be clearly strengthening its competitiveness in the enterprise customer market. Greater geographical coverage will also offer considerable advantages in connection with both the product and the solutions business with Large Accounts. Having network coverage of its own produces significant cost advantages and margins increases respectively, as well as quantifiable gains in quality and service, in particular for VPN. QSC therefore also anticipates that the planned network expansion will generate marked additional growth in high-margin business with Large Accounts.