11/05/2008

QSC returns to profitability / Preliminary numbers for Q3 2008

• Revenues grow by 25 percent to € 103.6 million
• EBITDA advances by 147 percent to € 18.3 million
• After-tax net income of € 2.1 million
• Increased guidance reiterated

Cologne, November 5, 2008. QSC AG returned to profitability in the third quarter of 2008, earning a net income of € 2.1 million according to preliminary results, as opposed to a net loss of € -4.7 million for the same quarter the year before. In spite of the weaker economy, the company is thus sustaining its strong and profitable growth in the third quarter of the current fiscal year.

According to preliminary results, revenues rose by 25 percent to € 103.6 million in the third quarter of 2008, as opposed to € 83.2 million for the corresponding quarter the year before. QSC recorded its strongest growth in the Wholesale/Reseller segment, where revenues were up by 57 percent to € 60.2 million. During the seasonably weaker third quarter, QSC connected 71,100 new DSL lines, increasing the total number of connected unbundled local loops to 538,200. Year-on-year, QSC was again forced to sustain a 13-percent decline in revenues in the Products segment, which slipped to € 25.1 million due to sustained substitution tendencies and pressure on pricing in conventional voice telephony; however the company has already succeeded in stabilizing the revenues relative to the preceding quarter thanks to the continued migration of conventional voice telephony customers to IP-based products. In the Managed Services segment, the growing demand for IP-VPN solutions, as well as network-related services, fueled a 14-percent rise in revenues to € 18.4 million.

18-percent EBITDA margin
The company's strong revenue growth, the swift implementation of synergies following the Broadnet merger, as well as improved cost discipline increased EBITDA by 147 percent to € 18.3 million in the third quarter of 2008 according to preliminary results, as opposed to € 7.4 million for the same quarter the year before. The EBITDA margin stood at 18 percent in the third quarter of 2008, rising by 4 percentage points within a single quarter.
As a result of strong customer growth and the network expansion project, depreciation expense rose to € 15.7 million in the third quarter of 2008, as opposed to € 12.7 million for the corresponding quarter the year before. Thanks to the very positive development of its operating business, QSC also earned a preliminary after-tax net income of € 2.1 million; a net loss of € -1.5 million had still be incurred in the second quarter of 2008.

Significant decline in capital expenditures
Following the conclusion of the network expansion project, capital expenditures declined as planned to € 21.1 million in the third quarter of 2008 according to preliminary results, as opposed to € 34.5 million for the same quarter the year before. During the past quarter, customer-related capital expenses amounted to 68 percent of the total, with QSC swiftly invoicing the largest part of these capital expenditures to the respective customers. With liquidity totaling € 49.4 million, QSC is well financed for its anticipated growth.

Guidance expressly reiterated
Given these preliminary numbers, QSC is expressly reiterating its guidance for the full 2008 fiscal year, which it had most recently raised on August 11, 2008: QSC anticipates revenues of more than € 405 million and an EBITDA of more than € 60 million. Moreover, the company is also aiming for a break-even result after-tax. Chief Executive Officer Dr. Bernd Schlobohm explains: "Our operating business continues to develop nicely. Our products and solutions are enabling our business customers to be more efficient, and thus more productive, and this is precisely what customers are focusing on in the current environment."

Queries to:
QSC AG
Claudia Zimmermann
Head of Corporate Communications
Mathias-Brüggen-Str. 55
D-50829 Cologne
Tel: 0221 6698-235
Fax: 0221 6698-289
E-Mail: presse@qsc.de
Internet: www.qsc.de

Notes:
From November 19, 2008, the 9-months report will be available under www.qsc.de/en/investor-relations.html. This corporate news contains forward-looking statements. 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.